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CST: 18/10/2019 19:40:40   

Broadwind Energy Announces Q2 2019 Results

77 Days ago

Highlights:

  • Q2 orders total $105M -- customers securing towers to support strong 2020 turbine installations

  • Backlog rises to $145 million at June 30

  • Q2 2019 revenue of $41.2 million up 12% from 2018, all segments higher

  • Continued strong Gearing performance -- $9 million revenue and 10% operating margin

  • EPS loss narrows to $.06

CICERO, Ill., Aug. 02, 2019 (GLOBE NEWSWIRE) -- Broadwind Energy, Inc. (NASDAQ: BWEN) reported sales of $41.2 million in Q2 2019, up 12% compared to $36.8 million in Q2 2018 due primarily to higher steel prices and a more complex tower product mix.

The Company reported a net loss of $1.0 million, or $.06 per share, in Q2 2019, compared to a net loss of $6.1 million, or $.40 per share, in Q2 2018.  The prior year quarter loss included an adverse $.25 per share impact related to a $5.0 million goodwill impairment charge, net of the $1.1 million reversal of an earn-out reserve.

The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring costs) of $1.9 million in Q2 2019, compared to non-GAAP adjusted EBITDA of $2.1 million in Q2 2018.  The prior year quarter benefited from the reversal of an earn-out reserve of $1.1 million. 

Broadwind CEO Stephanie Kushner stated, “We delivered a second consecutive quarter of revenue greater than $40M and healthier EBITDA generation, in line with our guidance.  Gearing continues to deliver strong operating results, demonstrating management’s significant strides in improving operational performance and customer diversification.”

Kushner continued, “We are pleased to see the order recovery in Towers, which is beginning to provide good visibility into 2020 production. We continue to prioritize diversification of our customer base, and booked a sizeable tower order from a new wind turbine OEM during the quarter.  We are growing our fabrication product line at a healthy rate, which offers additional diversification to our product and customer mix.”

Kushner concluded, “In Q3, we expect revenue to exceed $45 million with approximately $1.4-1.8 million of EBITDA.  Our full year EBITDA target remains at $8 million, which assumes the supply chain executes in a tightening environment.”

Orders and Backlog

The Company booked $104.6 million of net new orders in Q2 2019, compared to $18.6 million in Q2 2018. Towers and Heavy Fabrications orders rose nearly ten-fold to $96.3 million in Q2 2019, up from $9.9 million in Q2 2018, when a large portion of the Company’s capacity was committed under a multi-year framework agreement for which minimum volumes had been booked into backlog in 2016.  The 3-year framework agreement has been fulfilled, and orders are now recorded on a project-by-project basis.

Strong Q2 2019 bookings reflected the addition of a major new turbine OEM and increased demand to support growing turbine installations in 2020. Gearing orders totaled $5.6 million in Q2 2019, down from $6.1 million Q2 2018, due to timing of purchases from mining customers. Process Systems orders were essentially flat at $2.7 million, with higher demand for new gas turbine content mostly offset by weaker demand for aftermarket content.

At June 30, 2019, total backlog was $144.7 million, compared to $81.1 million at March 31, 2019, driven by the surge of Tower orders recorded during the quarter.

Segment Results

Towers and Heavy Fabrications
Broadwind Energy produces fabrications for wind, oil and gas, mining and other industrial applications, specializing in the production of wind turbine towers.  In Q1 2019, the Company revised and retroactively adjusted the financial statements of its segment reporting by moving the Abilene CNG and Fabrication business to the Towers and Heavy Fabrications segment from the Process Systems segment. 

Towers and Heavy Fabrications segment sales totaled $29.0 million in Q2 2019, compared to $25.6 million in Q2 2018. The increased revenue was attributable to a rise in steel prices and a more complex mix of towers produced.  Unit production volumes were flat versus the comparison period. 

Segment operating profit totaled $.3 million in Q2 2019 compared to an operating profit of $.5 million in Q2 2018. Improved gross profit from the Heavy Fabrication product line and lower depreciation were more than offset by the adverse impact on towers of lower pricing resulting from rising competition from tower imports. Net income declined comparatively for the Towers and Heavy Fabrications segment to $.2 million in Q2 2019, from net income of $.4 million in Q2 2018. Non-GAAP adjusted EBITDA in Q2 2019 was $1.5 million compared to Non-GAAP adjusted EBITDA of $2.2 million in Q2 2018, due to the cash factors described above. 

Gearing
Broadwind Energy engineers, builds and remanufactures precision gears and gearboxes for oil and gas, mining, steel, wind and other specialized applications.

