Broadwind - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $36.8M and diluted EPS was ($0.02); adjusted EBITDA was $2.4M (6.4% margin), with total orders up 5% y/y to $30.5M; backlog was $117.0M, and FY2025 guidance was reiterated at $140–$160M revenue and $13–$15M adjusted EBITDA.
• Versus consensus, Q1 revenue beat ($36.8M vs $32.8M), EPS was better than expected (loss of $0.02 vs loss of $0.037), and adjusted EBITDA was roughly in line, framing a modest overall beat on the top line and EPS; Q4 2024 also beat revenue consensus [Values retrieved from S&P Global]*.
• Heavy Fabrications revenue rose 14.7% y/y on wind repowering adapters, while Gearing (-28.4% y/y) and Industrial Solutions (-29.3% y/y) were impacted by softer mining/oil & gas and timing/supply chain issues; gross margin was 11.7%, up 45 bps sequentially.
• Call commentary highlighted improving orders across non-wind markets (power generation, infrastructure), explicit 45x IRA recognition (~$2.5M in Q1), and stable outlook for onshore wind through 2026; management maintained FY guidance and emphasized operational discipline and diversification.
• Post-quarter, Broadwind agreed to sell its Manitowoc, WI industrial fabrication operations for ≥$13M, expected to close in Q3 2025; management expects ~$8M annualized operating cost reduction and improved utilization—an incremental catalyst for leverage and liquidity.

What Went Well and What Went Wrong

What Went Well

• Heavy Fabrications strength: segment sales +14.7% y/y to $25.2M, operating income $2.2M, adjusted EBITDA $3.4M; driven by wind repowering adapters. “Customer activity continues to strengthen… demand for wind repowering adapters… drove the increase in total orders” — Eric Blashford.
• Non-wind momentum: Record orders/backlog in Industrial Solutions; segment orders $10.1M (+38% y/y), backlog ~$22.9M; book-to-bill 1.8x, supported by natural gas turbine demand tied to grid/data center loads.
• Liquidity and leverage: Cash and availability ~$22.6M; net leverage 1.4x, within target ≤2.0x; operational discipline held adjusted EBITDA margin flat sequentially despite mix/supply chain delays.

What Went Wrong

• Demand softness and mix: Revenue declined 2.1% y/y; Gearing (-28.4% y/y) and Industrial Solutions (-29.3% y/y) weighed by mining/oil & gas weakness and shipment timing; gross margin compressed to 11.7% y/y.
• Supply chain delays: Industrial Solutions shipments were delayed, temporarily depressing Q1 revenue and EBITDA; management expects improvement through 2025.
• Sequential backlog decline: Consolidated backlog decreased sequentially to $117.0M, reflecting timing of bookings and deliveries.

Transcript

Operator (participant)

Greetings and welcome to Broadwind's first quarter and full year 2025 results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Tom Ciccone. Thank you. You may begin.

Tom Ciccone (VP and CFO)

Good morning and welcome to the Broadwind first quarter 2025 results conference call. Leading the call today is our CEO, Eric Blashford, and I'm Tom Ciccone, the company's Vice President and Chief Financial Officer. We issued a press release before the market opened today detailing our first quarter results. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For discussion of some of the factors that could cause actual results to differ, please refer to the risk factor section of our latest annual and quarterly filings with the SEC.

Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. At the conclusion of our prepared remarks, we will open the line for questions. With that, I'll turn the call over to Eric.

Eric Blashford (CEO)

Thanks, Tom, and welcome to those joining us today. Broadwind delivered solid commercial and operational execution during the quarter with revenue and adjusted EBITDA of $37 million and $2.4 million, respectively, with increasing momentum reflected in sequential growth in both revenue and gross margin. Stronger demand for wind repowering adapters supported our revenue this quarter, while our disciplined operations produced a positive EBITDA margin despite a lower margin product mix and supply chain delays. Customer activity continues to accelerate, with order rates increasing 5% year-over-year to $30 million. Stronger demand for wind repowering adapters and natural gas turbine content more than offset lower demand in mining and natural gas pressure-reducing systems, or PRSs. These market dynamics highlight the importance of our diverse customer base, especially during times of U.S. trade policy uncertainty.

