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Earnings call: TPI Composites Q1 2024 earnings, sustainability & market outlook

EditorAhmed Abdulazez Abdulkadir
Published 03/05/2024, 16:42
© Reuters.
TPIC
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TPI Composites, Inc. (NASDAQ:TPIC), a leader in the wind energy industry, reported its first quarter 2024 earnings, emphasizing a strategic focus on sustainability and a commitment to achieving carbon neutrality by 2030. Despite facing challenges such as production line startups and transitions, the company reported sales slightly ahead of plan. TPI Composites also reiterated its revenue guidance for the year, expecting a rebound in wind installations and a significant increase in profitability in 2025.

Key Takeaways

  • TPI Composites reported a decrease in net sales to $299.1 million in Q1 2024, a 26% drop year-over-year.
  • Adjusted EBITDA showed a loss of $23 million, attributed to lower sales and higher startup and transition costs.
  • Positive EBITDA margins and free cash flow are anticipated in the second half of 2024.
  • The wind business performed well, while the field service and automotive segments saw revenue declines.
  • Investments in renewable energy in Turkey and India, and strides in inclusion and diversity were highlighted.
  • The company maintains its full-year revenue guidance between $1.3 billion and $1.4 billion.

Company Outlook

  • TPI Composites is committed to sustainability, aiming for carbon neutrality by 2030.
  • The company expects wind installations to increase due to favorable government policies.
  • A significant step up in profitability is anticipated in 2025.
  • TPI Composites plans to complete a transaction for its EV business by the end of Q2 2024.

Bearish Highlights

  • Decline in revenue for the field service business due to fewer technicians.
  • Automotive segment revenue fell, primarily impacted by the Proterra bankruptcy.
  • Negative free cash flow of $47.3 million, although an improvement from the previous year.

Bullish Highlights

  • Decline in commodity costs could be beneficial for TPI Composites and its customers.
  • The Nordex project is on schedule for handover at the end of June.
  • Potential interest in reactivating idle lines in India, possibly in 2025.

Misses

  • Net sales of wind blades and related products decreased by 25.5% from Q1 2023.
  • Adjusted EBITDA was impacted by higher startup and transition costs, along with warranty claim estimates.

Q&A Highlights

  • TPI Composites is exploring strategic alternatives for its EV business, with updates expected by the end of the quarter.
  • Repowering is expected to play a significant role in the US wind market's next upcycle.
  • The company anticipates an increase in average selling prices in the second half of the year with the introduction of new blades.

In conclusion, TPI Composites is navigating a challenging market environment with a clear focus on long-term sustainability and market recovery. The company's leadership remains optimistic about future growth prospects, driven by global efforts to transition to renewable energy and their strategic positioning in the market.

InvestingPro Insights

TPI Composites, Inc. (TPIC) has been steering through a turbulent financial landscape, as reflected in the company's recent performance metrics. The InvestingPro Data paints a picture of the challenges and the resilience of the company:

  • The Market Cap stands at a modest 172.79M USD, illustrating the company's current valuation in the market.
  • A negative P/E Ratio of -0.88 for the last twelve months as of Q1 2024 indicates that investors are not receiving earnings for their shareholdings, which aligns with the company's reported losses.
  • Revenue has seen a contraction of 14.72% over the last twelve months as of Q1 2024, which corroborates the sales decline mentioned in the company's financial report.

In terms of InvestingPro Tips, two notable points stand out:

1. TPIC operates with a significant debt burden, which may be a concern for investors considering the company's ability to manage financial obligations amidst declining revenues.

2. Analysts do not anticipate the company will be profitable this year, which suggests that the path to achieving the optimistic profitability in 2025 may be fraught with challenges.

For readers looking to delve deeper into the financial health and future prospects of TPI Composites, additional InvestingPro Tips are available. These tips provide a more comprehensive understanding of the company's performance and can be accessed at https://www.investing.com/pro/TPIC. There are 11 more tips listed in InvestingPro that could offer further insights into TPIC's financial and market position.

