TPI Composites, Inc. Announces Third Quarter 2019 Earnings Results – Net Sales up 50% and Adjusted EBITDA up 57%


SCOTTSDALE, Ariz., Nov. 06, 2019 (GLOBE NEWSWIRE) -- TPI Composites, Inc. (Nasdaq: TPIC), the only independent manufacturer of composite wind blades with a global footprint, today reported financial results for the third quarter ended September 30, 2019.

Highlights

For the quarter ended September 30, 2019:

  • Net sales of $383.8 million
  • Total billings of $385.6 million
  • Net loss of $4.6 million or $0.13 per share
  • EBITDA of $26.3 million
  • Adjusted EBITDA of $27.6 million
KPIs Q3'19 Q3'18 
 Sets¹858 589 
 Estimated megawatts²2,491 1,625 
 Utilization388%69%
 Dedicated manufacturing lines452 51 
 Manufacturing lines installed548 39 
 Manufacturing lines in operation630 28 
 Manufacturing lines in startup710 5 
 Manufacturing lines in transition88 6 
  1. Number of wind blade sets (which consist of three wind blades) invoiced worldwide during the period.
  2. Estimated megawatts of energy capacity to be generated by wind blade sets invoiced during the period.
  3. Utilization represents the percentage of wind blades invoiced during the period compared to the total potential capacity of wind blade manufacturing lines installed during the period.
  4. Number of wind blade manufacturing lines that are dedicated to our customers under long-term supply agreements at the end of the period.
  5. Number of wind blade manufacturing lines installed and either in operation, startup or transition at the end of the period.
  6. Number of wind blade manufacturing lines in operation represents the number of wind blade manufacturing lines installed less the number of manufacturing lines in startup and in transition.
  7. Number of wind blade manufacturing lines in a startup phase during the pre-production and production ramp-up period.
  8. Number of wind blade manufacturing lines that were being transitioned to a new wind blade model during the period.



“TPI generated solid financial results for the third quarter delivering 50% top line and 57% adjusted EBITDA growth,” said Steve Lockard, CEO of TPI Composites. “We remain encouraged by the longer-term outlook for the wind industry and the important role TPI plays in the wind supply chain as a trusted, outsourced manufacturer of wind blades. We are confident and committed to our business model and strategy, and we continue to focus on execution as we navigate this dynamic wind market environment.”

“The fundamentals of our business remain strong as we continue to partner with our customers to support their global production needs. We are making excellent progress in our diversification efforts, and we continue to deploy resources to accelerate existing and new development programs. In our core wind business, we are investing alongside our customers through cost sharing and collaborative teamwork to keep pace with the rapid expansion and development anticipated over the next few years. Our mature operations are performing at or above our expectations, even those going through line transitions this year.  So despite the near-term volatility that startups in new geographies and increased transitions have had on our results of operations for 2019 and are expected to have on our projected results of operations for 2020, our team remains focused on driving out costs, improving operational efficiency and utilization at our facilities, and remaining focused on the long-term,” concluded Mr. Lockard.

Third Quarter 2019 Financial Results

Net sales for the three months ended September 30, 2019 increased by $128.9 million or 50.5% to $383.8 million compared to $255.0 million in the same period in 2018. Net sales of wind blades increased by 49.9% to $352.2 million for the three months ended September 30, 2019 as compared to $234.9 million in the same period in 2018. The increase was primarily driven by a 44% increase in the number of wind blades produced year over year largely as a result of increased production at our China, Mexico and Turkey facilities. Total billings for the three months ended September 30, 2019 increased by $144.9 million or 60.2% to $385.6 million compared to $240.7 million in the 2018 period. The impact of the currency movement on consolidated net sales and total billings for the quarter was a net decrease of 1.6% and 1.5%, respectively, as compared to 2018.

Total cost of goods sold for the three months ended September 30, 2019 was $357.9 million and included $13.1 million related to ten lines in startup in our plants in China and Mexico and the startup of new wind blade models for a customer in Turkey and $9.0 million of transition costs related to eight lines in transition during the quarter. This compares to total cost of goods sold for the three months ended September 30, 2018 of $238.0 million and included $19.0 million related to startup costs in our new plants in Turkey, Mexico and Iowa, the startup costs related to a new customer in Taicang, China and $2.4 million of transition costs related to the six lines in transition during the quarter. Cost of goods sold as a percentage of net sales remained consistent during the three months ended September 30, 2019 as compared to the same period in 2018, driven primarily by the extended startup of our Newton, Iowa transportation facility, offset by the impact of savings in raw material costs and foreign currency fluctuations.

General and administrative expenses for the three months ended September 30, 2019 totaled $10.6 million, or 2.8% of net sales, compared to $9.8 million, or 3.8% of net sales, for the same period in 2018. The decrease was primarily driven by lower incentive compensation. 

Income taxes reflected a provision of $18.8 million for the quarter as compared to a benefit of $10.3 million for the same period in 2018. The change was primarily due to the jurisdictional earnings mix in the quarter as compared to the same period in 2018 and from the reversal of the U.S. valuation allowance in the 2018 quarter.