Orders within our heavy fabrication business increased 10% year-over-year due to continued strong demand for the adapters used to repower wind. Orders for our gearing business continued their upward sequential trajectory, increasing 13% versus Q4 2024, as we have begun to realize sizable wins in the strategic power generation market, as well as a lift in oil and gas gearing, which we believe is partially due to tariff-related onshoring. Orders from our industrial solutions segment increased 38% year-over-year due to continued strength in the global gas turbine market, setting another record for orders and backlog in this segment. At a commercial level, we continue to expand our product mix within higher margin adjacent markets. Quoting activity remains elevated in all segments, but most notably in our heavy fabrications and industrial solutions businesses, where we're seeing strong interest from the power generation market.

We are prudently adding resources to meet this increasing demand. In the gearing market, we're pleased to see that the investments made in equipment and quality certifications over the last year are returning dividends in the form of new orders from new customers in power generation and defense. Operationally, we continue to invest in equipment technology to improve our process capabilities, reduce costs, and improve our profitability. In the industrial solutions segment, we're investing in advanced testing equipment to expand our transmitter panel offering and are moving forward with a UL certification for electrical panels to further expand our offering. In heavy fabrications, we've invested in new milling and beveling equipment to improve throughput and precision in our wind tower and repowering adapter manufacturing processes while reducing costs.

Looking at sales in the first quarter, revenue was slightly below the prior year quarter due to the absence of a large natural gas turbine aftermarket shipment in the prior year and softness in the oil and gas gearing market, offset by stronger shipments into the wind market. Within our heavy fabrication segment, Q1 revenue was $25 million, up 15% from a year ago, mostly due to the aforementioned increase in demand for wind tower adapters, partially offset by slower sales of our PRS units. Gearing revenue was $6 million in Q1, down 28% year-over-year due to broad-based softness in the oil and gas gearing market, partially offset by strength in wind and the industrial sector. We've taken further cost actions to align production capacity with the present demand levels while maintaining key manufacturing and engineering talent required to accommodate the anticipated increase in orders later this year.

Industrial solutions revenue was $5.6 million, down 29% year-over-year, primarily due to the timing of certain aftermarket shipments into the natural gas turbine market. In summary, the team and business continues to perform well as we navigate demand fluctuations and policy uncertainty while we maintain our key operating talent and execute our diversification strategy. With that, I'll turn the call over to Tom for a discussion of our first quarter financial performance.

Tom Ciccone (VP and CFO)

Thank you, Eric. Turning to slide five for an overview of our first quarter performance. First quarter consolidated revenues were $36.8 million, a 2% decrease as our production levels continue to be impacted by the extended slowdown within the oil and gas sector. Sequentially, revenue was up almost 10% as we've experienced stronger demand for wind repowering. Adjusted EBITDA margin was 6.4% due primarily to low capacity utilization, particularly within our gearing segment, and a lower margin mix of products sold across all three operating segments. Q1 orders totaled $30.5 million, an increase of 5% versus the prior year first quarter. Orders in heavy fabrications and industrial solutions increased due to strong demand from the wind repowering and power generation markets, while orders in gearing remained muted. Turning to slide six for a discussion of our heavy fabrication segment.

First quarter orders of $12.4 million are up versus the $11.2 million booked in the prior year period as we continue to realize improved demand for wind repowering projects. This is partially offset by a decrease in orders for our PRS units. First quarter revenues of $25.2 million are up both sequentially and versus the prior year quarter, driven by an increase in wind tower sections sold and increased revenue related to repowering adapters. During the first quarter, we recognized segment-adjusted EBITDA of $3.4 million, an increase sequentially and versus the prior year first quarter, driven by increased revenue and overall production levels as we ramp up for increased shipments expected in the second quarter. Turning to slide seven, gearing orders of $8 million are down approximately $2.5 million.

