Broadwind Energy Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 12, 2025

Key Takeaways

  • Positive Sentiment: Pending sale of Manitowoc fabrication operations is on pace to close in Q3, bringing $13 M of cash and $8 M in annual cost savings.
  • Positive Sentiment: Q2 revenue rose 8% year-over-year to $39.2 M and orders jumped 14% to $21 M, driven by stronger demand in wind and industrial verticals.
  • Negative Sentiment: Adjusted EBITDA fell to $2.1 M with a 5.3 pp margin decline, reflecting early production inefficiencies at Manitowoc and Eberlin plus low gearing utilization.
  • Positive Sentiment: Industrial Solutions hit record Q2 orders of nearly $14 M and backlog of $30 M, prompting investments in robotic welding, painting, machining, and testing capacity.
  • Neutral Sentiment: Gearing orders rebounded 45% with a $6 M follow-on order in July, yet segment revenue declined year-over-year, leading to a modest EBITDA loss.
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Earnings Conference Call
Broadwind Energy Q2 2025
00:00 / 00:00

There are 2 speakers on the call.

Operator

Greetings, and welcome to Broadwind Second Quarter twenty twenty five Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Operator

Tom Cicconi. Thank you. You may begin. Good morning, and welcome to the Broadwind second quarter twenty twenty five results conference call. Leading the call today is our CEO, Eric Blashford and I'm Tom Cicconi, the company's Vice President and Chief Financial Officer.

Operator

We issued a press release before the market opened today detailing our second quarter results. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward looking statements, which by their nature are uncertain and outside of the company's control. Although these forward looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non GAAP financial measures discussed during our call in the press release issued today.

Operator

At the conclusion of our prepared remarks, we will open the line for questions. With that, I'll turn the call over to Eric. Thanks, Tom, and welcome to those joining us today. We continue to advance our strategic priorities during the second quarter, prioritizing our focus on high value precision manufacturing end markets while moving toward a leaner or diversified business capable of delivering profitable growth through the cycle. Second quarter revenue increased on both a sequential and year over year basis driven by increased demand from the wind and industrial verticals.

Operator

In June, we announced the pending sale of our industrial fabrication operations in Manitowoc, Wisconsin. This represents a meaningful step toward further optimizing our asset footprint, improving our balance sheet flexibility and sharpening our focus within stable, higher margin precision manufacturing verticals. We are on pace to complete this transaction in the third quarter and expect it will add approximately $13,000,000 of cash to our balance sheet while reducing costs by $8,000,000 annually. Customer activity continues to accelerate with order rates rising 14% year over year to $21,000,000. Robust demand from power generation and increasing demand from oil and gas customers offset softness in wind, industrials and mining.

Operator

These market dynamics reinforce the importance of our diverse customer base, especially during sustained periods of US trade policy uncertainty. Orders within our heavy fabrications business were adjusted to reflect the estimated backlog that we'll be transferring with the sale of the Manitowoc operation. In the second quarter, we also received the final purchase order release against the long term customer agreement we entered into in early twenty twenty three. So new power orders for that customer will add to backlog. Gearing orders continue to rebound, increasing 45%.

Operator

As we continue to see strength in power generation and some resurgence in the oil and gas aftermarket. In July, this momentum continued as we received a follow on order for $6,000,000 of gearing products with the power generation market. This acceleration in order activity is a direct result of the investments we made in capabilities and quality certification in this business. In q two twenty twenty five, orders within our industrial solutions business remained very strong, more than tripling year over year, driven by strong demand for new gas turbine units as well as upgrades and services. We're pleased to have set another record for both orders and backlog in this segment.

Operator

Operationally, we continue to invest in equipment technology to improve our process capabilities, reduce costs, and improve our profitability. In the 2025, margins were temporarily impacted by early production process inefficiencies at our Manitowoc and Eberlin facilities and lower capacity utilization levels within our Gearing segment. We expect profitability to improve as production normalizes throughout the duration of the year. In the Industrial Solutions segment, we are investing in additional manufacturing capacity in order to service our current backlog and meet future customer demand in the rapidly growing gas power generation equipment market. Within our heavy fabrication segment, Q2 revenue grew year over year primarily due to an increase in wind towers and repowering adapters sold, offset by lower demand from the mining market.