Interested readers can benefit from an additional 10% off a yearly or biyearly Pro and Pro+ subscription by using the coupon code PRONEWS24 at checkout. This offer could be particularly valuable for those seeking in-depth analysis and real-time data to inform their investment decisions regarding companies like TPIC.

Full transcript - TPI Composites Inc (TPIC) Q1 2024:

Operator: Good afternoon, and welcome to the TPI Composites First Quarter 2024 Earnings Conference Call. At this time, I'd like to turn the conference over to Jason Wegmann. Thank you. You may begin.

Jason Wegmann: Thank you, operator. I would like to welcome everyone to TPI Composites First Quarter 2024 Earnings Call. We will be making forward-looking statements during this call that are subject to risks and uncertainties, which could cause actual results to differ materially. A detailed discussion of applicable risks is included in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, tpicomposites.com. Today's presentation will include references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the Comparable GAAP financial measures. With that, let me turn the call over to Bill Siwek, TPI Composites for resident and CEO.

Bill Siwek: Thanks, Jason. Good afternoon, everyone. Thank you for joining our call. In addition to Jason, I'm here with Ryan Miller, our CFO. Please turn slide five. I'm pleased to announce the publication of our 2023 Sustainability Report in March of this year. We remain committed to our publicly stated goals of fostering a zero-harm culture in achieving carbon neutrality by 2030 through 100% renewable energy procurement. Wind blades produced by us in 2023 are estimated to prevent approximately 346 million metric tons of CO2 emissions over their 20-year lifespan. We're advancing towards our 2030 goal of carbon neutrality, achieving an 18% reduction in overall market-based Scope 1 and 2 CO2 emissions. In Turkey, we invested in two wind turbines and additional solar panels. Further, to enhance on-site renewable energy use, we signed a power purchase agreement in India. We reduced total annual waste generated by 12%. Our behavior-based safety program continued to yield safety results outperforming industry standards in our internal goals, and we have fully embraced our IDEA program and will recognize with numerous awards for our commitments to inclusion and diversity around the globe. In the U.S., our LEAP for Women program was recognized with a GRID Award for Best Affinity Group. In Mexico, we were recognized as a top employer. In India, we were recognized as one of the 100 best companies for women, and in Turkey, we were awarded the Silver Steady Great Employers Award for Achievement in Diversity and Inclusion. Advancing our sustainability goals remains a priority in 2024. We're actively negotiating a purchase power agreement in Mexico to ensure 100% renewable energy for our facilities there. Additionally, we're working to expand on our recent PPA in India. These investments go beyond environmental benefits. They also make strong economic sense, contributing directly to the improvement of our financial performance. Please turn to slide seven. With the guidance we provided during our 2023 fourth quarter earnings call, sales and adjusted EBITDA on the first quarter of 2024 were lower than in the prior year due to the timing of production line startups and transitions across several of our facilities. However, they were slightly ahead of our plan, so we are still on track for the full year. Let me remind you that we expect to go back to positive EBITDA margins and positive free cash flow in the second half of the year after we get through the process of ramping up the 10 lines that are in startup or transition in the first half of the year. I'm confident in our ability to achieve mid-single-digit adjusted EBITDA margins in the second half of the year, given the excellent operational execution we are seeing today in most of our plans. The $23 million adjusted EBITDA loss in the first quarter included $22 million related to startup and transition costs, $9 million of unanticipated losses from the Nordex Matamoros plant due to temperature and humidity issues as well as decreased volume requirements, and we recorded an $8 million charge to account for the inflationary impact of completing pre-existing warranty claims. Without these items, our adjusted EBITDA margin would have been over 5% and that's at a 67% factory utilization level. I'm not expecting these items to impact us in the second half of the year, which is why we will return to solid margin performance in the third and fourth quarters when our utilization climbs well above 80%. Activities to transition the Matamoros plant back to Nordex are in full swing and we are on track to return to the facility by June 30 as planned. Our use of cash in the quarter was primarily to fund our startups and transitions and was aligned with our expectations. We believe our quarter-end cash balance of $117 million, along with access to existing credit facilities, and the significant impact of the strategic refinancing with Oaktree provides us ample equity to navigate current market conditions and ultimately expand to meet our customers' growing needs as we target a return to positive cash flow in the second half of the year. Please turn to slide eight. Turning to our wind business performance, our blade facilities in India and Turkey continue to be profitable, delivering 241 blade sets representing 1.4 gigawatts of capacity during the quarter. Most of our Mexico operations performed well, even while going through numerous transition startups and volume adjustments. Overall, our operating performance is benefiting from our renewed