GlobeNewswire Inc | Aug 6, 2021 07:00AM EDT

August 06, 2021

CICERO, Ill., Aug. 06, 2021 (GLOBE NEWSWIRE) -- Broadwind (NASDAQ: BWEN), a diversified precision manufacturer of specialized components and solutions serving global markets, today announced results for the second quarter 2021.

SECOND QUARTER 2021 RESULTS(As compared to the second quarter 2020)

-- Total revenue of $46.5 million, down 15% year-over-year -- Total net income of $10.3 million, or $0.53 per diluted share, including $12.7 million of CARES Act benefits -- Total non-GAAP adjusted EBITDA of $12.8 million -- Total cash and excess availability of $23.7 million, up 8% year-over-year -- Net debt leverage at 0.4x TTM non-GAAP adjusted EBITDA, following forgiveness of $9.2 million in PPP loans

For the three months ended June 30, 2021, Broadwind reported total revenue of $46.5 million, a decline of 15% when compared to the prior-year period. The Company reported net income of $10.3 million, or $0.53 per diluted share in the second quarter, compared to net income of $0.5 million, or $0.03 per diluted share, in the prior-year period. The Company reported adjusted EBITDA, a non-GAAP measure, of $12.8 million in the second quarter 2021, compared to $2.9 million in the prior-year period.

Second quarter results included a $9.2 million benefit related to loan forgiveness under the Paycheck Protection Program (PPP), together with a $3.6 million benefit related to the Employee Retention Tax Credit (ERC), as outlined under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and further modified under the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021.

Second quarter results were primarily impacted by a year-over-year decline in wind tower sections sold, partially driven by the delay of several projects into the second half of 2021. To date, the Company has booked approximately 50% of its second half 2021 optimal wind tower capacity and has received orders for approximately 15% of 2022 production.

STRATEGY UPDATE

During the second quarter, the Company continued to advance a multi-year strategy to capitalize on favorable policy trends within the domestic wind energy market; further diversify consolidated revenues into complementary end-markets through both organic and inorganic investments; and maintain a disciplined capital structure positioned to support long-term growth.

Capitalize on favorable policy environment. In June 2021, the U.S. Treasury Department published the Biden Administrations tax proposals for the fiscal year 2022. These proposals include a provision for an extension of the Production Tax Credit (PTC) for qualified facilities, including onshore and offshore wind assets, commencing construction after December 31, 2021 and before January 1, 2027. If passed into law, the Company expects the Administrations planned, multi-year extension of the PTC would provide a significant catalyst for tower demand. As a result of this favorable policy backdrop and continued decline in the levelized cost of wind energy, the Company anticipates ~100 GW of new onshore wind capacity will be installed during the next decade.

Pursue inorganic expansion within adjacent, complementary clean tech end markets. Broadwind continues to actively evaluate bolt-on acquisitions that seek to leverage the Companys existing manufacturing expertise and exposure to clean tech markets. The Company will continue to consider opportunities for accretive acquisitions of assets or businesses with high revenue and/or cost synergies, complementary product lines and a well-established, diverse customer base that further supports Broadwinds long-term revenue diversification strategy.

Achieve scale through efficiency.The Company remains focused on operating its production facilities at or near capacity, while reducing costs through improvement initiatives. In addition to securing new tower orders from multiple turbine manufacturers in the second quarter of 2021, new order demand from gearing and industrial fabrication customers increased sequentially, reflecting an ongoing recovery in cyclical end markets.

Disciplined capital management. The Company believes it has sufficient liquidity to support ongoing operations, together with potential growth investments. Total cash and availability under its credit facility was $23.7 million as of June 30, 2021, compared to $21.9 million as of June 30, 2020. As of June 30, 2021, the ratio of net debt to trailing twelve-month non-GAAP adjusted EBITDA was 0.4x.

MANAGEMENT COMMENTARY

Although our second quarter results were adversely impacted by temporary project delays in the current year, we believe both onshore new build and repowering projects should benefit significantly from the Biden Administrations proposed PTC extension, supporting our expectations for sustained growth in domestic wind capacity during the next decade, stated Eric Blashford, President and CEO of Broadwind.