Operator

Revenue in our gearing segment fell year over year due to lower demand from the oil and gas gearing market, partially offset by strength in the mining and industrial sectors. We've taken further cost actions to align production capacity with the present demand levels while maintaining the key manufacturing and engineering talent required to accommodate the increasing order intake we're experiencing this year. Within Industrial Solutions, we saw growth year over year primarily due to stronger shipments into the new gas turbine equipment market. In summary, the team and business continue to perform well as we sharpen our focus within adjacent higher margin precision manufacturing verticals. Recent strategic actions to divest our Manslov facility will position us for increased balance sheet strength and optionality while reducing overhead costs materially.

Operator

While the trade policy environment remains volatile, our 100% domestic manufacturing base remains a key competitive advantage positioning us to partner with tier one OEMs who value our commitment to quality, on time service, and deep technical expertise. With that, I'll turn the call over to Tom for a discussion of our second quarter financial performance. Thank you, Eric. Turning to Slide five for an overview of our second quarter performance. Second quarter consolidated revenues were $39,200,000 an 8% increase versus the prior year period.

Operator

During the second quarter, we restarted Manitowoc power production for a limited customer run ahead of the planned asset sale and recognized increased repowering revenue in both our Manitowoc and Abilene facilities. Sequentially, revenue was up nearly 7% due to stronger deliveries within our Industrial Solutions segment as we resolved some of the temporary supply chain headwinds that impacted the first quarter. Despite an increase in revenue, second quarter adjusted EBITDA declined to $2,100,000 versus the prior year at $3,600,000 Adjusted EBITDA margin dropped 5.3% due primarily to lower capacity utilization within our gearing segment, manufacturing inefficiencies associated with the production of a new larger wind tower design in both the Manitowoc and Abilene facilities and additional labor to support increased volume within the wind and power generation verticals. Q2 orders totaled $21,000,000 an increase of 14% versus the prior year second quarter, driven primarily by stronger demand for natural gas turbine content serving power generation markets in our Industrial Solutions segment. Turning to Slide six for a discussion of our Heavy Fabrication segment.

Operator

Second quarter orders of $200,000 were muted given the timing of wind related orders and the fact that we're winding down operations within our Manitowoc facility. It should be noted that during the second quarter, we received purchase order releases satisfying the volume associated with the long term customer supply agreement that we announced in January 2023. Going forward, purchase orders received from that customer will again be recognized as orders and incremental backlog. Second quarter revenues of $25,000,000 are up 27% versus the prior year quarter, driven by an increase in wind power sectors sold as we restarted Manitowoc power production on a limited run and increased revenue related to repowering adapters, offset by lower demand for mining customer. Despite an increase in revenue, second quarter segment adjusted EBITDA was flat versus prior year at $2,800,000 due to the manufacturing headwinds previously mentioned.

Operator

Turning to Slide seven. Gearing orders of 6,800,000 were up over 2,000,000 versus the prior year period. Of note, we received follow on orders from a significant customer serving the power generation market. In July, we subsequently announced a multiyear supply agreement for gearing products to be used in natural gas turbine. In addition, oil and gas order growth accelerated for the second quarter in a row as we may be benefiting from onshoring in reaction to recent U.

Operator

S. Trade policies. Segment revenue was $7,300,000 up sequentially, but down over $3,000,000 versus the prior year quarter, recognized an adjusted EBITDA loss of 100,000 driven by lower revenue and reduced capacity utilization. Turning to Slide eight. Industrial Solutions recorded nearly 14,000,000 of orders during the second quarter, surpassing the previous $10,000,000 record achieved last quarter.

Operator

Segment participates in the natural gas power equipment industry, which is experiencing a significant resurgence driven by the increasing demand for reliable and flexible power supply. Segment backlog also hit a new record high of nearly $30,000,000 at the end of the second quarter, eclipsing the previous record of $23,000,000 set in Q1. This quarter represents the third straight quarter with record order and backlog levels. Q2 segment revenue was $7,400,000 up 30% sequentially as much of the supply chain headwinds impacting shipments in the first quarter were resolved during Q2. Revenue was up 14% versus the prior year second quarter, but adjusted EBITDA of $700,000 was down slightly from the prior year due to a lower margin mix of products sold as well as additional overhead to support increased production volumes.

Operator

Turning to Slide nine. We ended the second quarter with total cash and availability on our credit facility of approximately $15,000,000 Line of credit borrowings increased during q two to support a nearly $14,000,000 increase in operating working capital. This working capital increase was driven most notably by our deposit balance returning to more normal operating levels, while our inventory levels increased in response to higher wind related production levels. We expect that inventory levels will decrease in the third quarter. Finally, with respect to our financial guidance, in connection with the pending asset sale of Manitowoc and related operations, we are suspending our previously issued financial guidance for the full year 2025.

