Greetings, and welcome to the Broadwind First Quarter 2022 Results Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Tom Ciccone, Vice President and Principal Accounting Officer of Broadwind. Thank you. You may begin.

Good morning, and welcome to the Broadwind First Quarter 2022 Results Conference Call. Leading the call today is our CEO, Eric Blashford; and I’m Tom Ciccone, the Company’s Vice President and Principal Accounting 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 out 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 a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors 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.

Thank you, Tom. And welcome to those joining us today. As discussed in previous quarters, our wind business is experiencing a temporary pause in order activity due to a number of headwinds, such as the delay in the federal production tax credit, or PTC, and the high cost of steel. We believe the wind market will recover beginning in 2023 and that we could see some potential switching from solar investments to wind investments, given the recent Department of Commerce case in the solar industry. Our non-wind end markets remained strong. Labor remains a challenge, but we’ve enacted a number of programs to recruit, train, and retain the talent we need to meet our customers’ demand. We remain focused on quoting contracts competitively but with the recognition of rising costs; we are effectively managing our cash and expect to have liquidity at current levels by year-end 2022. During the first quarter, we delivered $42 million of revenue, a 28% increase year-over-year, led by the Heavy Fabrications and Gearing segment, which posted gains of 20% and 98%, respectively. Excluding the ERC impact in the first quarter of 2021, adjusted EBITDA increased by more than $2 million year-over-year. We are working with multiple turbine OEMs. We’ve placed orders to secure about 50% of our optimal 2022 tower capacity so far, and we’re in discussions for further orders. Our quoting activity increased during the first quarter of 2022 as customers reserve tower production capacity for the second half of 2022 and began discussions regarding 2023 capacity. Cost inflation on key materials remains a headwind for our wind turbine customers and one that has dampened near-term capital investment in wind. The cost of plate steel, a significant material in the construction of wind towers, remains elevated after the significant increases seen over the last year. While Broadwind absorbs only minimal direct commodity price risk, we believe some customers are waiting for raw material costs to normalize before placing orders. This, when balanced against wind developers' efforts to align projects with a potential PTC extension, has pushed tower orders out several quarters. Our Q1 orders were $53 million, a 54% increase year-over-year, led by strength in our Heavy Fabrication and Gearing segments. Our Heavy Fabrication segment saw orders of $34 million, a 64% increase over Q1 2021, while our Gearing segment booked $14 million of orders, a 42% increase year-over-year, following a record Q4 2021 due to continued strength in our energy and mining markets. Our backlog increased to $117 million, a 24% gain year-over-year, with all segments reporting a book-to-bill ratio above 1. Quoting activity in our non-wind markets remains robust, and we expect the good order flow to continue through 2022, especially from Gearing and industrial fabrication customers. We are seeing the ability to pass on inflationary cost increases in our new quoting activity. Within our Heavy Fabrication segment, revenue increased 20%, driven by strong repowering industrial fabrication shipments. We continue to quote and produce for multiple wind turbine OEMs and our customer diversification in the wind energy segment will serve us well as the wind market recovers. Within Gearing, revenue doubled to approximately $11 million as the anticipated improvement in customer activity continues. Revenue for our Industrial Solutions segment dropped by $0.5 million or 12% as several shipments were delayed into Q2 due to incoming supply chain constraints. Orders for this segment were up 30% year-over-year as we are seeing our gas turbine aftermarket strengthen, and we continue to expand the business globally. In summary, I’m pleased that our diversification strategy continues to provide revenue opportunities as we work through the temporary pause in wind tower demand until the headwinds of commodity pricing and policy uncertainty resolve. Our team has responded quickly to the well-documented global supply chain challenges as we continue to meet our customers’ needs and keep our people safe. We expect wind development activity to ramp up gradually over the medium term, particularly if we see a substantial extension of the PTC and increased interconnection activity. With that, I’ll turn the call back over to Tom for a discussion of our first quarter financial performance.