focus on lean, embracing lean practices and ensuring they are part of our day-to-day culture will enable us to deliver greater value to our customers while optimizing our cost structure, maximizing productivity and manufacturing the highest quality blades in the industry. Moving on to our field service business, as anticipated, our global service revenue declined year-over-year. This reflects a temporary reduction in technicians assigned to revenue-generating projects due to the warranty campaign announced last year. We expect our technicians to return to normal levels of revenue-generating work by mid-year. Despite continued progress building the automotive segment's order pipeline and operational execution, and notwithstanding growth in non-Proterra revenue, Q1 revenue fell year-over-year due to the Proterra bankruptcy. The growth in non-Proterra revenue was largely due to the launch of a new product line for our largest passenger EV customer. While we've made significant investments in expanding our automotive business over the past years and continue to see strong growth potential for composite products and electric vehicles, we're prioritizing capital allocation towards the wind business. To ensure our automotive segment has the resources and support to execute its growth strategies, we've been exploring strategic alternatives and expect to finalize a transaction by the end of the second quarter. Our supply chain execution and cost performance remain very stable. Raw material costs have decreased compared to this time in 2023, with further savings expected due to excess manufacturing capacity in China. Logistics around the Red Sea situation remain well-managed with no operational or significant cost impacts to date. Now, with respect to the wind market, we are seeing the beginnings of an EntraWin [ph] rebound driven by ambitious government action, including the Inflation Reduction Act in the U.S. and the E.U. Green Deal and Repower E.U. policies, in response to the need for greater energy independence and security to address climate change and to meet the increase in global electricity demand, fueled by factors like generative artificial intelligence and data centers, EVs, and the electrification of buildings. Excluding China, expectations are for global onshore installations to hold steady in 2024, with the growth inflection point in 2025 followed by continued expansion throughout the decade. And the U.S. BNEF is projecting onshore wind installations in 2024 of 8.4 gigawatts and to be nearly 20 gigawatts per year by the end of the decade. While favorable long-term policies like those in the U.S. and the E.U. provide optimism and have helped to accelerate orders for our customers, we still don't anticipate increase wind installations in our primary markets to fully materialize until 2025. The industry still awaits some critical details on implementing key components of the Inflation Reduction Act, such as the domestic content adder, prevailing wage and apprenticeship clarifications, 45Z, and the transition from PTC (NASDAQ:PTC) and ITC to the new tech-neutral version. Also elevated interest rates, inflation, the cost and availability of capital permitting hurdles and transmission bottlenecks are also contributing to near-term delays. There are, however, encouraging signs that the U.S. and the E.U. are addressing permitting and transmission bottlenecks. FA Wind recently announced that permits for projects in Germany soared to a record high in the first quarter of 2024, nearly 40% higher than the same period last year. This progress is largely attributed to new laws and regulations that streamline the permitting process, including granting renewable energy projects overriding public interest status. In the U.S., the Department of Energy released a transmission interconnection roadmap, I2X, to tackle challenges in connecting renewable energy to the grid. This roadmap aims to streamline the process by 2030, focusing on faster approvals and more consistent costs while maintaining grid stability. Additionally, the White House Council on Environmental Quality has finalized a rule to reform, simplify, and modernize the federal environmental review process under the National Environmental Policy Act. The new rule will build on more than $1 billion from President Biden's Inflation Reduction Act to expedite federal agency permitting. Technical advances are also being made. Recent research shows re-conductoring existing transmission lines with advanced conductors can double capacity on existing rights of way in just 18 to 36 months. Now, before I turn it over to Ryan, our financial outlook hasn't changed over the past couple of quarters as we still expect 2024 to be a year of transition. We're currently running 36 production lines, including those for Nordex and Matamoros, which are on track to transition back to them by the end of the second quarter. We are progressing nicely on the start of some transitions, all of which will impact production volume and utilization in the first half of the year, but significant improvement is expected in the second half as these lines achieve serial production. Despite lower utilization in 2024 compared to 2023, we still expect strong improvement and profitability as we have addressed the operational challenge faced in 2023. As such, we are reconfirming our 2024 revenue guidance of $1.3 billion to $1.4 billion with an EBITDA margin between 1% and 3%. In 2025, we continue to expect a significant step up in profitability with EBITDA exceeding $100 million, putting us back on track to achieve our high single-digit EBITDA margin target in 2026 and beyond. With that, I'll turn the call over to Ryan to review our financial results.