Operator

We intend to reinstate new financial guidance, excluding contributions from Manitowoc upon closing of the transaction, which is expected during the 2025, consistent with prior expectations. That concludes my remarks. I will turn the call back over to Eric to continue our discussion. Thanks, Tom. Now allow me to provide some thoughts as we move into Q3.

Operator

We continue to refocus production capacity towards stable recurring revenue streams across diverse end markets with recent gearing wins in the power generation markets and growing opportunities in a large utility scale natural gas turbine. We continue to see robust quote activity in both gearing and the industrial solutions segment. In our gearing segment, we continue to execute our strategy to move beyond traditional gearing for other precision machine products. The recent sizable orders we received from the power generation sector are evidence that our strategy is working. We're pleased with the increasing level of customer activity we're seeing in various new markets, including infrastructure support, such as cement plants and aggregate material processing among others.

Operator

In Industrial Solutions, significant growth in natural gas turbine industry is having a positive commercial impact on our business. In q two, we eclipsed the quarterly bookings record that was previously set in q one twenty twenty five by over $3,500,000 and established a new record quarterly backlog. Due to strong demand for power worldwide, our key customers are adding significant production capacity in order to meet both the current and foreseeable future demand. In order to take full advantage of the significant growth opportunity within our industry, we are investing in the necessary personnel and equipment, such as adding robotic welding, expanding painting and machining capacity, and upgrading testing equipment to meet this higher demand level and to maximize our growth opportunities within this dynamic market. We believe that our current actions will position us to capitalize on the opportunities to grow and expand within this high growth market.

Operator

In our heavy fabrication segment, we've expanded our service and commercial teams our clean fuel PRS line to better serve the DJ Basin and Bakken regions. This includes adding a cold weather performance package for the climate in these regions. Our l 70 low flow unit has performed well in field trials and is now available to purchase, lease, and rent. The addition of this product complements our current product offerings, which are the medium and high flow units to meet the various gas delivery requirements of our customers. We've just completed our first field start up on a medium flow m one twenty five export unit through a key distribution partner, and we're excited about the opportunities that this could bring over time.

Operator

We believe that domestic onshore wind power activity will continue at its present rate through 2026. We are encouraged by the continued momentum in the wind repowering market as we are seeing sustained demand from our OEM customers for the adapters we manufacture, which are required to upgrade most legacy turbines. In our view, the recent policy announcements from Washington provide clarity for our customers, which they need to confidently move forward with projects. We have good visibility for tower production through the balance of 2025 and into 2026. In summary, I'm pleased with the order growth and strategic actions we've taken this year as we continue to demonstrate strong execution of our strategic priorities.

Operator

Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long term opportunities for us. Our quality, quick response, and ability to solve complex manufacturing challenges for our customers continue to help us win new opportunities, notably within the gearing and industrial solutions businesses. We're reducing our cost structure, investing wisely, and taking strategic actions to refocus our resources toward higher value and growing end markets. We value our people and are committed to keeping them safe, fulfilled, and productive. All of our plants are US based, so we're prepared to capitalize on any opportunities afforded by the pro domestic manufacturing policy backdrop afforded by the current administration.

Operator

We're encouraged that our order intake continues to grow, positioning us for improved utilization of our manufacturing footprint for the rest of the year and into 2026 as we strengthen our foundation for steady, profitable growth, serving the power generation, infrastructure, and other key markets with high quality precision components and proprietary products to capitalize on improved demand in the years ahead. With that said, I'll turn the call over to the moderator for the Q and A session. Thank you. At this time, we'll be conducting a question and answer session. You may you may press star two if you'd like to remove your question from the queue.

Operator

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Justin Clare with ROTH Capital Partners. Morning, Justin. Morning, Justin.

Operator

Morning. So first, I just wanted to start on the guidance. Wanted to see if you could just expand a little bit on the uncertainty that may be created by the Manitowoc sale, whether it's timing related or whether your, you know, revenue or or margins could be affected by the sale? And then just beyond that, are there any other uncertainties within the business that is making it more challenging to provide guidance for the remainder for of the year here? Yes.

Operator

Thanks for the question, Justin. I think it's mostly related to timing. There is some uncertainty in terms of when we will close. There's not any uncertainty about closing, but the timing is a little up for grabs. So that will impact the amount of industrial fab revenue that we're ultimately able to recognize and realize.