Although down versus the prior year, Q1 gearing orders are up sequentially and are well above the quarterly average for the past two years within the segment. We have booked some meaningful oil and gas volume for the first time in over a year as we may be benefiting from the possible onshoring in reaction to recent U.S. trade policies. Segment revenue was $6 million, down $2.4 million versus the prior year quarter. We experienced an adjusted EBITDA loss of $0.2 million, driven by lower revenue resulting from softer order intake levels in recent quarters, in addition to operational inefficiencies experienced in Q1. Turning to slide eight, industrial solutions recorded more than $10 million of orders in the first quarter, surpassing the previous $8 million record achieved last quarter.

The segment continues to operate in a robust demand environment, and there continues to be strong commercial interest for its natural gas turbine content. Segment backlog also hit a new record high of nearly $23 million at the end of the first quarter, eclipsing the previous record of $18.5 million set in Q4 2024. Q1 segment revenue was $5.6 million, and Q1 segment-adjusted EBITDA was $0.5 million, both down versus the prior year period as we experienced supply chain headwinds, which impacted shipments during the quarter. We believe these issues to be temporary and expect revenue totals to improve over the balance of 2025. Turning to slide nine, we ended the first quarter with cash and availability on our credit facility of approximately $23 million, reflective of our deposit balance returning to a more normal operating level.

In addition, we experienced a significant inventory build in Q1 as we began a tower run in Manitowoc early in Q2 and transitioned to a new tower design with increased material content in Abilene. Finally, with respect to our financial guidance, today we are reiterating our full year 2025 revenue and adjusted EBITDA guidance. We anticipate full year revenue to be in the range of $140 million-$160 million and adjusted EBITDA to be in the range of $13 million-$15 million. That concludes my remarks. I will turn the call back over to Eric to continue our discussion.

Eric Blashford (CEO)

Thanks, Tom. Now, allow me to provide some thoughts as we move into Q2, beginning with our heavy fabrication segment. We believe that domestic onshore wind tower activity will continue at its present rate through 2026. We are encouraged by the continued momentum in the wind-repowering market as we are seeing sustained demand from our OEM customers for the adapters we manufacture, which are used to upgrade most legacy turbines. We believe that the tariffs announced earlier this year, combined with the existing anti-dumping measures in place, will continue to benefit domestic wind tower manufacturers. We have good visibility for tower production through the balance of 2025 and are in active discussions with several OEM customers for 2026 volume.

We continue to reallocate production capacity towards stable recurring project revenue streams across diverse end markets, with recent gearing wins in the power generation market and expanded opportunities in large utility-scale natural gas turbines. We continue to see quote activity from the power generation and grid hardening space, especially for products supporting the nation's electrical infrastructure, such as the large transformers required to support the grid. We are expanding our service and commercial teams for our Clean Fuels PRS line to better serve customers outside the Permian and Eagle Ford regions into the DJ and Bakken regions. The newest model in our line, the L-70 low flow unit, continues to perform well in field trials and will be ready for full release this summer.

Customers appreciate the unit's performance specifications, compact footprint, simplicity of operation, remote monitoring capability, and attractive price point, making it the ideal solution for industrial applications such as primary or backup power supply systems and pipeline integrity projects. Furthermore, we're evaluating certain export opportunities, which we will address through key distribution partners who will provide local service and support after the sale. In our gearing segment, we continue to execute our strategy to move beyond traditional gearing toward other precision machine products. We're pleased at the increasing level of customer activity we're seeing in various new markets, such as aeroderivative gas turbines, aggregate material processing, and large high-speed compressors, to name a few. The recent sizable orders we received from the power generation sector are evidence that our strategy is working.

In industrial solutions, the momentum that we've experienced in the gas turbine industry last year continues this year as we set another quarterly record for bookings in Q1. Our key customers, which see strong demand for gas turbine equipment and services, are reporting strong backlogs and are increasing their production capacity and response. This strength in the natural gas turbine market is attributable, at least in part, to data centers and other sources of increasing electrical load and is expected to continue for years. We are taking the necessary steps to increase capacity, add capabilities such as electrical panel manufacturing, and improve processes so that we can take full advantage of this significant growth opportunity. As a reminder, our industrial solutions business provides supply chain solutions, custom fabrications, and control panel manufacturing for the growing combined cycle natural gas turbine market worldwide.

