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TPI Composites, Inc. Announces Fourth Quarter and Full Year 2019 Earnings Results – Net Sales for the Year Up 40% and Strong Q4 Operational Results

Feb 27, 2020

SCOTTSDALE, Ariz., Feb. 27, 2020 (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 fourth quarter and full year ended December 31, 2019.

Highlights

For the quarter ended December 31, 2019:

  • Net sales of $422.1 million
  • Total billings of $417.7 million
  • Net loss of $0.9 million or $0.02 per share
  • EBITDA of $20.1 million
  • Adjusted EBITDA of $31.8 million

For the full year 2019:

  • Net sales of $1,436.5 million
  • Total billings of $1,387.2 million
  • Net loss of $15.7 million or $0.45 per share
  • EBITDA of $54.0 million
  • Adjusted EBITDA of $81.9 million
KPIs   Q4'19   Q4'18   FY’19   FY’18  
  Sets1 942   689   3,178   2,423  
  Estimated megawatts² 2,943   1,927   9,324   6,560  
  Utilization3 96 % 81 % 79 % 71 %
  Dedicated manufacturing lines4 52   55   52   55  
  Manufacturing lines installed5 48   43   48   43  
  Manufacturing lines in operation6 43   32   24   12  
  Manufacturing lines in startup7 3   7   14   16  
  Manufacturing lines in transition8 2   4   10   15  
  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 blades based on the number of manufacturing lines installed at the end of 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 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 achieved solid topline and Adjusted EBITDA growth in the fourth quarter despite a challenging operating environment in 2019,” said Steve Lockard, CEO of TPI Composites. “We continued to drive profitability by reducing our cycle times through improved speed and efficiency, while also delivering strong cash flow from operations for the full year 2019.  To that end, we’ve maintained a healthy balance sheet which has helped support our growth.  We continue to invest alongside our customers to support their global production needs and to better adapt to the evolving wind landscape. We have also made great progress working towards our diversification goals through our accelerated efforts around products and processes.

“We remain confident in the long-term outlook for the wind industry. The economics of wind remain attractive, and we believe we are well positioned in the wind energy supply chain to capitalize on its continued momentum as a trusted, independent manufacturer of composite wind blades.

“Our team continues to focus on improving operational efficiency, driving out costs, and delivering value to our shareholders. TPI had a strong finish to 2019 and we remain encouraged by our prospects going forward,” concluded Mr. Lockard.

Fourth Quarter 2019 Financial Results

Net sales for the three months ended December 31, 2019 increased by $132.1 million or 45.5% to $422.1 million compared to $290.1 million in the same period in 2018. Net sales of wind blades increased by 54.3% to $397.8 million for the three months ended December 31, 2019 as compared to $257.8 million in the same period in 2018. The increase was primarily driven by a 41% increase in the number of wind blades produced year over year largely as a result of increased production at our Mexico, China and Turkey facilities. Total billings for the three months ended December 31, 2019 increased by $112.9 million or 37.0% to $417.7 million compared to $304.8 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 0.8% and 1.0%, respectively, as compared to 2018.

Total cost of goods sold for the three months ended December 31, 2019 was $391.3 million and included $4.6 million related to three lines in startup and $0.2 million of transition costs related to two lines in transition during the quarter. This compares to total cost of goods sold for the three months ended December 31, 2018 of $277.5 million and included $20.5 million related to startup costs in our new plants in Turkey, Mexico, Iowa and China, the startup costs related to a new customer in Taicang, China and transition costs of $0.7 million related to the four lines in transition during the quarter. Cost of goods sold as a percentage of net sales decreased by three percentage points during the three months ended December 31, 2019 as compared to the same period in 2018, driven primarily by decrease in the startup and transition costs, foreign currency fluctuations and the impact of savings in raw material costs.

General and administrative expenses for the three months ended December 31, 2019 totaled $12.1 million, or 2.9% of net sales, compared to $11.6 million, or 4.0% of net sales, for the same period in 2018. The decrease was primarily driven by lower incentive compensation. 

Income taxes reflected a provision of $8.4 million for the quarter as compared to a provision of $3.3 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.

The net loss for the three months ended December 31, 2019 was $0.9 million as compared to a net loss of $8.8 million in the same period in 2018. The decrease in the net loss was primarily due to the reasons set forth above. The net loss per share was $0.02 for the three months ended December 31, 2019, compared to a net loss per share of $0.26 for the three months ended December 31, 2018. 

EBITDA for the quarter increased to $20.1 million, compared to $3.8 million during the same period in 2018. Adjusted EBITDA for the quarter increased to $31.8 million compared to $9.8 million during the same period in 2018. Adjusted EBITDA margin increased to 7.5% compared to 3.4% during the same period in 2018.

Capital expenditures were $15.3 million for the quarter compared to $2.1 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 $70.3 million of cash and cash equivalents and net debt was $71.8 million as compared to net debt of $53.2 million at December 31, 2018, and we had negative free cash flow during the quarter of $21.0 million.