While pandemic-related supply chain constraints were less acute during the second quarter, cost inflation on key raw materials remains a headwind for our customers, one that has dampened near-term capital investment, stated Blashford. This is particularly relevant with respect to the cost of steel, which has risen significantly during the past year. While Broadwind absorbs minimal direct commodity price risk, we believe some customers are waiting for raw materials costs to normalize which, when balanced against wind developers efforts to begin construction following a potential PTC extension, has served to push tower orders into next year. Given this pause in wind energy projects, we expect our second half tower production to be approximately 50% of optimal capacity, resulting in an approximate 25% decline in second half 2021 consolidated sales when compared to the second half of 2020.

Our diverse end-market strategy performed as intended during the second quarter, as growth in non-wind markets helped to offset softness in tower orders, continued Blashford. Our Gearing segment generated significant year-over-year growth in both revenue, orders and backlog, supported by increased demand from energy customers. We believe our non-wind end-markets are recovering, as evidenced by our industrial and energy customers placing orders to restock inventories in support of new capital projects.

We remain focused on pursuing immediately accretive, complementary acquisitions in adjacent markets, continued Blashford. While our precision manufacturing and heavy fabrications expertise has application across multiple end-markets, we remain particularly focused on building our presence within both the renewables and clean energy transition verticals. At the end of the second quarter, we had nearly $24 million in total cash and availability under our line of credit to support operations and growth opportunities.

We expect third quarter 2021 revenue to be in a range of $38.0 to $42.0 million and adjusted EBITDA to be in a range of $0.5 to $1.0 million, concluded Blashford.

ORDERS AND BACKLOG

Total orders declined 33% year-over-year to $26.4 million in the second quarter 2021, as Gearing segment order growth was more than offset by a year-over-year decline in Heavy Fabrications and Industrial Solutions orders. Gearing orders increased by 111% on a year-over-year basis given increased demand from energy and mining customers, while Heavy Fabrications and Industrial Solutions orders declined by 53% and 14%, respectively, versus the prior-year period.

Total backlog declined 34% year-over-year to $74.3 million in the second quarter. As of June 30, 2021, Heavy Fabrications orders represented approximately 65% of the Companys total 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 declined by $7.8 million to $35.8 million in the second quarter 2021, when compared to the prior year period. This decrease is primarily due to a 6% decline in tower sections sold, a lower average selling price due to the mix of towers produced and decreased industrial fabrication sales. The decline in tower section sales was attributable to lower demand, primarily a result of a shift in the timing of customer projects. Total operating income declined $2.9 million to $0.3 million, when compared to the second quarter of 2020. Segment non-GAAP adjusted EBITDA of $10.0 million, includes a benefit of $5.8 million related to the PPP loan forgiveness. EBITDA excluding PPP loan forgiveness, remained flat at $4.2 million, when compared to the prior-year period.

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 increased by $0.5 million to $7.4 million in the second quarter 2021, when compared to the year-ago period, primarily due to increased demand from energy customers. The Gearing segment reported an operating loss of ($0.9) million in the second quarter 2021, compared to an operating loss of ($0.7) million in the prior-year period. Segment non-GAAP adjusted EBITDA of $2.9 million, includes a benefit of $2.5 million related to the PPP loan forgiveness. EBITDA excluding the PPP loan forgiveness benefit was $0.4 million, versus ($0.1) million in the prior-year period.

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

Industrial Solutions segment sales declined by $0.9 million to $3.5 million in the second quarter 2021, when compared to the year-ago period, primarily driven by global logistics delays. Total operating income declined ($0.3) million to breakeven in the second quarter 2021, when compared to the prior-year period. Segment non-GAAP adjusted EBITDA of $0.7 million, includes a benefit of $0.5 million related to the PPP loan forgiveness. EBITDA excluding the PPP loan forgiveness, was $0.2 million, compared to $0.4 million in the comparable prior year period.

SECOND QUARTER 2021 CONFERENCE CALL

Broadwind will issue second quarter 2021 results before the market opens on August 6, 2021. A conference call will be held that same day 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: 1-877-407-9716International Live: 1-201-493-6779 To listen to a replay of the teleconference, which will be available throughAugust 13, 2021:Domestic Replay: 1-844-512-2921International Replay: 1-412-317-6671Conference ID: 13721138

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, including as a result of emerging variants: (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; (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, 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.