In summary, I'm pleased with our start this year as we continue to demonstrate strong execution of our strategic priorities. Each of our divisions is well-positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long-term opportunities for us. Our quality, quick response, and reliable deliveries continue to win new customers for us, particularly within the gearing business. We've reduced our cost structure during a transitional period for domestic onshore wind and oil and gas gearing demand while retaining our key talent and continuing to work on vital activities like process improvement, prudent capabilities investment, and product expansion. We value our people and are committed to keeping them safe, fulfilled, and productive. We have five plants, all U.S.-based, so we're prepared to capitalize on any opportunities afforded by the pro-domestic manufacturing policy backdrop afforded by the current administration.

While the potential impacts of both tariffs and renewable energy policy changes are unknown, we are confident that we can support the necessary rebuilding of the country's infrastructure. We're encouraged that our order intake continues to grow, positioning us for improved utilization of our manufacturing base over the coming year as we build a firm foundation for steady, profitable growth, serving the power generation infrastructure and other key markets with high-quality precision components and proprietary products to capitalize on improved demand in the years ahead. With that said, I'll turn the call back over to the moderator for the Q&A session.

Operator (participant)

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. One moment, please, while we poll for questions. Our first question comes from Justin Clare with ROTH Capital Partners. Please proceed with your question.

Justin Clare (Managing Director)

Hi, good morning. Thanks for the questions here. Just wanted to start off on the heavy fabrications segment. Q1 revenue was the strongest we've seen in, I think, over a year for that segment. Just wondering if you could talk a little bit more about the repowering opportunity that you're seeing and then maybe how revenue might trend for heavy fabrications through the remainder of 2025. If you could speak to 2026 a little bit, it sounds like you are anticipating kind of flat demand year-over-year, but do you see any mixed shift between Abilene or Manitowoc or between the repowering opportunity or tower segments?

Tom Ciccone (VP and CFO)

Yeah, thanks, Justin. I think some of the strength that we've seen in Q1 really had to do with strong demand for our repowering adapters that we produce for our customers. That seems to be a very strong market right now, and we're building for several OEMs in both of our plants right now. That's been a real good tailwind for us. As it relates to the rest of 2025, we are expecting to see some increase in our overall revenue in that segment, particularly in Manitowoc, as we did start a tower run in Q2. I mean, we expect to start reaping some of the revenue, recording some of that revenue in Q2 and Q3.

Eric Blashford (CEO)

Yeah. Justin, this is Eric, just to add on to that. Regarding 2026, we expect 2026 to be about the same from a new wind tower perspective and repowering adapters to be at the same level, if not a hair higher. We are actually producing for multiple—we're actually producing for multiple OEMs, and another one is actually interested in our capacity too in repowering.

Justin Clare (Managing Director)

Got it. Okay. That's good to hear. Maybe just shifting over to tariffs. I know all your manufacturing is in the U.S., but wondering if tariffs are having any effect on your cost structure, any materials that you might source from overseas. And then just wondering on the competitive environments, are the tariffs changing anything in terms of your relative cost structure to others you may compete against really across any of your segments?

Eric Blashford (CEO)

We start with wind. Wind, as you know, has some components that are sourced from overseas. Our OEM partners saw this coming, and they've shifted some of the internals, which typically come from China, out to other countries that are less suspect or less impacted by tariffs. I think it could have a minor impact, but that would be a pass-through for us. We do not see a lot of impact because of the kind of advanced change that we did within our supply chain. With regard to the other locations, the other divisions that we have, we're seeing a little bit of lift in terms of the consumables such as welding wire and whatnot that we're able to pass through to our customers because, as you know, we quote virtually every job independently.

On the flip side, we're starting to see some potential onshoring activities, even with oil and gas gearing, that we haven't seen before. We're seeing a lift, and we suspect that it could have something to do with our customers' concerns with regard to tariffs out of especially the Far East. Looking to reshore or onshore more gearing and gearing components to the U.S.

Justin Clare (Managing Director)

Okay. Got it. I guess just following up on gearing, we have seen oil prices drop this year, and they're still at a relatively low level. I guess what's your visibility into the demand outlook for gearing, and how might the outlook for oil and gas be affecting that?