Ryan Miller: Thanks, Bill. Please turn to slide 10. In the first quarter of 2024, net sales were $299.1 million compared to $404.1 million for the same period in 2023, a decrease of 26%, net sales of wind blades, tooling, and other wind-related sales, which hereafter I'll refer to as just wind sales, decreased by $98.7 million in the first quarter of 2024, or 25.5% compared to the same period in 2023. Blade sales this quarter were negatively affected by startup and transition activities at our Mexico and Turkey facilities, expected volume declines based on market activity levels, and a decrease in average sales prices due to changes in the mix of wind-blade models produced. This decrease was partially offset by favorable foreign currency fluctuations and an increase in tooling sales in preparation for manufacturing line startups and transitions. Field service revenue declined by $1.1 million in the first quarter of 2024 compared to the same period in 2023. Our first quarter is typically a low point for service revenue due to seasonal weather patterns and the nature of the work performed, and this year was also impacted by the warrants campaign announced last year. We expect a full transition back to revenue generating activity by the second half of this year. Automotive sales decreased by $5.3 million in the first quarter of 2024 compared to the same period in 2023. This decrease was primarily due to a reduction in bus body delivery due to Proterra bankruptcy partially offset by an increase in sales of other automotive programs and the launch of a new product line for our largest passenger EV customer. Adjusted EBITDA for the first quarter of 2024 was a loss of $23 million compared to the adjusted EBITDA of $8.4 million during the same period in 2023. The decrease in adjusted EBITDA for the first quarter of 2024 as compared to the same period in 2023 was primarily driven by lower sales, higher startup and transition costs, and changes in estimate for pre-existing warranty claims partially offset by favorable foreign currency fluctuations. Moving to slide 11, we entered the quarter with $170 million of unrestricted cash and cash equivalents and $510 million of net debt. As planned, we had negative free cash flow of $47.3 million in the first quarter of 2024 compared to negative free cash flow of $87.1 million in the same period in 2023. The year-over-year improvement was primarily driven by the absence of payments tied to the closure of our operations in China and the growth of contract assets in the first quarter of last year. The net use of cash in the first quarter of 2024 was primarily due to our EBITDA loss, capital expenditures and interest in tax payments. As previously communicated, we expect the second quarter to be the low water mark for cash. We've had much success improving the efficiency of our balance sheet over the past couple quarters and we will remain focused on preserving cash and optimizing working capital to ensure we have the resources to execute key initiatives and restart idle capacity moving forward. A summary of our financial guidance for 2024 can be found on slide 12. There are no changes to our original financial guidance provided earlier in the year and I want to reiterate that the results from the first quarter for sales, adjusted EBITDA and cash flow were in line with our plans. We continue to anticipate sales from continuing operations in the range of $1.3 to $1.4 billion for the year. We also continue to believe 2024 will be the tail of two halves. In the first half, we will be ramping up 10 lines that are either in startup or transition. We expect the first half's volume to be a fair amount lower than the second half and the first quarter will be lower than the second quarter. As we work through these transitions and startups, we are generating modest losses and consuming cash. In the first half of the year, we are still expecting our adjusted EBITDA margin to be a mid-single-digit loss. The first quarter was likely our low point for profitability this year and we should improve somewhat in the second quarter as volumes ramp to serial production. Our adjusted EBITDA margin improves to mid-single digits in the second half of the year and we expect to be generating positive cash flow. For the full year, we anticipate capital expenditures of $25 to $30 million. These investments are driven by our continued focus on achieving our long-term growth targets and restarting our idle lines. We continue to be confident in our liquidity position, which has improved significantly since we refinanced the Oaktree preferred shares into a term loan. We believe our balance sheet, along with the improvement in our liquidity and operating results, will enable us to navigate another transition year and will also allow us to invest to achieve our mid- and long-term growth, profitability, and cash flow targets. With that, I'll turn the call back over to Bill.

