GlobeNewswire Inc | Aug 5, 2020 07:00AM EDT

August 05, 2020

CICERO, Ill., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Broadwind (NASDAQ: BWEN), a diversified precision manufacturer of specialized components and solutions serving global markets, today announced results for the second quarter 2020.

2Q20 HIGHLIGHTS

-- Total revenue of $54.9 million (+33% y/y) -- Total gross margin of 9.9% (+40 bps y/y) -- Total net income of $0.5 million, or $0.03 per basic share -- Total non-GAAP adjusted EBITDA of $2.9 million (+50% y/y) -- Total cash and availability of $21.9 million (+$13.8 million y/y)

For the three months ended June 30, 2020, the Company reported total sales of $54.9 million, an increase of 33.4% when compared to the prior-year period. Broadwind reported net income of $0.5 million, or $0.03 per basic share in the second quarter 2020, compared to a net loss of ($1.0) million, or ($0.06) per basic share, in the second quarter 2019. The Company reported adjusted EBITDA of $2.9 million in the second quarter 2020, compared to $1.9 million in the prior-year period.

Significant revenue growth in the Heavy Fabrications and Industrial Solutions segments more than offset a decline in Gearing segment revenue during the second quarter 2020. Heavy Fabrications segment revenue increased by more than 50% on a year-over-year basis in the second quarter, driven by customer demand to support the expected increase of wind turbine installations and as a result of diversification traction in mining and other industrial markets. Industrial Solutions segment revenue also increased by 50%, given increased demand for natural gas turbine components, while Gearing segment revenue declined by 25%, as select customers postponed scheduled purchases into future periods given general economic uncertainty resulting from the novel coronavirus (COVID-19).

STRATEGY UPDATE

During the second quarter, Broadwind continued to execute on a multi-year strategy focused on (1) market expansion across key verticals (2) improved operating efficiency and plant utilization; and (3) disciplined capital management.

-- Diverse market focus. Revenue derived from customers in the wind, industrials, steel and natural gas turbine markets all increased in the second quarter 2020. Total wind-related revenues increased 40% year-over-year in the period. The Company remains a key supplier to the global on-shore wind energy industry and has begun to evaluate new, off-shore wind customer opportunities that leverage its existing expertise. -- Increased operating efficiency. As of August 5, 2020, the Company had booked more than 90% of its optimal wind tower production capacity through year-end 2020. Broadwind sold 320 wind tower sections in the second quarter 2020, versus 201 sections in the prior-year period. -- Disciplined capital management. Total cash and availability under outstanding credit facilities increased $2.9 million sequentially and $13.8 million compared to the prior year second quarter. As of June 30, 2020, the ratio of net debt to trailing twelve-month adjusted EBITDA was 1.4x, after excluding the $9.1 million in loans received under the Paycheck Protection Program.

MANAGEMENT COMMENTARY

Despite continued macro uncertainty related to the COVID-19 pandemic, our business performed well during the second quarter, guided by our long-term focus on end-market diversification, lean manufacturing processes and disciplined capital management, stated Eric Blashford, CEO of Broadwind. Total revenue increased by more than 30% when compared to the prior-year period, resulting in our second consecutive quarter of profitability. This strong performance was supported by broad-based revenue growth across our core wind, industrials, steel and natural gas turbine markets during the period.

To-date, we have booked approximately 90% of our optimal wind tower production capacity for the full-year 2020, continued Blashford. We sold 320 wind tower sections during the second quarter, an increase of nearly 60% when compared to the year-ago period. For the full-year 2020, we anticipate Broadwind will generate year-over-year growth in revenue, net income and adjusted EBITDA, continued Blashford. We expect our financial performance in the second half of 2020 will be largely comparable to what we achieved during the first half of the year, with our internal forecast calling for strong sequential growth between the second and third quarters of 2020.

We believe the offshore wind market remains a significant, untapped opportunity for Broadwind, continued Blashford. We are currently evaluating strategic alternatives that have the potential to provide an attractive entry point into offshore wind. As an established producer of onshore wind towers, the transition to offshore represents a natural progression for our business, one with the potential to drive sustained demand for our expertise.

While we are encouraged by the demand drivers for wind energy and our diversification progress, demand within our markets has begun to soften, as customer projects are postponed due to the impact of COVID-19, continued Blashford. Looking ahead, we anticipate this uncertainty will impact our fourth quarter results, with expectations for a recovery during the first half of 2021.