Eric Blashford (CEO)

As far as oil and gas gearing, as you know, as we reported before, that's on certainly an 18-month to two-year lull because fracking, new frack rigs, and whatnot are not being brought online. We are seeing some upgrades, updates to existing fleets, and we're selling into the aftermarket there. I would say that would be soft to a little bit of a lift. We had some stronger orders and revenue in gearing than we have seen in several years, which is interesting and certainly attractive to us. The power gen sector, which is obviously not drilling, it's using natural gas and oil, we're seeing a lift in. Those were strategic target markets we went after specifically with gearing, with this AS9100 certification, that's aeroderivatives and whatnot. We're starting to see some green shoots in that.

Notwithstanding the price of oil and gas being down, we're seeing some real opportunities in power generation from that sector.

Justin Clare (Managing Director)

Okay. Got it. Thank you all. Pass it on.

Eric Blashford (CEO)

Thanks, Justin.

Tom Ciccone (VP and CFO)

Thanks, Justin.

Operator (participant)

Our next question comes from Samir Joshi with H.C. Wainwright. Please proceed with your question.

Samir Joshi (Senior Equity Research Analyst)

Hey, good morning, and thanks for taking my questions. I'll focus on the—I’ll focus on the industrial solutions segment. It seems—and correct me if I'm wrong—but the drop in revenue could be attributed to supply chain and delays. Also, it looks like the outlook and the backlog seems to be quite strong here. Is the assessment that the Q1 performance only attributable to supply chain or delivery push-outs the correct assumption?

Tom Ciccone (VP and CFO)

Yes, Samir, that's a correct assumption. We're attributing the drop in revenue. It's simply a temporary delay as a result of supply chain issues that we've been experiencing in Q1. I think we've largely made up for that already in the beginning of Q2.

Eric Blashford (CEO)

Yeah. With regard to the industrial solutions, if you remember, we're providing some pretty complex and large packages for utility-scale installations and upgrades of turbines, and with several hundred pieces and components in each package, if one is delayed, we have to delay the whole package. Within our supply chain and our OEM support with their supply chain specifications, we are qualifying new suppliers in actually U.S. and international suppliers. We've resolved that supply chain, I would say, constraint. It's largely because of the growth in the industry, the overall growth in the industry as being absorbed by Broadwind, our customers, and the supply chain.

Samir Joshi (Senior Equity Research Analyst)

Understood. Maybe I'm reading too much into the inventory going up almost $10 million this quarter. Was it because of these sort of delayed shipments or any work in progress inventory that increased particularly from the industrial solutions?

Eric Blashford (CEO)

Samir, I'm sorry. Can you repeat that? Were you asking about inventory?

Samir Joshi (Senior Equity Research Analyst)

Yeah. So the inventory increased by around $9.5 million to $10 million. And I was wondering if it is mainly attributable to industrial solutions.

Eric Blashford (CEO)

I would say only partially. The real driver there is we're beginning tower production again in Manitowoc, and it's a rather large tower design. We've been increasing our inventory during Q1 to accommodate that. We're going to begin shipments in Q2 related to that tower build. The lion's share of that increase is related to Manitowoc. I'd also say that we're seeing a slight increase in Abilene as well because we're moving to a bigger tower design with a higher material content. That's really driving up some of the inventory that you're seeing. Biz is also a contributing factor as well. Industrial solutions, that is. Yeah.

Samir Joshi (Senior Equity Research Analyst)

Got it. Understood. And then one last one. On the PRS, I mean, we talked about the demand in clean fields and also the L-70 low flow, which is performing well. Do you have sort of aspirational goal revenues for 2026 from this particular product line or industry?

Eric Blashford (CEO)

Certainly. We have said before we see that to be about 10% of our revenue. I would say between $15 million and $20 million should be a comfortable assumption for that product line. We're starting to see some more interest in two things: in international, in South America for that product line, which we believe we've got certainly an innovative solution for that geography, but also some increased demand for rentals. If a customer takes on a new job, and it's a short-term job, and they're not comfortable with investing in capital, they'll often take advantage of one of our rental units or unit processes, and eventually, that can turn into a buy. With all that, I feel comfortable with about 10% of our revenue being out of the PRS line.