Bill Siwek: Thanks, Ryan. Please turn to slide 14. The numerous government policy initiatives aim at expanding the use of renewable energy, the need for energy independence, and security and growing OEM backlogs give us confidence in the wind industry's short and long-term growth. We are an integral part of the EntraWin growth story, and we remain focused on managing our business with an acute focus on reinforcing lean principles to enhance our operational and financial performance. We are committed to partnering with our customers by aligning our factories to support their next-generation turbine models, while also actively evaluating new geographies and sites to meet their expected needs in the future. The process of startups and transitions is progressing well, and we remain confident in our full-year financial expectations as we are planning a return to mid-single-digit adjusted EBITDA margins and positive free cash flow in the second half of 2024. Long-term prospects for TPI remain strong, and we are ready to get back to adjusted EBITDA north of $100 million in 2025. Finally, I want to thank all of our TPI associates for their continued commitment, dedication, and loyalty to TPI. I'll now turn it back to the operator to open the call for questions.

Operator: We will now begin the question and answer session. [Operator Instructions] The first question comes from Mark Strouse with JPMorgan. Please go ahead.

Mark Strouse: Yes. Good afternoon. Thank you very much for taking our questions. Yes. Congrats on the progress, sounds like we're getting closer and closer here. I did want to ask something on the guidance outlook. I think before you said the utilization percentage was on 36 lines. Now it's on 34. I'm sorry if I missed that. But what drove the difference in two lines?

Ryan Miller: So we have [indiscernible] for you. We have a couple lines that we're working through the contract on that through the first quarter and there are two lines in our India location where demand has come down and they're no longer under contract. So still working through filling that up, but it's two lines in our India site that they came down for. It didn't impact our guidance or sales or anything, all of our sales volume and everything still remains the same for '24.

Mark Strouse: Okay, got it. And then just following up on the last call, you mentioned some damages that you were seeking from the bad supply that you got. Is there any update on that timing or magnitude?

Bill Siwek: Yes, Mark. Okay, not going to give you the magnitude, but that claim has been filed and it's in process right now. I would expect that we would have it resolved before the end of the second quarter and it will be positive.

Mark Strouse: Okay. And then lastly for me, the GE war has ramp, I believe you said that that's still on track. My understanding is that ramps in 2Q, is that still correct?

Bill Siwek: Yes, so we were, yes, so the Mexico 2 facility is ramping as we speak, so that'll be ramping through Q2 and into Q3.

Mark Strouse: Yes. Okay, I'll take you at offline. Thank you.

Ryan Miller: Yes, just to clarify, we had two lines up and running today and then the other two lines, there are two more lines that will come up in Q2. It will be in sale production in the second half of the year on that point.

Mark Strouse: Okay, thanks, Ryan.

Ryan Miller: Thanks, Mark.