We exited the second quarter with cash and liquidity of nearly $22 million, up from $8 million in the prior-year period, concluded Blashford.

ORDERS AND BACKLOG

Total orders increased 17% to $39.6 million in the second quarter, versus $33.8 million in the first quarter 2020, supported by increased demand for wind towers. Heavy Fabrications segment orders declined compared to the prior year quarter, as wind turbine original equipment manufacturers secured production capacity in advance of historical lead times, given expectations for a surge in new wind tower installations during 2020.

Gearing segment orders declined sequentially mainly due to continued softness in domestic oil and gas production, a market that represented less than 15% of segment orders in the second quarter. Other markets within the Gearing segment also realized lower new order demand, primarily due to delayed or reduced capital purchases by customers due to the general economic uncertainty resulting from the COVID-19 pandemic. Industrial Solutions segment orders declined sequentially during the second quarter due to a modest decline in natural gas turbine orders.

Total backlog declined 12% sequentially in the second quarter to $112.1 million, as COVID-19 related delays postponed the timing of customer orders. As of June 30, 2020, Heavy Fabrications represented approximately 76% of total Company backlog.

SEGMENT RESULTS

Heavy Fabrications Segment Broadwind provides large complex and precision fabrications to customers in a broad range of industrial markets. Key products include wind towers and industrial fabrications, including mining and material handling components and other frames/structures.

Heavy Fabrications segment sales increased by $14.6 million to $43.6 million in the second quarter, when compared to the prior year period, primarily due to strong demand for wind towers. Total operating income increased $2.9 million to $3.2 million, when compared to the second quarter 2019. Segment non-GAAP adjusted EBITDA increased $2.7 million to $4.2 million, when compared to the second quarter 2019. Second quarter segment performance was primarily driven by growth in customer demand for wind towers.

Gearing SegmentBroadwind provides custom gearboxes, loose gearing and heat treat services to a broad set of customers in diverse markets, including oil & gas production, surface and underground mining, wind energy, steel, material handling and other infrastructure markets.

Gearing segment sales declined by $2.3 million to $6.9 million in the second quarter, when compared to the year-ago period, due primarily to lower order intake from oil and gas customers. The Gearing segment reported an operating loss of ($0.7) million, versus operating income of $0.9 million in the prior-year period. Segment non-GAAP adjusted EBITDA declined $1.6 million to ($0.1) million, when compared to the second quarter 2019. Second quarter segment performance was driven by lower sales across each major end-market. This decline was driven by the continuation of the COVID-19 pandemic and lower oil prices, which led customers to temporarily postpone orders and delay approximately $2.0 million of previously scheduled purchases into future periods.

Industrial Solutions Segment Broadwind provides supply chain solutions, inventory management, kitting and assembly services, primarily serving the combined cycle natural gas turbine market.

Industrial Solutions segment sales increased by $1.5 million to $4.4 million in the second quarter, when compared to the year-ago period. Total operating income increased by $0.2 million to $0.2 million in the second quarter, when compared to the prior-year period. Segment non-GAAP adjusted EBITDA increased $0.2 million to $0.4 million, when compared to the second quarter 2019. Second quarter segment performance was driven primarily by higher sales associated with new gas turbine content and improved operating efficiencies.

BALANCE SHEET

As of June 30, 2020, Broadwind had cash and availability under outstanding credit facilities of $2.1 million and $19.8 million, respectively. Total cash and liquidity increased by $13.8 million to $21.9 million at June 30, 2020, when compared to June 30, 2019.

Total debt and finance leases were $25.3 million as of June 30, 2020. During the current year quarter, the Company received $9.1M of proceeds from the Paycheck Protection Program (PPP), which was established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Under the terms of the CARES Act, the PPP loans, accrued interest and fees may be forgiven following a period of twenty-four weeks after PPP loan proceeds are received if they are used for qualifying expenses as defined by the Cares Act, which are subject to certain exclusions based on the number of full time equivalents retained and maintaining at least 75% of the level of compensation during the covered period. The Company used the PPP loan proceeds to pay for payroll costs and on other eligible expenses, consistent with the terms of the PPP and plans to submit its forgiveness applications to its lender in Q3, 2020.

SECOND QUARTER 2020 CONFERENCE CALL

Broadwind will host a conference call today, August 5, 2020, at 11:00 A.M. ET to review the Companys financial results, discuss recent events and conduct a question-and-answer session. A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of Broadwinds website atwww.BWEN.com/Investors. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.

