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SCOTTSDALE, Ariz., Nov. 03, 2022 (GLOBE NEWSWIRE) -- TPI Composites, Inc. (Nasdaq: TPIC), today reported financial results for the third quarter ended September 30, 2022.
“In the third quarter, TPI delivered strong adjusted EBITDA growth and finished the quarter with a cash position of $129 million,” said Bill Siwek, President and CEO of TPI Composites. “We continue to focus on managing our cost structure and efficiently operating our facilities despite a challenging macro backdrop.”
“While the wind industry continues to face near-term challenges, we are working with our customers to be ready to address their capacity needs when demand comes back to the market. Since our last earnings call, we have agreed in principle to a long-term global partner framework agreement with Vestas that aims to provide flexibility and capacity for Vestas while enabling better facility utilization for us in the geographies that we serve Vestas. We have also signed an agreement with GE Renewable Energy that enabled us to secure a ten-year lease extension of our manufacturing facility in Newton, Iowa. Under the agreement, GE and TPI plan to develop competitive blade manufacturing options to best serve GE’s commitments in the U.S. market with production expected to start in 2024. We have also agreed in principle with GE to extend all our lines in Mexico through 2025 and expect to finalize and execute the contract extensions before the end of this year. Finally, we extended our supply agreement with Enercon for two lines in Türkiye through 2025 and with Nordex for four lines in Türkiye through 2023.”
“Given the near term challenges the wind industry is facing, we are commencing multiple cost saving initiatives to better position us for 2023 and the long term, including optimizing our global manufacturing footprint, reducing headcount primarily in geographies most impacted by demand and reducing or eliminating loss-making operations. While a plan has not yet been initiated and therefore not finalized, we intend to cease production at our Yangzhou, China manufacturing facility in December 2022. We expect to record material restructuring and impairment charges during the three months ended December 31, 2022 with respect to closing this facility, additional headcount reductions in our other manufacturing facilities and corporate functions as well as actions related to loss-making operations. We expect these actions to result in structural cost reductions of approximately $20 million to be realized in 2023 and beyond while continuing to focus on operating efficiencies to drive annual productivity savings of over $20 million per year which we have consistently achieved over the past three years.”
“We remain confident that the mid to long-term prospects for wind energy outweigh any near-term challenges today and we are encouraged by the ongoing broad-based support for the Inflation Reduction Act in the United States and REPowerEU in Europe. Right now, our focus is to best position TPI for the long-term while dealing with the near-term challenges,” concluded Mr. Siwek.
| KPIs | 3Q’22 | 3Q’21 | |
| Sets1 | 740 | 830 | |
| Estimated megawatts2 | 3,164 | 3,395 | |
| Utilization3 | 80% | 76% | |
| Dedicated manufacturing lines4 | 43 | 54 | |
| Manufacturing lines installed5 | 43 | 54 | |
Third Quarter 2022 Financial Results
Net sales for the three months ended September 30, 2022, decreased 4.2% to $459.3 million as compared to $479.6 million in the same period in 2021 due to the following:
Total cost of goods sold for the three months ended September 30, 2022, was $450.6 million and included $4.8 million of costs related to lines in transition during the period. This compares to total cost of goods sold for the three months ended September 30, 2021, of $486.7 million and included $4.5 million of costs related to lines in startup and $10.0 million of costs related to lines in transition during the period. Total cost of goods sold as a percentage of net sales decreased by 3.4% during the three months ended September 30, 2022, as compared to the same period in 2021, primarily due to net favorable currency fluctuations, reduced startup and transition costs, and improved operational efficiencies offset by continued operating challenges at our newest Matamoros, Mexico facility. The fluctuating U.S. dollar against the Turkish Lira, Euro, Chinese Renminbi and Mexican Peso had a favorable impact of 8.2% for the three months ended September 30, 2022, on consolidated cost of goods sold as compared to the same period in 2021.
Income taxes reflected a provision of $10.1 million for the three months ended September 30, 2022, as compared to a provision of $8.2 million for the same period in 2021. The increase in the provision was primarily due to the changes in the earnings mix by jurisdiction and a decrease in the U.S. valuation allowance.
Net loss before preferred stock dividends and accretion improved to a loss of $1.5 million for the three months ended September 30, 2022 from a loss of $30.7 million for the three months ended September 30, 2021. Including $14.9 million of preferred stock dividends and accretion, net loss attributable to common stockholders for the quarter was $16.4 million, compared to a net loss of $30.7 million in the same period in 2021.