Operator: The next question is from Pavel Malikov, I'm sorry, Raymond James. Please go ahead.

Pavel Malikov: Yes, thanks for taking the question. Let me start with kind of a housekeeping question. Interest expense in Q1, $21 million seemed rather high. Is that going to be the run rate going forward?

Ryan Miller: Yes, Pavel, so because we took the -- we have the fair value, the debt that we had with Oaktree in the fourth quarter last year and refinanced that, if you recall, we had a $118 million discount, and so there are really two components of interest and why it's at that elevated level. One is just the interest that we're picking. And so that - so this year, that will probably be the neighborhood of $46-ish million or so for the full year, and then the discount amortization will be around $31 million, and so you will see an elevated level of interest because we need to increase that discount up. So full year, I'd expect that our interest expense on Oaktree, including that discount, is going to be in the neighborhood of $77 million.

Pavel Malikov: Okay. That's very helpful. On the EV business, you mentioned you're still kind of contemplating its future. Anything changed from the last time we spoke three months ago in that regard?

Bill Siwek: No, not really. We're in advanced discussions, and our plan is to have a transaction completed by the end of the second quarter.

Pavel Malikov: Okay. We will look forward to that. And last question, we've seen a lot of input costs across the Queentex [ph] value chains subsiding, certainly including steel and others, carbon fiber that are relevant from your perspective. What kind of role is that playing in the margin uplift that you're envisioning for the second half of the year?

Ryan Miller: Yes. I mean, we are seeing, we have seen decreases in overall raw material costs year-over-year from last year to this year, for sure. Clearly a portion of that we benefit from, so that's a small portion, I would say, of the uplift. The bigger portion is just getting the lines out of transition and start-up into serial production and driving our utilization up north of 80%, 85%. That's the biggest driver. But there is some uplift from the commodity cost decline, for sure. If you'll remember, Pavel, we share a bunch of that with our customers, so we get a piece of it. Our customers get a piece of it, but it is helpful, for sure.

Pavel Malikov: Understood. All right. Thanks very much.

Bill Siwek: Thank you.

Operator: [Operator Instructions] The next question is from Eric Stine with Craig Hallum. Please go ahead.

Eric Stine: Hi, Bill. Hi, Ryan.

Bill Siwek: Hey, Eric. How are you?

Eric Stine: Hi, doing well. Thanks. So maybe just starting on the start-up and transitions, given your commentary, obviously going to be heavy again in the second quarter, is it a kind of a similar number in terms of start-up and transition costs in Q2, and then I would think that as part of your guidance that meaningfully subsides in the second half?

Ryan Miller: That's correct.

Eric Stine: Okay. So the $22.2 million, I mean, I think, did you complete, I think it was either four or six. So it's, I mean, again, that's a representative number to think about?

Ryan Miller: Yes, so we had six lines that we had started up by the end of the quarter, and yet the $22 million relates to those. We have four more lines yet to start up. I think the first quarter is from our internal forecast, will probably be the heaviest quarter for startup and transition costs. So I don't expect it to be above that number that you found in the first quarter and the second quarter.

Eric Stine: Okay. That was helpful. And then just on Nordex, good to hear that that's on track to turn the handover at the end of June, you called out, I believe, $9 million in kind of one-time expenses, and I know that's a big part of your confidence in what the second half looks like. Can you just remind us, though, I mean, is there a number, I mean, what are the expenses above and beyond what maybe you would call one time that hit you in the first quarter?

Bill Siwek: Yes, I'm not sure I would characterize them as one-time. What they really, what they actually were was underutilization of the plant as a result of us having to halt production for a period of time due to temperature and humidity issues in the facility, as well as their reduced demand, reduced volume needs from the customer. And as a result, you know this is a pretty fixed cost business. So that's what's created the challenge in the first quarter. We see that.

Eric Stine: Okay. So there's not a -

Bill Siwek: You know. Go ahead.

Eric Stine: Yes. I was just going to say, so it's not, it's not $9 million plus a number. It's more that's just kind of a good number to use that will not be there when you get into the second half?