To participate in the live teleconference: Domestic Live: 877-407-9716International Live: 201-493-6779 To listen to a replay of the teleconference, which will be available throughAugust 12, 2020:

Domestic Replay: 844-512-2921International Replay: 412-317-6671Conference ID: 13706212

ABOUT BROADWIND

Broadwind (NASDAQ: BWEN) is a precision manufacturer of structures, equipment and components for clean tech and other specialized applications. With facilities throughout the U.S., our talented team is committed to helping customers maximize performance of their investmentsquicker, easier and smarter. Find out more at www.bwen.com

NON-GAAP FINANCIAL MEASURES

The Company provides non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share-based compensation and other stock payments, restructuring costs, impairment charges and other non-cash gains and losses) as supplemental information regarding the Companys business performance. The Companys management uses this supplemental information when it internally evaluates its performance, reviews financial trends and makes operating and strategic decisions. The Company believes that this non-GAAP financial measure is useful to investors because it provides investors with a better understanding of the Companys past financial performance and future results, which allows investors to evaluate the Companys performance using the same methodology and information as used by the Companys management. The Company's definition of adjusted EBITDA may be different from similar non-GAAP financial measures used by other companies and/or analysts.

FORWARD-LOOKING STATEMENTS

This release contains forward looking statementsthat is, statements related to future, not past, eventsas defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. Forward looking statements include any statement that does not directly relate to a current or historical fact. We have tried to identify forward looking statements by using words such as anticipate, believe, expect, intend, will, should, may, plan and similar expressions, but these words are not the exclusive means of identifying forward looking statements.

Our forward-looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following, many of which are, and will be, amplified by the COVID-19 pandemic: (i) the impact of global health concerns, including the impact of the current COVID-19 pandemic on the economies and financial markets and the demand for our products; (ii) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related extension, continuation or renewal of federal tax incentives and grants and state renewable portfolio standards as well as new or continuing tariffs on steel or other products imported into the United States; (iii) our customer relationships and our substantial dependency on a few significant customers and our efforts to diversify our customer base and sector focus and leverage relationships across business units; (iv) the economic and operational stability of our significant customers and suppliers, including their respective supply chains, and the ability to source alternative suppliers as necessary, in light of the COVID-19 pandemic; (v) our ability to continue to grow our business organically and through acquisitions, and the impairment thereto by the impact of the COVID-19 pandemic; (vi) the production, sales, collections, customer deposits and revenues generated by new customer orders and our ability to realize the resulting cash flows; (vii) information technology failures, network disruptions, cybersecurity attacks or breaches in data security, including with respect to any remote work arrangements implemented in response to the COVID-19 pandemic; (viii) the sufficiency of our liquidity and alternate sources of funding, if necessary; (ix) our ability to realize revenue from customer orders and backlog; (x) our ability to operate our business efficiently, comply with our debt obligations, manage capital expenditures and costs effectively, and generate cash flow; (xi) the economy, including its stability in light of the COVID-19 pandemic, and the potential impact it may have on our business, including our customers; (xii) the state of the wind energy market and other energy and industrial markets generally and the impact of competition and economic volatility in those markets; (xiii) the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities; (xiv) competition from new or existing industry participants including, in particular, increased competition from foreign tower manufacturers; (xv) the effects of the change of administrations in the U.S. federal government; (xvi) our ability to successfully integrate and operate acquired companies and to identify, negotiate and execute future acquisitions; (xvii) the potential loss of tax benefits if we experience an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended; (xviii) our ability to utilize various relief options enabled by the CARES Act, including our ability to receive forgiveness of the PPP Loans; (xix) the limited trading market for our securities and the volatility of market price for our securities; and (xx) the impact of future sales of our common stock or securities convertible into our common stock on our stock price. These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements including, but not limited to, those set forth under the caption Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, as supplemented by our Current Report on Form 8-K filed April 17, 2020 . We are under no duty to update any of these statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or other factors that could cause our current beliefs, expectations, plans and/or assumptions to change. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results.