Gearing segment sales totaled $9.3 million in Q2 2019, compared to $8.6 million in Q2 2018. The $.7 million increase was due primarily to higher shipments to mining, wind and other industrial customers, partially offset by lower purchases by oil and gas customers, as the significant expansion of fracking capacity experienced in 2018 has subsided. Operating profit increased to $.9 million in Q2 2019, compared to a $.7 million loss in Q2 2018, reflecting the impact of higher revenues and the significant operational improvements achieved in recent quarters. Compared to the prior year, these operational improvements included better production efficiencies, the absence of prior year supply chain disruptions and improved manufacturing variances.  The net income for the Gearing segment rose comparably to $.8 million in Q2 2019, compared to a net loss of $.7 million in Q2 2018. The Gearing segment reported $1.5 million of Non-GAAP adjusted EBITDA in Q2 2019 compared to a near break-even Non-GAAP adjusted EBITDA in Q2 2018.

Process Systems
Broadwind Energy provides contract manufacturing services that include build-to-print, kitting, and inventory management for customers, primarily supporting the natural gas electrical generation market.

Process Systems revenue totaled $2.9 million in Q2 2019 compared to $2.6 million in Q2 2018, due primarily to higher sales for new natural gas turbine content.  The segment operated at break-even in Q2 2019 compared to a $5.6 million operating loss in Q2 2018, primarily due to a $5 million goodwill impairment in the prior year quarter. Also contributing to the improvement was an improved product mix.  Net income for the Process Systems segment was break-even in Q2 2019, compared to an after tax loss of $3.8 million in Q2 2018. The Process Systems segment reported $.2 million of Non-GAAP adjusted EBITDA for Q2 2019 compared to Non-GAAP adjusted EBITDA loss of $.2 million in Q2 2018.

Corporate
Corporate and other expenses increased by $1.4 million in Q2 2019. The rise in net expenses was due primarily to the absence of a $1.1 million gain associated with the release of the earn-out reserve in the prior year quarter, combined with increased incentive compensation and professional fee expenses.

Cash and Liquidity

During Q2 2019, operating working capital (accounts receivable and inventory, net of accounts payable and customer deposits) increased to $22.0 million from $17.6M at March 31, 2019, in support of higher scheduled tower deliveries. The cash conversion ratio increased sequentially, from 41 days at March 31, 2019 to 53 days, predominantly driven by the increase in operating working capital.

Capital expenditures, net of disposals, in Q2 2019 totaled $.9 million.

Debt and finance leases totaled $29.9 million at June 30, 2019.  The Company’s $35 million line of credit with CIBC had a balance of $26.6 million at June 30, 2019.  Availability under the credit line improved to $8.0 million from $7.5 million at March 31, 2019.

Cash assets (cash and short-term investments) remained near zero as expected because the Company’s cash and receipts are automatically applied to the outstanding credit line balance consistent with the terms of the line.

Conference Call

Broadwind Energy will conduct a teleconference and live webcast, with a slide presentation, beginning at 10 a.m. Central Time on Friday, August 2nd, 2019, to discuss its 2019 second-quarter financial results. This webcast will be available in listen-only mode and can be accessed, for up to ninety days following the call, through the investors section on the Broadwind Energy website at http://www.bwen.com/investors/events-and-presentations.

About Broadwind Energy, Inc.
Broadwind Energy (NASDAQ: BWEN) is a precision manufacturer of structures, equipment and components for clean tech and other specialized applications. From gears and gearing systems for wind, oil and gas and mining applications, to wind towers and industrial weldments, we have solutions for the clean tech, energy and infrastructure needs of the future. With facilities throughout the U.S., Broadwind Energy's talented team is committed to helping customers maximize performance of their investments—quicker, easier and smarter. Find out more at www.bwen.com.

Non-GAAP Financial Measure
The Company provides non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, and stock compensation) as supplemental information regarding the Company’s business performance. The Company’s management uses adjusted EBITDA when it internally evaluates the performance of the Company’s business, reviews financial trends and makes operating and strategic decisions. The Company believes that this non-GAAP financial measure is useful to investors because it provides investors with a better understanding of the Company’s past financial performance and future results allows investors to evaluate the Company’s performance using the same methodology and information as used by the Company’s management. The Company's definition of adjusted EBITDA may be different from similar non-GAAP financial measures used by other companies and/or analysts.

Forward-Looking Statements
This release contains “forward looking statements”—that is, statements related to future, not past, events—as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. Forward-looking statements include any statement that does not directly relate to a current or historical fact. We have tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “plan” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements.