Thank you, Eric. Turning to Slide 5 for an overview of our first quarter performance. First quarter consolidated sales were $41.8 million compared to $32.7 million in the prior year quarter. Versus the prior year, Q1 sales increased in our Gearing and Heavy Fabrication segments. Our Gearing segment continues to operate in a robust commercial environment and saw revenue increase in almost all end markets. Within the Heavy Fabrication segment, tower sections sold were flat, but we benefited from an increase in repowering activity as well as a 57% increase in Industrial Fabrication revenue, a byproduct of record-level Q4 order intake for that product line. In Q1, we recognized breakeven adjusted EBITDA compared to adjusted EBITDA of $1.2 million in the prior year first quarter. It should be noted that the prior year Q1 EBITDA included a $3.4 million benefit attributable to the employee retention credit as outlined in the provisions of the CARES Act. Excluding the impact of the employee retention credit, adjusted EBITDA increased by $2.2 million when compared to the first quarter of 2021. Turning to Slides 6 and 7 for a discussion of our Heavy Fabrication segment. First quarter sales were $27.3 million, up 20% when compared to $22.8 million in the prior year quarter as industrial fabrication throughput increased due to strong order intake activity in 2021. Tower sales also increased 13% due to an increase in repowering activity versus the prior year. Tower sections sold were flat versus the prior year quarter as weakness in demand for our Manitowoc tower production was offset by the absence of operational headwinds that were experienced in the prior year. First quarter orders were $34.2 million, a 64% increase from the prior year period. Despite the industry-wide pause in overall power activity, orders more than doubled as orders were received sooner than expected to secure available Abilene production capacity and helped mitigate potential supply chain challenges. Overall, our Manitowoc facility continues to be soft given the location of wind projects, but we are able to partially offset that temporary softness with other industrial fabrication business as per our plan. There continues to be strong interest in our Abilene production capacity due to ongoing planned projects in that region. Industrial fabrication product line orders decreased relative to Q1 2021 as Abilene has been focused on servicing demand for towers and PRS or pressure reduction system units. Additionally, supply chain challenges have delayed some work with a major customer in Manitowoc. During the first quarter, we sold 169 tower sections flat versus the prior year period. However, over the last 12 months, our tower section sold and as a result, our EBITDA has been adversely impacted by the aforementioned pause in wind tower activity. Despite a lack of power demand in Manitowoc, inflationary pressure and supply chain challenges, we have been successful in temporarily reallocating some of our plant capacity from wind to industrial fabrication production where we serve diverse end markets such as mining, construction, and energy. Additionally, demand for tower sections in Abilene remains strong, and we expect to operate at near-optimal capacity levels for the balance of the year. Adjusted EBITDA for the segment was $600,000 in Q1. Excluding the impact of the employee retention credit, adjusted EBITDA increased by $1.2 million when compared to the first quarter of 2021. Turning to Slide 8. I will cover our Gearing segment. Gearing continues to operate in a robust commercial environment, led by energy and mining markets. As a result of this strength, orders totaled $14.1 million in Q1, up 42% from what was booked in the prior year quarter, and we’ve begun to book orders into 2023. First quarter segment sales increased to $10.6 million versus $5.3 million in the prior year. Sales were also up $2.3 million over 28% sequentially. The favorable sales comps are a result of the strong order intake we’ve been experiencing since mid-2021. In addition to some inflationary pressures experienced in Q1, we also incurred costs related to hiring, training, and learning curve inefficiencies as we ramped up capacity to meet increased demand. We generated $0.5 million of segment EBITDA in Q1, a modest increase of $0.2 million versus the prior year period. However, excluding the impact of the employee retention credit, adjusted EBITDA increased by $1 million when compared to the first quarter of 2021. Turning to Slide 9 for a discussion of our Industrial Solutions segment. Industrial Solutions recorded $4.5 million of new orders in Q1, up $1 million from the prior year quarter. Sequentially, orders are down as Q4 included a large $3.2 million follow-on order from a new international customer. Although overall orders are down, we’ve been encouraged by the progress in our core gas turbine businesses as both gas turbines and aftermarket orders are up sequentially. First quarter segment sales dropped to $4.1 million from $4.6 million in the prior year period as supply chain delays on inbound materials impacted our production sequencing. EBITDA decreased to breakeven due to decreased sales volume and a less favorable sales mix when compared to the prior year quarter. Turning to Slide 10. Total cash and availability under our credit facility remains at an adequate level with nearly $15 million of liquidity at quarter end, similar to where we ended 2021. Net operating working capital increased $4 million sequentially to $22.6 million, primarily reflecting a change in customer deposits due to customer mix. Inventory balances also remain at elevated levels as supply chain issues continue to delay customer deliveries. We expect inventory balances to normalize over the balance of 2022 as we’re able to ship inventory, which we’ve been carrying for extended periods. During Q1, net debt, which includes finance leases, increased from $10.5 million to just over $19 million as we funded the working capital build and added two significant finance leases to our balance sheet for new machinery and equipment within our Gearing segment. Our net leverage stood at 1.6x trailing 12-month EBITDA as of quarter end. We are watching liquidity closely and remain committed to managing it aggressively, especially given ongoing global supply chain challenges. We feel comfortable that we have sufficient liquidity available and expect to end the year in a similar liquidity position as we are in today. As noted in our press release issued this morning, we expect second quarter adjusted EBITDA to be approximately $400,000 to $600,000. That concludes my remarks. I will turn the call back over to Eric for an overview of end markets in addition to some concluding remarks.