The net loss per common share was $0.39 for the three months ended September 30, 2022, compared to net loss per common share of $0.83 for the three months ended September 30, 2021.
Adjusted EBITDA for the three months ended September 30, 2022 was $16.4 million as compared to $0.2 million during the same period in 2021. Adjusted EBITDA margin increased to 3.6% as compared to breakeven during the same period in 2021, primarily due to favorable foreign currency fluctuations, reduced startup and transition costs, and improved operating cost efficiencies as compared to the prior period, partially offset by the non-restructuring related operating costs that were associated with the three manufacturing locations where production has stopped and cost challenges at our newest facility in Matamoros.
Capital expenditures were $3.5 million for the three months ended September 30, 2022, as compared to $3.1 million during the same period in 2021. Our capital expenditures primarily relate to machinery and equipment and expansion and improvements to our existing facilities.
We ended the quarter with $129.1 million of unrestricted cash and cash equivalents, and net cash was $67.0 million as compared to net cash of $167.5 million as of December 31, 2021. We used $25.9 million of cash from operating activities primarily due to improving the health of our supply chain and timing impacts from the Türkiye labor disruption and the temporary production suspension in Mexico, and had negative free cash flow of $29.4 million. Net cash used in financing activities increased by $24.7 million for the three months ended September 30, 2022, as compared to the same period in 2021, primarily as a result of decreased borrowings and increased repayments on outstanding borrowings.
2022 Guidance
Guidance for the full year ending December 31, 2022:
| Guidance | Full Year 2022 |
| Dedicated Manufacturing Lines | 43 |
| Wind Blade Set Capacity | 3,710 |
| Utilization % | 80% to 85% |
| Average Sales Price per Blade | $170,000 to $180,000 |
| Capital Expenditures | $15 million to $20 million |
Conference Call and Webcast Information
TPI Composites will host an investor conference call this afternoon, Thursday, November 3rd, at 5:00 pm ET. Interested parties are invited to listen to the conference call which can be accessed live over the phone by dialing 1-877-232-4484, or for international callers, 1-212-231-2921. A replay will be available two hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the live call and the replay is 22020922. The replay will be available until November 10, 2022. Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investors section of the Company’s website at www.tpicomposites.com. The online replay will be available for a limited time beginning immediately following the call.
About TPI Composites, Inc.
TPI Composites, Inc. is a global company focused on innovative and sustainable solutions to decarbonize and electrify the world. TPI delivers high-quality, cost-effective composite solutions through long-term relationships with leading OEMs in the wind and transportation markets. TPI is headquartered in Scottsdale, Arizona and operates manufacturing facilities in the U.S., China, Mexico, Türkiye and India. TPI operates additional engineering development centers in Denmark and Germany and global service training centers in the U.S. and Spain.
Forward-Looking Statements
This release contains forward-looking statements which are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements, among other things, concerning: growth of the wind energy and electric vehicle markets and our addressable markets for our products and services; the impact of the COVID-19 pandemic on our business, effects on our financial statements and our financial outlook; our business strategy, including anticipated trends and developments in and management plans for our business and the wind industry and other markets in which we operate; competition; future financial results, operating results, revenues, gross margin, operating expenses, profitability, products, projected costs, warranties, our ability to improve our operating margins, and capital expenditures. These forward-looking statements are often characterized by the use of words such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “seek,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,” “could,” “predict,” “continue” and the negative or plural of these words and other comparable terminology. Forward-looking statements are only predictions based on our current expectations and our projections about future events. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update any of these forward-looking statements for any reason. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. These factors include, but are not limited to, the matters discussed in “Risk Factors,” in our Annual Report on Form 10-K and other reports that we will file with the SEC.
Non-GAAP Definitions
This press release includes unaudited non-GAAP financial measures, including EBITDA, adjusted EBITDA, net cash (debt) and free cash flow. We define EBITDA as net income (loss) plus interest expense (including losses on the extinguishment of debt and net of interest income), income taxes and depreciation and amortization. We define adjusted EBITDA as EBITDA plus any share-based compensation expense, anyforeign currencyincome or losses, any gains or losses on the sale of assets and asset impairments and any restructuring charges. We define net cash (debt) as the total unrestricted cash and cash equivalents less the total principal amount of debt outstanding. We define free cash flow as net cash flow from operating activities less capital expenditures. We present non-GAAP measures when we believe that the additional information is useful and meaningful to investors. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See Table Four for a reconciliation of certain non-GAAP financial measures to the comparable GAAP measures.