Our forward-looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following: (i) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related extension, continuation or renewal of federal tax incentives and grants and state renewable portfolio standards; (ii) our customer relationships and our substantial dependency on a few significant customers and our efforts to diversify our customer base and sector focus and leverage relationships across business units; (iii) our ability to continue to grow our business organically and through acquisitions; (iv) the production, sales, collections, customer deposits and revenues generated by new customer orders and our ability to realize the resulting cash flows; (v) the sufficiency of our liquidity and alternate sources of funding, if necessary; (vi) our ability to realize revenue from customer orders and backlog; (vii) our ability to operate our business efficiently, comply with our debt obligations, manage capital expenditures and costs effectively, and generate cash flow; (viii) the economy and the potential impact it may have on our business, including our customers; (ix) the state of the wind energy market and other energy and industrial markets generally and the impact of competition and economic volatility in those markets; (x) the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities; (xi) the effects of the change of administrations in the U.S. federal government; (xii) our ability to successfully integrate and operate companies and to identify, negotiate and execute future acquisitions; (xiii) the potential loss of tax benefits if we experience an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended; (xiv) the limited trading market for our securities and the volatility of market price for our securities; and (xv) the impact of future sales of our common stock or securities convertible into our common stock on our stock price. These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. We are under no duty to update any of these statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or other factors that could cause our current beliefs, expectations, plans and/or assumptions to change.


BROADWIND ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)

        June 30,     December 31,  
          2019       2018  
  ASSETS      
  CURRENT ASSETS:      
    Cash and cash equivalents $ 74     $ 1,177  
    Accounts receivable, net   20,273       17,455  
    Inventories, net   35,758       22,670  
    Prepaid expenses and other current assets   1,760       1,776  
      Total current assets   57,865       43,078  
  LONG-TERM ASSETS:      
    Property and equipment, net   48,197       49,087  
    Operating lease right-of-use assets   16,651       -  
    Other intangible assets, net   6,196       6,602  
    Other assets   349       398  
  TOTAL ASSETS $ 129,258     $ 99,165  
             
  LIABILITIES AND STOCKHOLDERS' EQUITY      
  CURRENT LIABILITIES:      
    Line of credit and other notes payable $ 27,555     $ 11,930  
    Current portion of finance lease obligations   825       967  
    Current portion of operating lease obligations   1,591       -  
    Accounts payable   15,484       11,618  
    Accrued liabilities   4,372       3,806  
    Customer deposits   18,561       23,507  
    Current liabilities held for sale   26       27  
      Total current liabilities   68,414       51,855  
  LONG-TERM LIABILITIES:      
    Long-term debt, net of current maturities   998       1,408  
    Long-term finance lease obligations, net of current portion   553       571  
    Long-term operating lease obligations, net of current portion   17,020       -  
    Other   69       1,969  
      Total long-term liabilities   18,640       3,948  
  COMMITMENTS AND CONTINGENCIES      
             
  STOCKHOLDERS' EQUITY:      
    Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued      
    or outstanding   -       -  
    Common stock, $0.001 par value; 30,000,000 shares authorized; 16,437,109      
    and 15,982,622 shares issued as of June 30, 2019 and      
    December 31, 2018, respectively   16       16  
    Treasury stock, at cost, 273,937 shares as of June 30, 2019 and December 31, 2018,      
    respectively   (1,842 )     (1,842 )
    Additional paid-in capital   382,343       381,441  
    Accumulated deficit   (338,313 )     (336,253 )
      Total stockholders' equity   42,204       43,362  
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 129,258     $ 99,165  



BROADWIND ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

        Three Months Ended June 30,   Six Months Ended June 30,
          2019       2018       2019       2018  
                     
                     
  Revenues   $ 41,169     $ 36,781     $ 82,829     $ 66,748  
  Cost of sales     37,277       34,442       75,388       64,426  
  Restructuring     -       116       12       231  
  Gross profit     3,892       2,223       7,429       2,091  
                     
  OPERATING EXPENSES:                
  Selling, general and administrative     3,895       2,495       7,723       6,393  
  Impairment charges   -       4,993       -       4,993  
  Intangible amortization     203       471       406       942  
  Restructuring     -       -       -       36  
    Total operating expenses     4,098       7,959       8,129       12,364  
  Operating loss     (206 )     (5,736 )     (700 )     (10,273 )
                     
  OTHER EXPENSE, net:                
  Interest expense, net     (773 )     (352 )     (1,309 )     (650 )
  Other, net     (16 )     (1 )     (18 )     (4 )
    Total other expense, net     (789 )     (353 )     (1,327 )     (654 )
                     