2020 Guidance – for the full year ending December 31, 2020, we expect:

Net Sales $1.55 billion to $1.65 billion
Adjusted EBITDA $100 million to $125 million
Utilization1 80% to 85%
Capacity (sets)2 4,380
Average Selling Price per Blade $140,000 to $145,000
Non-Blade Sales3 $75 million to $100 million
Capital Expenditures $80 million to $90 million
Startup Costs $17 million to $20 million

The foregoing guidance takes into account the estimated impact of the COVID-19 virus on our operations in 2020, which we expect will adversely affect our Q1 2020 net sales by approximately $45 million and Adjusted EBITDA by approximately $15 million, however, we do not believe the COVID-19 virus will have a material impact on our results of operations for the full year because we expect to recover most if not all of the expected decline in net sales and Adjusted EBITDA in Q1 2020 over the remaining three quarters of 2020.  

  1. Utilization represents the percentage of wind blades invoiced during the period compared to the total potential capacity of wind blades based on the number of manufacturing lines installed at the end of the period.
  2. Capacity (sets) represents the total potential of wind blade sets (which consist of three blades) that can be invoiced worldwide during the period at 100% utilization.
  3. Non-blade sales represent sales of all products and services other than the sale of wind blades, which includes sales of our tooling for wind blades and other composite structures, transportation products, wind blade field services and repairs and engineering services.

Conference Call and Webcast Information

TPI Composites will host an investor conference call this afternoon, Thursday, February 27, 2020 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 1-877-407-9208, 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 13698754. The replay will be available until March 5, 2020. 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 the total amounts we have invoiced our customers for products and services that we are entitled to payment 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 realized gains or losses from foreign currency remeasurement, plus or minus any realized gains or losses from the sale of assets and asset impairments. 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 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
December 31,
  Year Ended
December 31,
 
(in thousands, except per share data)     2019     2018       2019     2018    
               
Net sales   $ 422,113   $ 290,057     $ 1,436,500   $ 1,029,624    
Cost of sales     386,484     256,258       1,290,619     882,075    
Startup and transition costs     4,827     21,234       68,033     74,708    
Total cost of goods sold     391,311     277,492       1,358,652     956,783    
Gross profit     30,802     12,565       77,848     72,841    
General and administrative expenses     12,115     11,634       39,916     43,542    
Realized loss on sale of assets and asset impairments     7,556     4,581       18,117     4,581    
Restructuring charges, net     202     -       3,927     -    
Income (loss) from operations     10,929     (3,650 )     15,888     24,718    
Other income (expense):              
Interest income     32     52       157     181    
Interest expense     (1,776 )   (2,041 )     (8,179 )   (10,417 )  
Loss on extinguishment of debt     -     -       -     (3,397 )  
Realized loss on foreign currency remeasurement     (3,057 )   (532 )     (4,107 )   (13,489 )  
Miscellaneous income     1,413     647       3,648     4,650    
Total other expense     (3,388 )   (1,874 )     (8,481 )   (22,472 )  
Income (loss) before income taxes     7,541     (5,524 )     7,407     2,246    
Income tax benefit (provision)     (8,402 )   (3,324 )     (23,115 )   3,033    
Net income (loss)   $ (861 ) $ (8,848 )   $ (15,708 ) $ 5,279    
               
Weighted-average common shares outstanding:              
Basic     35,174     34,606       35,062     34,311    
Diluted     35,174     34,606       35,062     36,002    
               
Net income (loss) per common share:              
Basic   $ (0.02 ) $ (0.26 )   $ (0.45 ) $ 0.15    
Diluted   $ (0.02 ) $ (0.26 )   $ (0.45 ) $ 0.15    
               
Non-GAAP Measures (unaudited):              
Total billings   $ 417,692   $ 304,786     $ 1,387,235   $ 1,006,541    
EBITDA   $ 20,133   $ 3,814     $ 54,009   $ 42,308    
Adjusted EBITDA   $ 31,823   $ 9,751     $ 81,914   $ 68,173    
               


TPI COMPOSITES, INC. AND SUBSIDIARIES  
TABLE TWO - CONDENSED CONSOLIDATED BALANCE SHEETS  
(UNAUDITED)  
  December 31, December 31,  
(in thousands)   2019     2018    
Current assets:      
Cash and cash equivalents $ 70,282   $ 85,346    
Restricted cash   992     3,555    
Accounts receivable   184,012     176,815    
Contract assets   166,515     116,708    
Prepaid expenses   10,047     9,219    
Other current assets   29,843     16,819    
Inventories   6,731     5,735    
Total current assets   468,422     414,197    
Noncurrent assets:      
Property, plant, and equipment, net   205,007     159,423    
Operating lease right of use assets   122,351     -    
Other noncurrent assets   30,897     31,235    
Total assets $ 826,677   $ 604,855    
       