Investor Relations
480-315-8742
Investors@TPIComposites.com
| TPI COMPOSITES, INC. AND SUBSIDIARIES | |||||||||||||||
| TABLE ONE - CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (UNAUDITED) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (in thousands, except per share data) | 2022 | 2021 | 2022 | 2021 | |||||||||||
| Net sales | $ | 459,271 | $ | 479,599 | $ | 1,296,509 | $ | 1,343,120 | |||||||
| Cost of sales | 445,778 | 472,188 | 1,257,830 | 1,295,660 | |||||||||||
| Startup and transition costs | 4,821 | 14,541 | 30,411 | 38,994 | |||||||||||
| Total cost of goods sold | 450,599 | 486,729 | 1,288,241 | 1,334,654 | |||||||||||
| Gross profit (loss) | 8,672 | (7,130 | ) | 8,268 | 8,466 | ||||||||||
| General and administrative expenses | 8,030 | 8,185 | 22,578 | 23,819 | |||||||||||
| Loss on sale of assets and asset impairments | 3,571 | 7,250 | 7,093 | 9,998 | |||||||||||
| Restructuring charges, net | (87 | ) | 1,422 | 2,316 | 3,876 | ||||||||||
| Loss from operations | (2,842 | ) | (23,987 | ) | (23,719 | ) | (29,227 | ) | |||||||
| Other income (expense): | |||||||||||||||
| Interest expense, net | (1,149 | ) | (2,662 | ) | (2,831 | ) | (8,057 | ) | |||||||
| Foreign currency income (loss) | 11,362 | 3,958 | 21,458 | (6,273 | ) | ||||||||||
| Miscellaneous income | 1,273 | 262 | 2,124 | 1,322 | |||||||||||
| Total other income (expense) | 11,486 | 1,558 | 20,751 | (13,008 | ) | ||||||||||
| Income (loss) before income taxes | 8,644 | (22,429 | ) | (2,968 | ) | (42,235 | ) | ||||||||
| Income tax provision | (10,111 | ) | (8,248 | ) | (19,809 | ) | (30,036 | ) | |||||||
| Net loss | (1,467 | ) | (30,677 | ) | (22,777 | ) | (72,271 | ) | |||||||
| Preferred stock dividends and accretion | (14,976 | ) | - | (43,658 | ) | - | |||||||||
| Net loss attributable to common stockholders | $ | (16,443 | ) | $ | (30,677 | ) | $ | (66,435 | ) | $ | (72,271 | ) | |||
| Weighted-average common shares outstanding: | |||||||||||||||
| Basic | 41,984 | 37,052 | 41,950 | 36,846 | |||||||||||
| Diluted | 41,984 | 37,052 | 41,950 | 36,846 | |||||||||||
| Net loss per common share: | |||||||||||||||
| Basic | $ | (0.39 | ) | $ | (0.83 | ) | $ | (1.58 | ) | $ | (1.96 | ) | |||
| Diluted | $ | (0.39 | ) | $ | (0.83 | ) | $ | (1.58 | ) | $ | (1.96 | ) | |||
| Non-GAAP Measures (unaudited): | |||||||||||||||
| EBITDA | $ | 20,519 | $ | (6,478 | ) | $ | 34,038 | $ | 3,221 | ||||||
| Adjusted EBITDA | 16,365 | 179 | 32,770 | 30,635 | |||||||||||
| TPI COMPOSITES, INC. AND SUBSIDIARIES | |||||
| TABLE TWO - CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
| (UNAUDITED) | |||||
| September 30, | December 31, | ||||
| (in thousands) | 2022 | 2021 | |||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 129,137 | $ | 242,165 | |
| Restricted cash | 9,822 | 10,053 | |||
| Accounts receivable | 184,029 | 157,804 | |||
| Contract assets | 211,726 | 188,323 | |||
| Prepaid expenses | 21,230 | 19,280 | |||
| Other current assets | 27,140 | 22,584 | |||
| Inventories | 15,110 | 11,533 | |||
| Assets held for sale | 8,529 | 8,529 | |||
| Total current assets | 606,723 | 660,271 | |||
| Property, plant and equipment, net | 157,391 | 169,578 | |||
| Operating lease right of use assets | 147,081 | 137,192 | |||
| Other noncurrent assets | 39,171 | 40,660 | |||
| Total assets | $ | 950,366 | $ | 1,007,701 | |
| Liabilities and Stockholders' Equity | |||||
| Current liabilities: | |||||
| Accounts payable and accrued expenses | $ | 308,915 | $ | 336,697 | |