An attachment accompanying this release can be found at: https://www.globenewswire.com/NewsRoom/AttachmentNg/a7adf909-b0b7-434b-b21a-c4c062b048e9

BROADWIND, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(IN THOUSANDS)(UNAUDITED)

June 30, December 31, 2020 2019 ASSETS CURRENT ASSETS: Cash $ 2,119 $ 2,416 Accounts receivable, net 26,119 18,310 Inventories, net 37,611 31,863 Prepaid expenses and other current assets 1,739 2,124 Total current assets 67,588 54,713 LONG-TERM ASSETS: Property and equipment, net 46,382 46,940 Operating lease right-of-use assets 19,490 15,980 Intangible assets, net 4,553 4,919 Other assets 439 314 TOTAL ASSETS $ 138,452 $ 122,866 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Line of credit and other notes payable $ 13,046 $ 12,917 Current portion of finance lease 1,032 546 obligationsCurrent portion of operating lease 1,582 1,326 obligationsAccounts payable 21,901 21,876 Accrued liabilities 5,096 4,911 Customer deposits 21,716 22,717 Total current liabilities 64,373 64,293 LONG-TERM LIABILITIES: Long-term debt, net of current maturities 9,500 505 Long-term finance lease obligations, net of 1,769 673 current portionLong-term operating lease obligations, net 19,931 16,591 of current portionOther 80 44 Total long-term liabilities 31,280 17,813 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $0.001 par value;10,000,000 shares authorized; no shares - - issued or outstandingCommon stock, $0.001 par value; 30,000,000shares authorized; 17,113,616 and 17 17 16,830,930 shares issued as of June 30,2020 and December 31, 2019, respectivelyTreasury stock, at cost, 273,937 shares asof June 30, 2020 and December 31, 2019, (1,842 ) (1,842 )respectivelyAdditional paid-in capital 383,917 383,361 Accumulated deficit (339,293 ) (340,776 )Total stockholders' equity 42,799 40,760 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 138,452 $ 122,866

BROADWIND, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(IN THOUSANDS, EXCEPT PER SHARE DATA)(UNAUDITED)

Three Months EndedJune 30, Six Months EndedJune 30, 2020 2019 2020 2019 Revenues $ 54,926 $ 41,169 $ 103,560 $ 82,829 Cost of sales 49,509 37,277 91,971 75,388 Restructuring - - - 12 Gross profit 5,417 3,892 11,589 7,429 OPERATING EXPENSES:Selling,general and 4,198 3,895 8,507 7,723 administrativeIntangible 184 203 367 406 amortizationTotaloperating 4,382 4,098 8,874 8,129 expensesOperating 1,035 (206 ) 2,715 (700 )income (loss) OTHER EXPENSE, net:Interest (474 ) (773 ) (1,147 ) (1,309 )expense, netOther, net (1 ) (16 ) (3 ) (17 )Total other (475 ) (789 ) (1,150 ) (1,326 )expense, net Net income(loss) before 560 (995 ) 1,565 (2,026 )provision forincome taxesProvision for 31 23 83 34 income taxesNET INCOME $ 529 $ (1,018 ) $ 1,482 $ (2,060 )(LOSS) NET INCOME(LOSS) PER COMMON SHARE -BASIC:Net income $ 0.03 $ (0.06 ) $ 0.09 $ (0.13 )(loss) WEIGHTEDAVERAGE COMMONSHARES 16,761 16,046 16,678 15,917 OUTSTANDING -BASIC NET INCOME(LOSS) PER COMMON SHARE -DILUTED:Net income $ 0.03 $ (0.06 ) $ 0.09 $ (0.13 )(loss) WEIGHTEDAVERAGE COMMONSHARES 17,125 16,046 16,934 15,917 OUTSTANDING -DILUTED

BROADWIND, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS)(UNAUDITED)

Six Months Ended June 30, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 1,482 $ (2,060 ) Adjustments to reconcile net cash used in operating activities:Depreciation and amortization expense 3,194 3,390 Deferred income taxes 21 (5 )Change in fair value of interest rate swap 157 26 agreementsStock-based compensation 556 510 Allowance for doubtful accounts 34 (12 )Common stock issued under defined contribution - 392 401(k) planGain on disposal of assets - (1 )Changes in operating assets and liabilities, net of acquisition:Accounts receivable (7,843 ) (2,806 )Inventories (5,748 ) (13,088 )Prepaid expenses and other current assets 385 16 Accounts payable 520 3,306 Accrued liabilities 28 540 Customer deposits (1,001 ) (4,946 )Other non-current assets and liabilities (23 ) 127 Net cash used in operating activities (8,238 ) (14,611 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (929 ) (1,183 )Proceeds from disposals of property and - 1 equipmentNet cash used in investing activities (929 ) (1,182 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit 93,358 91,007 Payments on line of credit (92,768 ) (75,370 )Proceeds from long-term debt 9,530 - Payments on long-term debt (822 ) (462 )Principal payments on finance leases (428 ) (485 )Net cash provided by financing activities 8,870 14,690 - NET DECREASE IN CASH (297 ) (1,103 )CASH beginning of the period 2,416 1,177 CASH end of the period $ 2,119 $ 74