  Net loss before provision (benefit) for income taxes     (995 )     (6,089 )     (2,027 )     (10,927 )
  Provision (benefit) for income taxes     23       (6 )     34       (33 )
  LOSS FROM CONTINUING OPERATIONS     (1,018 )     (6,083 )     (2,061 )     (10,894 )
  INCOME (LOSS) FROM DISCONTINUED OPERATIONS     -       (33 )     1       (60 )
  NET LOSS   $ (1,018 )   $ (6,116 )   $ (2,060 )   $ (10,954 )
                     
                     
  NET LOSS PER COMMON SHARE - BASIC:                
  Loss from continuing operations   $ (0.06 )   $ (0.40 )   $ (0.13 )   $ (0.71 )
  Income (loss) from discontinued operations     0.00       0.00       0.00       0.00  
  Net loss   $ (0.06 )   $ (0.40 )   $ (0.13 )   $ (0.71 )
                     
  WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC     16,046       15,421       15,917       15,339  
                     
  NET LOSS PER COMMON SHARE - DILUTED:                
  Loss from continuing operations   $ (0.06 )   $ (0.40 )   $ (0.13 )   $ (0.71 )
  Income (loss) from discontinued operations     0.00       0.00       0.00       0.00  
  Net loss   $ (0.06 )   $ (0.40 )   $ (0.13 )   $ (0.71 )
                     
  WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED     16,046       15,421       15,917       15,339  

 

BROADWIND ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

          Six Months Ended June 30,
            2019     2018  
CASH FLOWS FROM OPERATING ACTIVITIES:      
  Net loss   $ (2,060 ) $ (10,954 )
  Income (loss) from discontinued operations     1     (60 )
  Loss from continuing operations     (2,061 )   (10,894 )
             
Adjustments to reconcile net cash used in operating activities:    
    Depreciation and amortization expense     3,390     4,706  
    Deferred income taxes     (5 )   (42 )
    Impairment charges     -     4,993  
    Change in fair value of interest rate swap agreements     26     -  
    Stock-based compensation     510     489  
    Allowance for doubtful accounts     (12 )   (25 )
    Common stock issued under defined contribution 401(k) plan     392     338  
    Gain on disposal of assets     (1 )   -  
    Changes in operating assets and liabilities, net of acquisition:      
      Accounts receivable     (2,806 )   (4,232 )
      Inventories     (13,088 )   (1,003 )
      Prepaid expenses and other current assets     16     49  
      Accounts payable     3,306     4,823  
      Accrued liabilities     540     325  
      Customer deposits.     (4,946 )   (1,141 )
      Other non-current assets and liabilities     127     (1,179 )
Net cash used in operating activities of continued operations     (14,612 )   (2,793 )
             
CASH FLOWS FROM INVESTING ACTIVITIES:      
  Purchases of property and equipment     (1,183 )   (1,676 )
  Proceeds from disposals of property and equipment     1     -  
Net cash used in investing activities of continued operations     (1,182 )   (1,676 )
             
CASH FLOWS FROM FINANCING ACTIVITIES:      
  Proceeds from line of credit     91,007     66,985  
  Payments on line of credit   (75,370 )   (63,200 )
  Proceeds from long-term debt   -     1,410  
  Payments on long-term debt     (462 )   (313 )
  Principal payments on finance leases     (485 )   (377 )
Net cash provided by financing activities of continued operations     14,690     4,505  
              -  
DISCONTINUED OPERATIONS:      
  Operating cash flows     1     (38 )
Net cash provided by (used in) discontinued operations     1     (38 )
             
NET DECREASE IN CASH AND CASH EQUIVALENTS     (1,103 )   (2 )
CASH AND CASH EQUIVALENTS beginning of the period     1,177     78  
CASH AND CASH EQUIVALENTS end of the period   $ 74   $ 76  
             
Supplemental cash flow information:      
  Interest paid   $ 825   $ 537  
  Income taxes paid   $ 49   $ 84  
             
Non-cash activities:      
  Issuance of restricted stock grants   $ 510   $ 489  
  Non-cash purchases of property and equipment $ 325   $ -  



BROADWIND ENERGY, INC. AND SUBSIDIARIES
SELECTED SEGMENT FINANCIAL INFORMATION
(IN THOUSANDS)
(UNAUDITED)