| Accrued warranty | 20,212 | 42,020 | |||
| Current maturities of long-term debt | 60,894 | 66,438 | |||
| Current operating lease liabilities | 21,372 | 22,681 | |||
| Contract liabilities | - | 1,274 | |||
| Total current liabilities | 411,393 | 469,110 | |||
| Noncurrent liabilities: | |||||
| Long-term debt, net of current maturities | 1,227 | 8,208 | |||
| Noncurrent operating lease liabilities | 133,098 | 146,479 | |||
| Other noncurrent liabilities | 15,739 | 10,978 | |||
| Total liabilities | 561,457 | 634,775 | |||
| Total mezzanine equity | 294,632 | 250,974 | |||
| Total stockholders’ equity | 94,277 | 121,952 | |||
| Total liabilities and stockholders’ equity | $ | 950,366 | $ | 1,007,701 | |
| TPI COMPOSITES, INC. AND SUBSIDIARIES | ||||||||||||||
| TABLE THREE - CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net cash used in operating activities | $ | (25,934 | ) | $ | (24,986 | ) | $ | (85,095 | ) | $ | (28,241 | ) | ||
| Net cash used in investing activities | (3,482 | ) | (3,079 | ) | (11,492 | ) | (30,138 | ) | ||||||
| Net cash provided by (used in) financing activities | (139 | ) | 24,578 | (12,865 | ) | 48,280 | ||||||||
| Impact of foreign exchange rates on cash, cash equivalents and restricted cash | 4,842 | (616 | ) | (3,807 | ) | (939 | ) | |||||||
| Cash, cash equivalents and restricted cash, beginning of year | 163,672 | 123,261 | 252,218 | 130,196 | ||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 138,959 | $ | 119,158 | $ | 138,959 | $ | 119,158 | ||||||
| TPI COMPOSITES, INC. AND SUBSIDIARIES | |||||||||||||
| TABLE FOUR - RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||
| (UNAUDITED) | |||||||||||||
| EBITDA and adjusted EBITDA are reconciled as follows: | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||
| Net loss attributable to common stockholders | $ | (16,443 | ) | $ | (30,677 | ) | $ | (66,435 | ) | $ | (72,271 | ) | |
| Preferred stock dividends and accretion | 14,976 | - | 43,658 | - | |||||||||
| Net loss | (1,467 | ) | (30,677 | ) | (22,777 | ) | (72,271 | ) | |||||
| Adjustments: | |||||||||||||
| Depreciation and amortization | 10,726 | 13,289 | 34,175 | 37,399 | |||||||||
| Interest expense, net | 1,149 | 2,662 | 2,831 | 8,057 | |||||||||
| Preferred stock dividends and accretion | 10,111 | 8,248 | 19,809 | 30,036 | |||||||||
| EBITDA | 20,519 | (6,478 | ) | 34,038 | 3,221 | ||||||||
| Share-based compensation expense | 3,724 | 1,943 | 10,781 | 7,267 | |||||||||
| Foreign currency loss (income) | (11,362 | ) | (3,958 | ) | (21,458 | ) | 6,273 | ||||||
| Loss on sale of assets and asset impairments | 3,571 | 7,250 | 7,093 | 9,998 | |||||||||
| Restructuring charges, net | (87 | ) | 1,422 | 2,316 | 3,876 | ||||||||
| Adjusted EBITDA | $ | 16,365 | $ | 179 | $ | 32,770 | $ | 30,635 | |||||
| Net debt is reconciled as follows: | September 30, | December 31, | |||||||||||
| (in thousands) | 2022 | 2021 | |||||||||||
| Cash and cash equivalents | $ | 129,137 | $ | 242,165 | |||||||||
| Less total debt | (62,121 | ) | (74,646 | ) | |||||||||
| Net cash | $ | 67,016 | $ | 167,519 | |||||||||
| Free cash flow is reconciled as follows: | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||
| Net cash used in operating activities | $ | (25,934 | ) | $ | (24,986 | ) | $ | (85,095 | ) | $ | (28,241 | ) | |
| Less capital expenditures | (3,482 | ) | (3,079 | ) | (11,492 | ) | (30,138 | ) | |||||
| Free cash flow | $ | (29,416 | ) | $ | (28,065 | ) | $ | (96,587 | ) | $ | (58,379 | ) | |