The net loss for the three months ended September 30, 2019 was $4.6 million as compared to net income of $9.5 million in the same period in 2018. The decrease was primarily due to the reasons set forth above. The net loss per share was $0.13 for the three months ended September 30, 2019, compared to diluted income per share of $0.26 for the three months ended September 30, 2018. 

EBITDA for the quarter increased to $26.3 million, compared to $7.4 million during the same period in 2018. Adjusted EBITDA for the quarter increased to $27.6 million compared to $17.6 million during the same period in 2018. Adjusted EBITDA margin increased slightly to 7.2% compared to 6.9% during the same period in 2018.

Capital expenditures were $21.4 million for the quarter compared to $8.3 million during the same period in 2018. Our capital expenditures have been primarily related to machinery and equipment for new facilities and expansion or improvements at existing facilities.

We ended the quarter with $92.1 million of cash and cash equivalents and net debt was $51.3 million as compared to net debt of $53.2 million at December 31, 2018, and we had free cash flow during the quarter of $42.9 million.

2019 GuidancePreviousUpdated
Total billings$1.45 billion to $1.5 billion$1.38 billion to $1.4 billion
Net sales$1.45 billion to $1.5 billionUnchanged
Adjusted EBITDA$80 million to $85 millionUnchanged
Loss per share$0.18 to $0.23Unchanged
Sets invoiced3,180 to 3,2203,180 to 3,205
Average sales price per blade$135,000 to $140,000Unchanged
Non-blade billings$100 million to $105 millionUnchanged
G&A costs as a % of billings (incl. SBC and loss on sale of receivables)4.0% to 4.25%3.5% to 4.0%
Estimated megawatts of sets invoiced9,300 to 9,400Unchanged
Dedicated manufacturing lines at year end52 to 55Unchanged
Manufacturing lines installed at year end48Unchanged
Manufacturing lines in operation at year end24 to 26Unchanged
Manufacturing lines in startup during the yearapproximately 14Unchanged
Manufacturing lines in transition during the yearapproximately 10Unchanged
Line utilization (based on 50 lines in Q1 & Q2 and 48 lines in Q3 & Q4)approximately 80%Unchanged
Startup costs$47 million to $49 millionUnchanged
Transition costs$19 million to $21 millionUnchanged
Capital expenditures$95 million to $100 million
(approx. 85% growth related)
Unchanged
Depreciation and amortization$37 million to $38 millionUnchanged
Interest expense$8 million to $8.5 millionUnchanged
Share-based compensation expense$7 million to $8 millionUnchanged

Postponement of Investor Day

Considering the significant changes in our industry and increased uncertainty around the number and timing of wind blade model startups and transitions with certain of our customers, and the corresponding impact that these factors will have on our 2020 outlook, TPI Composites has postponed its Investor Day originally scheduled for November 15 in New York and will reschedule it as soon as its 2020 plans are finalized.

Conference Call and Webcast Information

TPI Composites will host an investor conference call this afternoon, Wednesday, November 6, 2019 at 5:00pm ET. Interested parties are invited to listen to the conference call which can be accessed live over the phone by dialing 1-877-407-9208, or for international callers, 1-201-493-6784. 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 13695460. The replay will be available until November 13, 2019. 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 the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. 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 factories in the U.S., China, Mexico, Turkey and India. TPI operates additional engineering development centers in Denmark and Germany. 

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: 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; our projected annual revenue growth; 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 total billings, EBITDA, adjusted EBITDA, net cash/debt and free cash flow. We define total billings as total amounts billed from products and services that we are entitled to payment and have billed under the terms of our long-term supply agreements or other contractual arrangements. We define EBITDA as net income/loss plus interest expense (including losses on extinguishment of debt and net of interest income), income taxes and depreciation and amortization. We define adjusted EBITDA as EBITDA plus share-based compensation expense plus or minus any gains or losses from foreign currency remeasurement, plus or minus any gains or losses from the sale of assets. 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 generated 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 below for a reconciliation of certain non-GAAP financial measures to the comparable GAAP measures as well as our Investor Presentation which can be found in the Investors section at www.tpicomposites.com.

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)  2019  2018   2019  2018 
Net sales $383,836 $254,976  $1,014,387 $739,567 
Cost of sales  335,778  216,594   904,135  625,817 
Startup and transition costs  22,127  21,415   63,206  53,474 
Total cost of goods sold  357,905  238,009   967,341  679,291 
Gross profit  25,931  16,967   47,046  60,276 
General and administrative expenses  10,608  9,756   27,801  31,908 
Realized loss on sale of assets  3,354  -   10,561  - 
Restructuring charges (reversals), net  (149) -   3,725  - 
Income from operations  12,118  7,211   4,959  28,368 
Other income (expense):      
  Interest income  43  45   125  129 
  Interest expense  (2,130) (2,323)  (6,403) (8,376)
  Loss on extinguishment of debt  -  -   -  (3,397)
  Realized gain (loss) on foreign currency remeasurement  3,719  (8,181)  (1,050) (12,957)
  Miscellaneous income  517  2,511   2,235  4,003 
Total other income (expense)  2,149  (7,948)  (5,093) (20,598)
Income (loss) before income taxes  14,267  (737)  (134) 7,770 
Income tax benefit (provision)  (18,838) 10,269   (14,713) 6,357 
Net income (loss) $(4,571)$9,532  $(14,847)$14,127 
       