Bill Siwek: That's correct.

Eric Stine: Okay. All right. And then last one for me, just on the EV business, so strategic alternatives and you're talking about targeting a transaction. I mean, that implies at least to me that that might no longer be part of your business going forward or is that same transaction kind of a catch all could mean an investment, could mean partnering that includes an investment, which is the better way to think about it?

Ryan Miller: Yes, it could be any one of those. Eric.

Eric Stine: Okay. Yes. All right.

Ryan Miller: You'll know by the end of the quarter.

Eric Stine: All right. Thank you.

Bill Siwek: Yes. Thank you.

Operator: The next question is from Jeffrey Osborne with TD Cowen. Please go ahead.

Jeffrey Osborne: Good afternoon, Bill. Just a couple of questions on my end. On the Iowa facility as part of the CapEx guidance, can you just remind us what you'll be producing for GE there? Is that a repowering product or one of their newer blades? And then what would be the timing of when that revenue would start?

Ryan Miller: Yes. So not sure yet, Jeff. That's still, still to be determined and timing is, I would say most likely as first, as early 2025 would be my best guess at this point in time. But don't have a final, don't have a final blade type nor a final start date yet. That's still in discussion.

Jeffrey Osborne: But it's in the CapEx guidance just to be clear.

Ryan Miller: No. That's not in the CapEx guidance. It, quite frankly, Jeff, it'll depend on the blade, right? If it's the same blade we've been building the CapEx is pretty light. If it's a new blade, depending on the size of the blade, then that'll be a different CapEx number. So, until we understand what blade type, it's hard to predict that.

Jeffrey Osborne: So is there a way to box, put bookings on that, like what the upside number to CapEx would be, just given the strain balance sheet with the low water point here, because that's an extra 10 million?

Bill Siwek: Yes it's probably no more than 10 million would be my guess. Again, it'll depend on the blade type ultimately. And how many lines, quite frankly.

Jeffrey Osborne: Got it. The, the building is what suitable for -- is it five, six lines?

Bill Siwek: Right now it's, it's got, we, the last blade we built was a 62 meter blade and we had six lines in there.

Jeffrey Osborne: Got it. And then you spoke super fast when you had the three items around the EBITDA translation, so nine million was the Nordex that we talked about just before. The 8 million was the inflation on the pre-existing warranty claims. What was the 22 million for?

Bill Siwek: No, that was the startup and transition costs that we incurred in the quarter.

Jeffrey Osborne: Got it. All right. Perfect. That's all I had.

Bill Siwek: All right. Cool. Thanks, Jeff.

Operator: The next question is from Tom Curran with Seaport Research Partners. Please go ahead.

Tom Curran: Hi guys.

Bill Siwek: Hi, Tom.

Tom Curran: Casting my view out a bit, a bit longer term here and, and allowing us to dream a bit. Are you seeing any, any green shoots of potential interest that could lead you to reactivating the, the two idle lines in, in Turkey? And if you are, when might be the earliest we could see you do that?

Bill Siwek: We really don't have idle lines in Turkey right now. We have two idle lines in India. And the answer is, yes, I mean, we're starting to see order books fill or backlog build. A lot of that backlog as you probably know, it's for '25 and '26 and beyond. But I think as things begin to open up a little bit more in Europe as well as the U.S., you could see those lines. So now there is a lot of activity around those lines, Tom. We are actively working or in discussions with multiple parties for those lines. So, it's not that there's not activity. So we are optimistic that we fill. Not only those two lines that got idled, but there's two more lines there as well that we can activate. So we've got a total of four potentially to activate in India as we move forward through the year.

Tom Curran: And those are all in tonight, Bill.

Bill Siwek: Yes. It's correct. Yes.

Tom Curran: And, and sorry, if I misspoke when I said Turkey, I didn't mean India. Could we -- if all went well, would we expect to see the CapEx and production contribution from those most likely in '25?