      Three Months Ended   Six Months Ended
      June 30,   June 30,
        2019       2018       2019       2018  
ORDERS:            
  Towers and Heavy Fabrications   $ 96,328     $ 9,870     $ 108,839     $ 19,674  
  Gearing     5,572       6,148       12,707       21,514  
  Process Systems     2,712       2,584       7,072       5,555  
  Total orders   $ 104,612     $ 18,602     $ 128,618     $ 46,743  
                   
REVENUES:            
  Towers and Heavy Fabrications   $ 28,970     $ 25,552     $ 57,264     $ 43,747  
  Gearing     9,266       8,632       19,293       17,438  
  Process Systems     2,933       2,620       6,272       5,586  
  Corporate and Other     -       (23 )     -       (23 )
  Total revenues   $ 41,169     $ 36,781     $ 82,829     $ 66,748  
                   
OPERATING (LOSS)/PROFIT:            
  Towers and Heavy Fabrications   $ 318     $ 541     $ 96     $ (1,554 )
  Gearing     913       (662 )     2,300       (1,288 )
  Process Systems     28       (5,589 )     (256 )     (5,890 )
  Corporate and Other     (1,465 )     (26 )     (2,840 )     (1,541 )
  Total operating (loss)/profit   $ (206 )   $ (5,736 )   $ (700 )   $ (10,273 )



BROADWIND ENERGY, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
(UNAUDITED)

  Consolidated   Three Months Ended June 30,   Six Months Ended June 30,
          2019       2018       2019       2018  
  Loss from Continuing Operations   $ (1,019 )   $ (6,083 )   $ (2,061 )   $ (10,894 )
  Interest Expense     774       352       1,309       650  
  Income Tax Provision/(Benefit)     22       (6 )     34       (33 )
  Depreciation and Amortization     1,628       2,349       3,390       4,706  
  Share-based Compensation and Other Stock Payments     494       418       930       846  
  Restructuring Costs     -       116       12       267  
  Impairment Charges     -       4,993       -       4,993  
    Adjusted EBITDA (Non-GAAP)   $ 1,899     $ 2,139     $ 3,614     $ 535  

 

  Towers and Heavy Fabrications Segment   Three Months Ended June 30,   Six Months Ended June 30,
        2019     2018     2019       2018  
  Net Income/(Loss)   $ 186   $ 446   $ (49 )   $ (1,263 )
  Interest Expense     63     50     129       82  
  Income Tax Provision/(Benefit)     54     46     1       (373 )
  Depreciation and Amortization     978     1,317     2,073       2,636  
  Share-based Compensation and Other Stock Payments     214     181     379       334  
  Restructuring Expense     -     116     12       267  
  Adjusted EBITDA (Non-GAAP)   $ 1,495   $ 2,156   $ 2,545     $ 1,683  

 

  Gearing Segment   Three Months Ended June 30,   Six Months Ended June 30,
        2019     2018       2019     2018  
  Net Income/(Loss)   $ 796   $ (662 )   $ 2,096   $ (1,293 )
  Interest Expense     113     2       195     5  
  Income Tax Provision/(Benefit)     4     (3 )     9     -  
  Depreciation and Amortization     483     586       965     1,176  
  Share-based Compensation and Other Stock Payments     102     77       194     143  
  Adjusted EBITDA (Non-GAAP)   $ 1,498   $ -     $ 3,459   $ 31  

 

  Process Systems   Three Months Ended June 30,   Six Months Ended June 30,
        2019     2018       2019       2018  
  Net Income/(Loss)   $ 4   $ (3,794 )   $ (274 )   $ (3,844 )
  Interest Expense     -     -       1       -  
  Income Tax Provision/(Benefit)     23     (1,797 )     14       (2,050 )
  Depreciation and Amortization     122     386       244       773  
  Share-based Compensation and Other Stock Payments     13     12       26       30  
  Impairment Expense     -     4,993       -       4,993  
  Adjusted EBITDA (Non-GAAP)   $ 162   $ (200 )   $ 11     $ (98 )

 

  Corporate and Other   Three Months Ended June 30,   Six Months Ended June 30,
        2019       2018       2019       2018  
  Loss from continuing operations   $ (2,005 )   $ (2,073 )   $ (3,834 )   $ (4,494 )
  Interest Expense     598       300       984       563  
  Income Tax Provision/(Benefit)     (59 )     1,748       10       2,390  
  Depreciation and Amortization     45       60       108       121  
  Share-based Compensation and Other Stock Payments     165       148       331       339  
  Adjusted EBITDA (Non-GAAP)   $ (1,256 )   $ 183     $ (2,401 )   $ (1,081 )

 

BWEN INVESTOR CONTACT: Jason Bonfigt, 708.780.4821 jason.bonfigt@bwen.com

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