Weighted-average common shares outstanding:      
Basic  35,131  34,419   35,024  34,212 
Diluted  35,131  36,282   35,024  35,946 
       
Net income (loss) per common share:      
Basic $(0.13)$0.28  $(0.42)$0.41 
Diluted $(0.13)$0.26  $(0.42)$0.39 
       
Non-GAAP Measures (unaudited):      
Total billings $385,603 $240,699  $969,543 $701,755 
EBITDA $26,302 $7,419  $33,876 $38,494 
Adjusted EBITDA $27,619 $17,572  $50,091 $58,422 
       



 
TPI COMPOSITES, INC. AND SUBSIDIARIES
TABLE TWO - CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
 September 30,December 31,
(in thousands) 2019  2018 
Current assets:  
Cash and cash equivalents$92,085 $85,346 
Restricted cash 1,600  3,555 
Accounts receivable 152,725  176,815 
Contract assets 164,568  116,708 
Prepaid expenses 19,272  9,219 
Other current assets 26,609  16,819 
Inventories 11,559  5,735 
Total current assets 468,418  414,197 
Noncurrent assets:  
Property, plant, and equipment, net 193,988  159,423 
Operating lease right of use assets 126,366  - 
Other noncurrent assets 32,200  31,235 
Total assets$820,972 $604,855 
   
Current liabilities:  
Accounts payable and accrued expenses$286,545 $199,078 
Accrued warranty 48,282  36,765 
Current maturities of long-term debt 19,262  27,058 
Current operating lease liabilities 16,730  - 
Contract liabilities 2,141  7,143 
Total current liabilities 372,960  270,044 
Noncurrent liabilities:  
Long-term debt, net of debt issuance costs and  
current maturities 123,390  110,565 
Noncurrent operating lease liabilities 113,147  - 
Other noncurrent liabilities 5,310  3,289 
Total liabilities 614,807  383,898 
Total stockholders' equity 206,165  220,957 
Total liabilities and stockholders' equity$820,972 $604,855 
   
Non-GAAP Measure (unaudited):  
Net debt$(51,290)$(53,155)
   



 
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)  2019  2018   2019  2018 
Net cash provided by operating activities $64,253 $14,660  $62,735 $17,195 
Net cash used in investing activities  (22,455) (8,326)  (60,194) (50,636)
Net cash provided by (used in) financing activities  (8,088) (11,247)  2,358  (4,555)
Impact of foreign exchange rates on cash, cash equivalents and restricted cash  (811) 170   (115) (283)
Cash, cash equivalents and restricted cash, beginning of period  61,261  118,901   89,376  152,437 
Cash, cash equivalents and restricted cash, end of period $94,160 $114,158  $94,160 $114,158 
       
       
Non-GAAP Measure (unaudited):      
Free cash flow $
42,900 $
6,334  $
3,643 $
(33,441)
       



 
TPI COMPOSITES, INC. AND SUBSIDIARIES
TABLE FOUR - RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
      
Total billings is reconciled as follows:Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands) 2019  2018   2019  2018 
Net sales$383,836 $254,976  $1,014,387 $739,567 
(Increase) decrease in gross contract assets 2,303  (1,434)  (41,444) (24,526)
Foreign exchange impact (536) (12,843)  (3,400) (13,286)
Total billings$385,603 $240,699  $969,543 $701,755 
      
EBITDA and adjusted EBITDA are reconciled as follows:Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands) 2019  2018   2019  2018 
      
Net income (loss)$(4,571)$9,532  $(14,847)$14,127 
Adjustments:     
Depreciation and amortization 9,948  5,878   27,732  19,080 
Interest expense (net of interest income) 2,087  2,278   6,278  8,247 
Loss on extinguishment of debt -  -   -  3,397 
Income tax provision (benefit) 18,838  (10,269)  14,713  (6,357)
EBITDA 26,302  7,419   33,876  38,494 
Share-based compensation expense 1,682  1,972   4,604  6,971 
Realized (gain) loss on foreign currency remeasurement (3,719) 8,181   1,050  12,957 
Realized loss on sale of assets 3,354  -   10,561  - 
Adjusted EBITDA$27,619 $17,572  $50,091 $58,422 
      
Free cash flow is reconciled as follows:Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands) 2019  2018   2019  2018 
Net cash provided by operating activities$64,253
 $14,660  $62,735 $17,195 
Less capital expenditures (21,353) (8,326)  (59,092) (50,636)
Free cash flow$42,900 $6,334  $3,643 $(33,441)
              
Net debt is reconciled as follows:September 30,
December 31,
       
(in thousands) 2019  2018        
Cash and cash equivalents$92,085 $85,346        
Less total debt, net of debt issuance costs (142,652) (137,623)       
Less debt issuance costs (723) (878)       
Net debt$(51,290)$(53,155)