BROADWIND, INC. AND SUBSIDIARIESSELECTED SEGMENT FINANCIAL INFORMATION(IN THOUSANDS)(UNAUDITED)

Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 ORDERS: Heavy $ 31,401 $ 96,328 $ 46,916 $ 108,839 FabricationsGearing 3,731 5,572 16,151 12,707 Industrial 4,426 2,712 10,300 7,072 SolutionsTotal orders $ 39,558 $ 104,612 $ 73,367 $ 128,618 REVENUES: Heavy $ 43,614 $ 28,970 $ 81,983 $ 57,264 FabricationsGearing 6,922 9,266 13,149 19,293 Industrial 4,397 2,933 8,435 6,272 SolutionsCorporate (7 ) - (7 ) - and OtherTotal $ 54,926 $ 41,169 $ 103,560 $ 82,829 revenues OPERATINGPROFIT/ (LOSS):Heavy $ 3,199 $ 318 $ 6,740 $ 96 FabricationsGearing (651 ) 913 (912 ) 2,300 Industrial 217 28 410 (256 )SolutionsCorporate (1,730 ) (1,465 ) (3,523 ) (2,840 )and OtherTotaloperating $ 1,035 $ (206 ) $ 2,715 $ (700 )profit/(loss)

BROADWIND, INC. AND SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURES (IN THOUSANDS)(UNAUDITED)

Consolidated Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Net Income/(Loss) $ 529 $ (1,018 ) $ 1,482 $ (2,060 )Interest Expense 474 773 1,147 1,309 Income Tax 31 23 83 34 ProvisionDepreciation and 1,581 1,628 3,194 3,390 AmortizationShare-basedCompensation and 248 493 562 929 Other StockPaymentsRestructuring - - - 12 CostsAdjusted EBITDA 2,863 1,899 6,468 3,614 (Non-GAAP)

Heavy Fabrications Three Months Ended June Six Months Ended June 30,Segment 30, 2020 2019 2020 2019 Net Income/(Loss) $ 2,467 $ 186 $ 5,165 $ (49 )Interest Expense 89 63 194 129 Income Tax 643 54 1,381 1 Provision/(Benefit)Depreciation 939 978 1,903 2,073 Share-basedCompensation and 60 214 102 379 Other StockPaymentsRestructuring - - - 12 ExpenseAdjusted EBITDA $ 4,198 $ 1,495 $ 8,745 $ 2,545 (Non-GAAP)

Gearing Segment Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019 Net (Loss)/Income $ (674 ) $ 796 $ (988 ) $ 2,096 Interest Expense 20 113 70 195 Income Tax Provision 2 4 6 9 Depreciation and 503 483 1,015 965 AmortizationShare-basedCompensation and 25 102 40 194 Other Stock PaymentsAdjusted EBITDA $ (124 ) $ 1,498 $ 143 $ 3,459 (Non-GAAP)

Industrial Solutions Three Months Ended June Six Months Ended JuneSegment 30, 30, 2020 2019 2020 2019 Net Income/(Loss) $ 197 $ 4 $ 356 $ (274 )Interest Expense 10 - 10 1 Income Tax Provision/ 9 23 40 14 (Benefit)Depreciation and 106 122 210 244 AmortizationShare-basedCompensation and Other 31 13 50 26 Stock PaymentsAdjusted EBITDA $ 353 $ 162 $ 666 $ 11 (Non-GAAP)

Corporate and Three Months Ended June 30, Six Months Ended June 30,Other 2020 2019 2020 2019 Loss fromcontinuing $ (1,461 ) $ (2,004 ) $ (3,051 ) $ (3,833 )operationsInterest 355 597 873 984 ExpenseIncome Tax(Benefit)/ (623 ) (58 ) (1,344 ) 10 ProvisionDepreciationand 33 45 66 108 AmortizationShare-basedCompensation 132 164 370 330 and Other StockPaymentsAdjusted EBITDA $ (1,564 ) $ (1,256 ) $ (3,086 ) $ (2,401 )(Non-GAAP)

CORPORATE CONTACT

Jason BonfigtInvestor@BWEN.com