Current liabilities:      
Accounts payable and accrued expenses $ 293,104   $ 199,078    
Accrued warranty   47,639     36,765    
Current maturities of long-term debt   13,501     27,058    
Current operating lease liabilities   16,629     -    
Contract liabilities   3,008     7,143    
Total current liabilities   373,881     270,044    
Noncurrent liabilities:      
Long-term debt, net of debt issuance costs and      
current maturities   127,888     110,565    
Noncurrent operating lease liabilities   113,883     -    
Other noncurrent liabilities   5,975     3,289    
Total liabilities   621,627     383,898    
Total stockholders' equity   205,050     220,957    
Total liabilities and stockholders' equity $ 826,677   $ 604,855    
       
Non-GAAP Measure (unaudited):      
Net debt $ (71,779 ) $ (53,155 )  
       


TPI COMPOSITES, INC. AND SUBSIDIARIES  
TABLE THREE - CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(UNAUDITED)  
    Three Months Ended December 31,   Year Ended December 31,  
(in thousands)     2019     2018       2019     2018    
               
Net cash provided by (used in) operating activities $ (5,651 ) $ (20,453 )   $ 57,084   $ (3,258 )  
Net cash used in investing activities     (15,316 )   (2,052 )     (75,510 )   (52,688 )  
Net cash provided by (used in) financing activities   (1,388 )   (3,177 )     970     (7,732 )  
Impact of foreign exchange rates on cash, cash equivalents and restricted cash     (56 )   900       (171 )   617    
Cash, cash equivalents and restricted cash, beginning of period     94,160     114,158       89,376     152,437    
Cash, cash equivalents and restricted cash, end of period   $ 71,749   $ 89,376     $ 71,749   $ 89,376    
               
               
Non-GAAP Measure (unaudited):              
Free cash flow   $ (20,967 ) $ (22,505 )   $ (17,324 ) $ (55,946 )  
               


TPI COMPOSITES, INC. AND SUBSIDIARIES  
TABLE FOUR - RECONCILIATION OF NON-GAAP MEASURES  
(UNAUDITED)  
             
Total billings is reconciled as follows: Three Months Ended December 31,   Year Ended December 31,  
(in thousands)   2019     2018       2019     2018    
Net sales $ 422,113   $ 290,057     $ 1,436,500   $ 1,029,624    
Change in gross contract assets   (1,961 )   9,515       (43,405 )   (15,011 )  
Foreign exchange impact   (2,460 )   5,214       (5,860 )   (8,072 )  
Total billings $ 417,692   $ 304,786     $ 1,387,235   $ 1,006,541    
             
EBITDA and adjusted EBITDA are reconciled as follows: Three Months Ended December 31,   Year Ended December 31,  
(in thousands)   2019     2018       2019     2018    
Net income (loss) $ (861 ) $ (8,848 )   $ (15,708 ) $ 5,279    
Adjustments:            
  Depreciation and amortization   10,848     7,349       38,580     26,429    
  Interest expense (net of interest income)   1,744     1,989       8,022     10,236    
  Loss on extinguishment of debt   -     -       -     3,397    
  Income tax provision (benefit)   8,402     3,324       23,115     (3,033 )  
EBITDA   20,133     3,814       54,009     42,308    
  Share-based compensation expense   1,077     824       5,681     7,795    
  Realized loss on foreign currency remeasurement   3,057     532       4,107     13,489    
  Realized loss on sale of assets and asset impairments   7,556     4,581       18,117     4,581    
Adjusted EBITDA $ 31,823   $ 9,751     $ 81,914   $ 68,173    
             
Free cash flow is reconciled as follows: Three Months Ended December 31,   Year Ended December 31,  
(in thousands)   2019     2018       2019     2018    
Net cash provided by (used in) operating activities $ (5,651 ) $ (20,453 )   $ 57,084   $ (3,258 )  
Capital expenditures   (15,316 )   (2,052 )     (74,408 )   (52,688 )  
Free cash flow $ (20,967 ) $ (22,505 )   $ (17,324 ) $ (55,946 )  
             
Net debt is reconciled as follows: December 31,        
(in thousands)   2019     2018          
Cash and cash equivalents $ 70,282   $ 85,346          
Less total debt, net of debt issuance costs   (141,389 )   (137,623 )        
Less debt issuance costs   (672 )   (878 )        
Net debt $ (71,779 ) $ (53,155 )        
             
A reconciliation of the low end and high end ranges of projected net income to projected EBITDA and projected adjusted EBITDA for the full year 2020 are as follows:   2020 Guidance Range (1)  
(in thousands)       Low End High End  
Projected net income       $ 16,000   $ 26,000    
Adjustments:            
  Projected depreciation and amortization         50,000     55,000    
  Projected interest expense (net of interest income)         11,000     13,000    
  Projected income tax provision         10,000     15,000    
Projected EBITDA         87,000     109,000    
  Projected share-based compensation expense         5,000     6,000    
  Projected realized loss on sale of assets and asset impairments       8,000     10,000    
Projected Adjusted EBITDA       $ 100,000   $ 125,000    
             
(1) All figures presented are projected estimates for the full year ending December 31, 2020.      
             


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Source: TPI Composites, Inc.

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