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

June 30, December 31, 2021 2020 ASSETS CURRENT ASSETS: Cash $ 4,757 $ 3,372 Accounts receivable, net 17,614 15,337 Employee retention credit 1,714 - receivable Contract assets 2,665 2,253 Inventories, net 31,951 26,724 Prepaid expenses and other current 1,885 2,909 assets Total current assets 60,586 50,595 LONG-TERM ASSETS: Property and equipment, net 45,186 45,195 Operating lease right-of-use 18,926 19,321 assets Intangible assets, net 3,819 4,186 Other assets 502 385 TOTAL ASSETS $ 129,019 $ 119,682 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Line of credit and other notes $ 6,392 $ 1,406 payable Current portion of finance lease 1,801 1,427 obligations Current portion of operating lease 1,729 1,832 obligations Accounts payable 17,096 18,180 Accrued liabilities 4,612 6,307 Customer deposits 15,470 18,819 Total current liabilities 47,100 47,971 LONG-TERM LIABILITIES: Long-term debt, net of current 228 9,381 maturities Long-term finance lease obligations, net of current 2,658 1,996 portion Long-term operating lease obligations, net of current 19,310 19,569 portion Other 927 104 Total long-term liabilities 23,123 31,050 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding - - Common stock, $0.001 par value; 30,000,000 shares authorized; 19,658,998 and 17,211,498 shares issued as of June 30, 2021 and December 31, 2020, respectively 20 17 Treasury stock, at cost, 273,937 shares as of June 30, 2021 and December 31, 2020, respectively (1,842 ) (1,842 ) Additional paid-in capital 393,839 384,749 Accumulated deficit (333,221 ) (342,263 ) Total stockholders' equity 58,796 40,661 TOTAL LIABILITIES AND STOCKHOLDERS' $ 129,019 $ 119,682 EQUITY

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

Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenues $ 46,491 $ 54,926 $ 79,219 $ 103,560 Cost of sales 44,293 49,509 76,739 91,971 Gross profit 2,198 5,417 2,480 11,589 OPERATING EXPENSES: Selling,general and 4,325 4,198 8,735 8,507 administrativeIntangible 184 184 367 367 amortizationTotal operating 4,509 4,382 9,102 8,874 expensesOperating (2,311 ) 1,035 (6,622 ) 2,715 (loss) income OTHER INCOME (EXPENSE), net:PaycheckProtection 9,151 - 9,151 - Program loanforgivenessInterest (318 ) (474 ) (547 ) (1,147 )expense, netOther, net 3,775 (1 ) 7,137 (3 )Total otherincome (expense), 12,608 (475 ) 15,741 (1,150 )net Net income beforeprovision for income 10,297 560 9,119 1,565 taxesProvision for 45 31 77 83 income taxesNET INCOME $ 10,252 $ 529 $ 9,042 $ 1,482 NET INCOME PERCOMMON SHARE - BASIC:Net income $ 0.55 $ 0.03 $ 0.50 $ 0.09 WEIGHTEDAVERAGE COMMONSHARES 18,761 16,761 17,974 16,678 OUTSTANDING -BASIC NET INCOME PERCOMMON SHARE - DILUTED:Net income $ 0.53 $ 0.03 $ 0.48 $ 0.09 WEIGHTEDAVERAGE COMMONSHARES 19,400 17,125 18,864 16,934 OUTSTANDING -DILUTED

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

Six Months Ended June 30, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,042 $ 1,482 Adjustments to reconcile net cash used in operating activities:Depreciation and amortization expense 3,164 3,194 Paycheck Protection Program loan (9,151 ) - forgivenessDeferred income taxes 21 21 Change in fair value of interest rate swap 12 157 agreementsStock-based compensation 664 556 Allowance for doubtful accounts (421 ) 34 Common stock issued under defined 570 - contribution 401(k) planGain on disposal of assets (23 ) - Changes in operating assets and liabilities: Accounts receivable (1,856 ) (7,843 )Employee retention credit receivable (1,714 ) - Contract assets (412 ) - Inventories (5,227 ) (5,748 )Prepaid expenses and other current assets 1,024 385 Accounts payable (1,342 ) 520 Accrued liabilities (953 ) 28 Customer deposits (3,349 ) (1,001 )Other non-current assets and liabilities (36 ) (23 )Net cash used in operating activities (9,987 ) (8,238 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (765 ) (929 )Proceeds from disposals of property and 23 - equipmentNet cash used in investing activities (742 ) (929 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit 82,862 93,358 Payments on line of credit (78,108 ) (92,768 )Proceeds from long-term debt 387 9,530 Payments on long-term debt (157 ) (822 )Principal payments on finance leases (728 ) (428 )Shares withheld for taxes in connection (1,491 ) - with issuance of restricted stockProceeds from sale of common stock, net 9,349 - Net cash provided by financing activities 12,114 8,870 - NET INCREASE (DECREASE) IN CASH 1,385 (297 )CASH beginning of the period 3,372 2,416 CASH end of the period $ 4,757 $ 2,119