Operator

So yes, it's mostly timing. There are also some transitional costs that we'll be incurring as a result of you know, winding down the operations in Manitowoc. So we will be shipping some materials down to Abilene when we're incurring some legal costs. So we're vetting all that out, and we just wanna be prudent and accurate with our with our guidance. Got it.

Operator

Okay. In terms of in terms of other in terms of other phenomenon that you're talking about, I don't I don't think there's anything any other reason why I was, you know, in any other other business units that we pulled the guidance. Got it. Okay. I appreciate that added detail there.

Operator

And and then just on Industrial Solutions, you know, I think record orders, your backlog's up, I think, more than a 100% here. So just wondering if you could speak to the visibility you have into additional demand. You know, is your visibility improving in terms of, you know, the the when you see orders and and the time frame expected for the delivery of those orders? And then maybe you just speak to the capacity you have to fulfill the demand and whether there's anything that you need to do in order to expand. Yes.

Operator

Thanks. Thanks, Justin. This is Eric. I'll I'll take that call. So Industrial Solutions primarily services the large gas turbine market, and those are over 100 megawatts.

Operator

The so far this year through Q2, the market sold 93 units versus 21 units last year at the same time. So that's four times up. Our customers vary, but our largest customer is GE Vernova in that, and they are dominant in the field. We do see visibility with that customer. Again, be based on their reporting for several years out, we do follow that.

Operator

We do talk to that customer frequently. They're saying that they've got visibility up through '28 and beyond that, and they're increasing their own capability to produce these turbines. And so that would drive demand for us. When we see orders taken in the market, it's about a twelve to eighteen month lag time before we see orders because it just takes some time for these things to get to get set up. As far as available capacity, we do have the capacity.

Operator

We've got room in that facility in Sanford, North Carolina. We also have the ability to expand into an adjacent facility and really just become continuing to increase our capabilities. That's where we we talked about robotic welding, our paint capacity, some machining capacity, some testing capacity, and then it's all about material movement. So we do believe we can we can receive this this increased volume quite handily. Got it.

Operator

Okay. And then just as you expand the business here, wondering if you could speak to the margin profile and whether, you know, as a result of operating leverage you may have, you could see an expansion in margins over time here? Yes. I think that's reasonable to assume. I mean, we have a fairly large fixed cost structure.

Operator

And the more fixed cost coverage that we get from increase in revenue, a pickup in revenue definitely helps us. So for us, a big factor in our profitability is capacity utilization. Okay. Got it. All right.

Speaker 1

Thank you. I'll pass it on. Thank you, Justin.

Operator

Our next question comes from Amit Dayal with H. C. Wainwright. Please proceed with your question.

Speaker 1

Thank you. Good morning, everyone, and, you know, congrats on sort of continuing to, you know, put together good quarters despite the headwinds you guys are facing. In that context, you know, what else is being done to maybe capitalize on, you know, the growing demand for the power generation side of things? Like, are you adding more folks on the sales side? Just wanted to see, you know, how that pipeline is being built up or, you know, what you are thinking strategically you could take advantage of to, participate maybe in a bigger way in that opportunity?

Operator

Well, thank you. Thank you, Mick, for that question. We have, within our Gearing segment, really expanded our independent sales rep organizations across the country. We now have pretty good representation West Of The Rockies, which we hadn't had before. We brought in some new reps that are actually on our payroll that have specificity in markets like cement and aggregates and to a lesser extent power generation.

Operator

But with regard to taking advantage of that, I think it's capacity increases that we've done in Industrial Solutions and in the gearing market. Also, the TRF, which is our proprietary product within compressed natural gas, we released that product, the L70, which is the lowest volume or lowest power unit, and that's really ideal for backup power supply support. And so I think the more that product is accepted in the marketplace, improve, and I think that will help us expand opportunities within power generation.

Speaker 1

Understood. You mentioned there's a new tower order that I'm not sure if that is showing in the backlog you highlighted in the earnings release. How big is this new tower order?

Operator

Well, we were talking about the the manufacturing challenges with with that we had with the tower order small tower order that we were building a Manitowoc. That order was received late last year, and we're producing it this year. That's the one. It's a very large tower with very thick steel. It's actually twice as thick as the normal steel we produce.

Operator

So it's presented some challenges for engineers to make sure that that those cans that are made by that out of that fixed steel can be moved appropriately to to to construct the wind tower. That's what we're referring to on prepared remarks.

Speaker 1

Okay. Sorry. I I so it's already part of the banking.