Samir Joshi (Senior Equity Research Analyst)

Do you expect the gross margins to be similar, higher for this going forward?

Eric Blashford (CEO)

Yes, we do. Yeah. The L-70 has an attractive pricing point, but that does not mean we are sacrificing gross margin for that. Obviously, with the rental and service, that comes naturally with higher margins. There is a capital outlay on Broadwind's part, but the return is quite a bit higher.

Samir Joshi (Senior Equity Research Analyst)

Got it. Understood. Thanks. I'll pass it on.

Eric Blashford (CEO)

Thank you.

Tom Ciccone (VP and CFO)

Thanks, Samir.

Operator (participant)

Our next question comes from Eric Stine with Craig-Hallum Capital Partners. Please proceed with your question.

Eric Stine (Senior Research Analyst)

Hi, Eric. Hi, Tom.

Tom Ciccone (VP and CFO)

Hi, Eric. Good morning.

Eric Stine (Senior Research Analyst)

Good morning. Can we just dig into wind a little bit more? Interesting starting tower production for a new opportunity in Manitowoc. I mean, do you see that as kind of indicative of something changing in the market or more of a one-off? Also, just want to think about kind of your longer-term view in 2026. You talked about seeing elevated quoting activity. When you're talking about that being flat year-over-year, are you anticipating that that quoting activity turns to orders? Do you need that for it to be flat year-over-year, or is it kind of flat year-over-year based on what's in hand today?

Eric Blashford (CEO)

I'll take the second part of your question. The first part of your question has to do with Manitowoc. As you know, wind is basically project-based, whether it be in the north or the south. That's why we have the two plants to address it. What's happening in the north are a couple of sizable projects that our customers are taking advantage of our capacity there in the north. That's one of the reasons why we're building repowering adapters in both plants to keep those capabilities and the workforce ready for a tower build. I would say that would be project-based. I think demand is still stronger in the south in general than it is in the north. Regarding 2026, I do believe that the volume to be consistent in 2026 versus 2025.

The backlog that we have now, that is partially because of the long-term agreement we signed a couple of years ago, takes us through the end of 2025. Into 2026, those would be new orders with consistent customer base.

Eric Stine (Senior Research Analyst)

Got it. Okay. Did you—and I can't remember if you do this on the call or if it's in the queue—but did you call out the 45X tax credit that you recognized in Q1?

Tom Ciccone (VP and CFO)

We did not, but it's about $2.5 million for Q1 is what we've recorded.

Eric Stine (Senior Research Analyst)

Okay. No, that's helpful. Thanks for that. Then maybe last thing for me, just I want to make sure I understand it. I know that you had identified $4 million in cost reductions for 2025, and I guess my understanding was that most of that had been put in place or achieved. In your commentary, it seemed as if you may be considering targeted cost reductions in other areas. Am I hearing that right? If so, could you just provide a little bit more detail?

Eric Blashford (CEO)

Sure. Yeah, sure. What we did last year was general cost actions. And really, that was a result of the overall reduction in wind output from 2023 into 2024. Those cost reductions, they're being maintained. They're in place, and they remain in place. What I mentioned in the prepared remarks is with varying capacity utilization in gearing, we've taken some cost actions in gearing to balance our output capability with demand. I expect that to kind of return back as we expect orders to increase throughout this year through these target markets I mentioned earlier, such as power generation and infrastructure and whatnot, defense, and even aerospace out of that division. That's what I'm referring to in the remarks is we took further actions in gearing to balance our capacity with demand.

Eric Stine (Senior Research Analyst)

Okay. That's helpful. Thank you.

Eric Blashford (CEO)

Thank you.

Operator (participant)

We have reached the end of the question and answer session. I'd now like to turn the call back over to Eric Blashford for closing comments.

Eric Blashford (CEO)

Yeah. Thanks, everyone. I appreciate your interest and look forward to executing our strategy in Q2 and coming back before you at the end of Q2 to talk about our results. Thank you.

Operator (participant)

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.