TPI Composites Inc (TPIC) (Q1 2024) Earnings Call Transcript Highlights: Navigating Challenges ...

GuruFocus Research

3 May 2024 at 4:17 am·4-min read

Revenue: Q1 2024 revenue was $299.1 million, a decrease of 26% from $404.1 million in Q1 2023.
Adjusted EBITDA: Q1 2024 saw a loss of $23 million compared to a gain of $8.4 million in Q1 2023.
Net Sales of Wind Blades: Decreased by $98.7 million or 25.5% in Q1 2024 compared to Q1 2023.
Field Service Revenue: Declined by $1.1 million in Q1 2024 from Q1 2023.
Automotive Sales: Decreased by $5.3 million in Q1 2024 compared to Q1 2023.
Free Cash Flow: Negative $47.3 million in Q1 2024, an improvement from negative $87.1 million in Q1 2023.
Cash and Cash Equivalents: Ended Q1 2024 with $170 million.
Net Debt: Stood at $510 million at the end of Q1 2024.
2024 Financial Guidance: Reaffirms revenue guidance of $1.3 billion to $1.4 billion with an EBITDA margin between 1% and 3%.
Capital Expenditures: Expected to be $25 million to $30 million for 2024.

Warning! GuruFocus has detected 3 Warning Signs with TPIC.

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

TPI Composites Inc (NASDAQ:TPIC) is advancing towards its 2030 goal of carbon neutrality, achieving an 18% reduction in Scope one and two CO2 emissions.
The company has made significant investments in renewable energy, including wind turbines and solar panels in Turkey, and power purchase agreements in India and Mexico.
TPI Composites Inc (NASDAQ:TPIC) reported that its blade facilities in India and Turkey continued to be profitable, delivering 241 blade sets during the quarter.
The company is actively negotiating additional power purchase agreements to ensure 100% renewable energy for its facilities, which also contribute to financial performance improvement.
TPI Composites Inc (NASDAQ:TPIC) is on track to return to positive EBITDA margins and positive free cash flow in the second half of the year, with expected mid single digit adjusted EBITDA margins.

Negative Points

Sales and adjusted EBITDA in the first quarter of 2024 were lower than the previous year due to the timing of production line startups and transitions.
The company recorded a $23 million adjusted EBITDA loss in the first quarter, including significant costs related to start-up and transition, unanticipated losses from the Matamoros plant, and charges for inflationary impact on warranty claims.
TPI Composites Inc (NASDAQ:TPIC) experienced a decrease in global service revenue year over year, reflecting a temporary reduction in technicians assigned to revenue-generating projects.
The automotive segment's revenue fell year over year due to the Proterra bankruptcy, despite launching a new product line for the largest passenger EV customer.
The company faces challenges such as elevated interest rates, inflation, the cost and availability of capital, permitting hurdles, and transmission bottlenecks which contribute to near-term delays in the wind industry.

Q & A Highlights

Q: What drove the difference in two lines from 36 to 34? A: Ryan Miller, CFO of TPI Composites, explained that two lines in India were no longer under contract due to decreased demand, which did not impact the company's guidance or sales volume for 2024.

Q: Any update on the damages sought from the bad supply received previously? A: Ryan Miller mentioned that the claim has been filed and is expected to be resolved positively by the end of the second quarter.

Q: Is the GE ramp still on track, particularly for the Mexico two facility? A: William Siwek, CEO of TPI Composites, confirmed the ramp-up is ongoing and expected to continue into Q3, with additional lines starting in Q2.

Q: What is the expected interest expense going forward, particularly concerning the Oaktree refinancing? A: William Siwek noted an elevated interest expense due to the amortization of a discount from the Oaktree refinancing, projecting around $77 million for the year.

Q: What are the plans for the EV business and potential transactions? A: William Siwek indicated that TPI Composites is in advanced discussions to complete a transaction by the end of Q2, which could involve various strategic alternatives.

Q: Can you provide an update on the start-up and transition costs for Q2 and their impact in the second half of the year? A: Ryan Miller clarified that Q1 likely saw the heaviest quarter of start-up and transition costs, with expectations for these costs to not exceed Q1 levels in Q2 and to subside significantly in the second half of the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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