Ryan Miller: Given where we're at in the year, probably it's most likely that it would be '25 -- you start to see the revenue in '25 as well as contribution. CapEx again, depending on blade size, number of blades, et cetera, the CapEx will vary there. I mean, that's already an eight line facility where we built it out pretty nicely. So there shouldn't be a ton of CapEx as we activate those four lines.

Tom Curran: Maybe like 2 million to 4 million range?

Ryan Miller: Again, it'll depend on blade size. Quite frankly, I hate to keep saying that but that's pretty important is the blade size. So, I mean, we sized it for 80 plus meter blades for eight lines depending on who the customer is. Some of them take more room than others, depending on how the blade is constructed. But it should be relatively minor amount of CapEx if we fill all these lines.

Tom Curran: Got it. And then, sticking with blade size and, and how important it is. Gifting back to new in Iowa and how seriously GE seems to be deliberating whether to stick with the 127 versus shifting to the new workforce model, in part, from my understanding, because of its popularity for repowering, especially given the, the share gains GE seems to have made in the U.S. market. As you look to the next upcycle in the U.S., do you expect repowering to play a bigger role in this next upcycle that it did in the prior one?

Bill Siwek: Yes, I certainly then it did in the prior one. The numbers I've seen are pretty fairly significant in the U.S. between now and kind of 2030 time frame. So yes, I mean, the bulk of it will still be new install, but there is a fair amount of repowering that we're seeing in the marketplace. So I do think that it will play a much bigger role this time around than it did last time for sure.

Tom Curran: Got it. Thanks for taking my questions.

Bill Siwek: Thanks, Tom.

Operator: The next question is from William Griffin with UBS. Please go ahead.

William Griffin: Hey, good evening, thanks for the time. Just one for me here. Really curious if you have any comments around what you're seeing in terms of offshore wind discussions with your customers, just giving the pullback and a lot of U.S. projects and perhaps as that maybe shift away from offshore, creating some opportunities for some of your onshore production?

Bill Siwek: So, on the first part of the question, not having a lot of active discussions today in the offshore space, and I'm not sure that that really has an impact on what we're doing from an onshore perspective. I will tell you as we look at where onshore growth may be, we're always keeping in mind the offshore side of it as well and where we might think about different geographies, we would certainly keep in mind an offshore play at some point in time, but today that's certainly on the back burner.

William Griffin: Got it. Thanks very much.

Bill Siwek: Yes. Thanks Will.

Operator: The next question is from Patrick Ouellette with Stifel. Please go ahead.

Unidentified Analyst: Hey, it's [indiscernible]. Thanks for taking a question. So just a quick one on the ASP side. Price came down from last year. Is the expectation still here that you get a rebound in ASP from the better mix, so any of those lines coming on from the transition or a pickup in ASP from any of the lines that came on recently? Does the expected increase in ASP look like a step up in flat liner? Should we be anticipating somewhat of a gradual increase into 2025?

Bill Siwek: Yes, Patrick, I think this quarter it was a little bit of an anomaly. I think, we had material costs come down a little bit. So that also impacts ASPs for us. But it was really just a mix issue with the mix of the blades. We had a pretty low volume quarter, so that mix issue can be evaporated when that occurs. But the new blades that we're bringing online, they're all bigger, longer, heavier, more expensive blades. They're all refreshed blades from the OEMs that we expect to be in production for many years to come. So, because of that, they're bigger and longer, they'll be higher ASPs, which drove our guidance when we originally said our ASPs are expected to be about $8,000 a blade or so. So I would expect that you'll see that gap close here in the second quarter and in the second half we really see a differential there when we're in serial production on all the newer blades.

Unidentified Analyst: All right. Thanks a lot. That's all for me.

Operator: This concludes the question and answer session. I would now like to turn the conference back over to Bill Siwek for any closing remarks.

Bill Siwek: Yes, thank you. And thanks again for your time today and continued interest and support at TPI. Look forward to talking to you again soon. Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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