Operator

Yeah. Okay. Understood. Okay. Right.

Operator

But but but one of the things we did say is that at the end of the quarter, we quarter two, we have we have completed the long term agreement we had with one of our key OEM partners, and that had always been in backlog for the last two years. And so as we were receiving PO releases against that order, they weren't counting as new orders because the order was already in backlog. Since we have not completed that, new orders, in fact, orders that we've received in July and beyond will count as as new orders and new backlog. That's all that was also referenced in my prepared remarks.

Speaker 1

Okay. Understood. It looks like, you know, the the sentiment around wind, at least from a new headline perspective, still is a little sort of depressed. But from the commentary, it looks like things are picking up for you. Like, how should folks sort of think about, you know, the opportunity ahead for you with respect to the wind related business?

Operator

Sure. Well, the the the big beautiful bill act did have some have some challenges in it for renewables as our investors are aware of. But one of the things that it did have is the 45X credits that we take advantage of as to others component manufacturers in our market are still in place, but they end in 2028 as opposed to a couple of years later. So I think we could see actually in a pulling in of some orders in 'twenty six and 'twenty seven ahead of that. There's also a provision that projects have to start construction by 07/04/2026 to avoid a deadline, placed in service deadline, which impacts the PTC, the production tax credit, which benefits developers.

Operator

So, I think, certainly, in '26 and likely '27, there would be a pull in of orders as developers take advantage of the changes in the tax law.

Speaker 1

Understood. That's all I've made. Thank you so much. Thank you.

Operator

Our last question comes from Eric Stine with Craig Hallum Capital Group. Please proceed with your question. Hi, Eric. Hi, Tom. Hey, Eric.

Operator

Good morning. Good morning. So maybe just getting back to wind. So you mentioned that you've satisfied the the original order with GE, and I believe that was for or is for the SunZia project. And, you know, just curious as you think about that going forward and now, you know, you will be recognizing those orders.

Operator

What type of what type of demand do you see? Is that part of the visibility you mentioned that you have through 2026 on the tower side out of Abilene? Just maybe any thoughts on that would be great. Sure. Yes.

Operator

Just remember, we're one of only several in The U. S. That are qualified to produce for as many OEMs as we are. And that one particular OEM we had the long term agreement with is still an important customer of ours. Think, in fact, the relationship is every bit as strong as it ever was.

Operator

So when I mentioned that we've got good visibility, certainly through 'twenty five and into 'twenty six, for orders, we literally have those booked through January 2026. And let's just say, strong customer indication that we we will have a good flow throughout the whole year of 2026 of power power and and adapters in Abilene. And you're saying from that customer and others, or or or are you more focused on that customer? Well, from that customer and others. From that customer and others.

Operator

And I would say, directionally, if we were operating, call it, a 50%, 60% capacity utilization rate in that plant in 2025, we would comfortably be more like 60% to 80% capacity utilization in that plant through 2026, including towers and adapters for multiple OEMs. Sounds great. Then maybe just heavy fab as a whole. I know that the order level, you mentioned, you know, some of its timing. And maybe you did mention this and I missed it, but I I mean, I would think there was some impact related to just some of the variability or uncertainty related to selling Manitowoc.

Operator

So maybe, you know, do you sense that there are heavy fab orders that are kind of pent up and that you would see upon closing? Or, you know, how do you view that, as we think about 3Q and the remainder of the year into 'twenty six? I would say regarding the orders that we have for Abilene, I think the customers received the news quite well. We did have a customer cancel a small adapter order, and that customer intends to give to redo that adapter order in Abilene for 2026 production. But as far as industrial fabrication orders, those orders, we're still taking those orders, but those orders will be will transfer over to the new operator of that facility.

Operator

So we delineate between industrial fab. Those are the crane orders, Eric, and the construction orders that we produce in Anastawa. As far as Abilene, those orders would not impact this this particular sale. TRS orders and power and adapter orders seem to be pulling as you as usual. Okay.

Operator

And then maybe last one for me. Just you mentioned $8,000,000 in cost savings related to the planned divestiture. Can you just remind me the split between cost of goods and OpEx? I think it I would say that's it's all that's a that would be all in cost of goods sold. It's mostly fixed Yeah.

Operator

Okay. Thank you. We have reached the end of the question and answer session. I'd now like to turn the call back over to Eric Blashford for closing comments. Yes.

Operator

Well, thank you, everyone, for your interest, and we look forward to getting back with you after our third quarter results to discuss them with you. Have a great day. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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