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

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 ORDERS: Heavy $ 14,760 $ 31,401 $ 35,557 $ 46,916 Fabrications Gearing 7,858 3,731 17,778 16,151 Industrial 3,823 4,426 7,320 10,300 Solutions Total $ 26,441 $ 39,558 $ 60,655 $ 73,367 orders REVENUES: Heavy $ 35,830 $ 43,614 $ 58,607 $ 81,983 Fabrications Gearing 7,404 6,922 12,753 13,149 Industrial 3,541 4,397 8,145 8,435 Solutions Corporate and (284 ) (7 ) (286 ) (7 ) Other Total $ 46,491 $ 54,926 $ 79,219 $ 103,560 revenues OPERATING (LOSS) /PROFIT: Heavy $ 271 $ 3,199 $ (1,429 ) $ 6,740 Fabrications Gearing (882 ) (651 ) (1,871 ) (912 ) Industrial (47 ) 217 (61 ) 410 Solutions Corporate and (1,653 ) (1,730 ) (3,261 ) (3,523 ) Other Total operating $ (2,311 ) $ 1,035 $ (6,622 ) $ 2,715 profit/(loss)

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

Consolidated Three Months Ended Six Months Ended June June 30, 30, 2021 2020 2021 2020Net Income $ 10,252 $ 529 $ 9,042 $ 1,482Interest Expense 318 474 547 1,147Income Tax Provision 45 31 77 83Depreciation and Amortization 1,612 1,582 3,164 3,194Share-based Compensation and Other 573 247 1,187 562Stock PaymentsAdjusted EBITDA (Non-GAAP) 12,800 2,863 14,017 6,468

Heavy Fabrications Segment Three Months Ended Six Months Ended June June 30, 30, 2021 2020 2021 2020Net Income. $ 6,020 $ 2,467 $ 6,942 $ 5,165Interest Expense 158 89 257 194Income Tax Provision 2,594 643 2,191 1,381Depreciation 992 939 1,937 1,903Share-based Compensation and Other 261 60 483 102Stock PaymentsAdjusted EBITDA (Non-GAAP) $ 10,025 $ 4,198 $ 11,810 $ 8,745

Gearing Segment Three Months Ended Six Months Ended June June 30, 30, 2021 2020 2021 2020 Net Income (Loss) $ 2,354 $ (674 ) $ 2,071 $ (988 )Interest Expense 7 20 19 70 Income Tax Provision 3 2 7 6 Depreciation and Amortization 462 503 920 1,015 Share-based Compensation and 63 25 143 40 Other Stock PaymentsAdjusted EBITDA (Non-GAAP) $ 2,889 $ (124 ) $ 3,160 $ 143

Industrial Solutions Segment Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020Net Income $ 636 $ 197 $ 814 $ 356Interest Expense 18 10 32 10Income Tax Provision 29 9 47 40Depreciation and Amortization 104 106 211 210Share-based Compensation and Other (43 ) 31 103 50Stock PaymentsAdjusted EBITDA (Non-GAAP) $ 744 $ 353 $ 1,207 $ 666

Corporate and Three Months Ended June 30, Six Months Ended June 30,Other 2021 2020 2021 2020 Net Income (Loss) $ 1,242 $ (1,461 ) $ (785 ) $ (3,051 )Interest Expense 135 355 239 873 Income Tax(Benefit)/ (2,581 ) (623 ) (2,168 ) (1,344 )ProvisionDepreciation and 54 34 96 66 AmortizationShare-basedCompensation and 292 131 458 370 Other StockPaymentsAdjusted EBITDA $ (858 ) $ (1,564 ) $ (2,160 ) $ (3,086 )(Non-GAAP)

CORPORATE CONTACT

Jason BonfigtInvestor@BWEN.com