Thanks, Tom. Turning to Slide 11 for further discussion of our outlook for the domestic wind market. There are some encouraging signs for the medium to long term as we expect nearly 12 gigawatts of annual onshore wind capacity to be added through 2030 with an acceleration of new installation activity in the latter half of the decade. In the near to medium term, we view the PTC extension, rising commercial and industrial demand, and repowering activity as catalysts for increased installation. We’re also encouraged by the cooperation between regional transmission organizations such as the recently completed study by MISO or the Midcontinent Independent System Operator and the SPP, the Southwest Power Pool, to resolve interconnection constraints along their shared boundaries. Broadwind applauds this cooperation as we need all parties of the value stream to work together from citing to component manufacturing, generation, and transmission to ensure continued expansion of renewable energy in North America. Wood Mackenzie forecasts increasing capacity installations from 2023 through 2030 echoing our confidence in wind. The long-term outlook remains positive as the energy market transitions from fossil fuels to renewable energy, which includes wind power. As we continue to augment our wind business with complementary products, our progress continues across a number of diverse end markets. Our customer and market diversification initiative remains central to our overall plan, providing opportunities to leverage our valued workforce and optimize our production facilities as wind projects vary from quarter to quarter. Renewables and other forms of clean power remain core to Broadwind, even as we expand the revenue streams outside of wind. Today, our fastest-growing non-wind segments include power generation, mining, and the industrial segment, including our increasing penetration into the infrastructure, material handling, and some new inroads into the paper industry. In our Heavy Fabrication segment, we’re adding capabilities to improve our plant utilization and reduce costs as we continue to work with customers to sell remaining 2022 capacity in both towers and other industrial fabrication. The Broadwind PRS line, we introduced in 2021 to service the growing natural gas virtual pipeline market, continues to gain momentum, and we’re developing new models to serve broader applications. In our Gearing segment, we continue to shift our sales mix toward markets that tend to be less cyclical and offer a more balanced revenue stream. We’ve engaged other customers to share inflationary cost increases as we deploy new machining capabilities to expand capacity, reduce costs, and most importantly, open new markets. Our custom gearbox business continues to grow with special emphasis on our repair and upgrade categories to help our customers improve their plant reliability and utilization. The talent upgrades and process improvements we put in place in the last year are bearing fruit as we’re able to manage the continuing supply chain challenges and win business based on lead times and reliable deliveries. In our Industrial Solutions segment, we’re expanding our market share both domestically and internationally, including the growing aeroderivative segment of the gas turbine market. We’ve added resources in both operations and engineering to continue our growth in the natural gas, wind turbines, and solar markets. In summary, Broadwind remains an active participant in the ongoing clean energy transition. We see long-term growth of the domestic wind market, given that wind energy continues to be one of the most cost-competitive energy technologies available. Our broadening customer set and increasing precision manufacturing capabilities create new business opportunities to help offset the normal order fluctuation in the markets we serve. We are prudently investing in technology and capability improvements in all divisions to improve throughput, reduce costs and address new market opportunities, and lastly, to adequately capitalize to support our growth strategy. With that said, I’ll turn the call over to the moderator for the Q&A session.

Our first questions come from Justin Clare with ROTH Capital Partners.

So first off, I just wanted to start on the Q2 guidance. I was wondering if you could just provide a little bit more detail on how you might expect revenue and adjusted EBITDA to trend by segments in Q2? And then just what is driving the sequential improvement in adjusted EBITDA from Q1 to Q2?

Yes, I think we’re going to see, as far as the individual segments of the business, revenue will grow from Q1. We’re going to see continued strength in the Gearing business, as I’ve indicated in my prepared remarks. Also, we’re going to see some shipments out of the Industrial Solutions because of the supply chain delays we had, going to be resolved. Regarding EBITDA and the growth there, it’s going to be a couple of things. It’s going to be because of the revenue adjustment, but also we incurred some costs in Q1 that we don’t expect to continue such as some hiring, training, and ramp-up costs in the Gearing business as we’re increasing our capacity to meet demand. And there’s a little bit of price impact that we’re seeing because some of the price that we were able to take—there's some delay in realization.

Okay. Great. And then in your press release, it indicated that you’re anticipating improvement in quarterly financial performance as you move through the remainder of 2022. So wondering if you could just touch on the drivers of that improvement. And then does that mean that we should see adjusted EBITDA sequentially improve in Q2 and then again in Q3 and then again in Q4? So if you could maybe expand on that, that would be helpful?

Yes. As we mentioned, you will see sequential improvement in Q2, and possibly in Q3 as well. For Q4, there is still some unsold capacity that we need to fill, so I can't really comment on Q4 at this time.

Okay. And then just on the capacity that you need to fill here, you’ve booked nearly 50% of optimal tower capacity for the year. It sounds like Abilene may be completely booked. So maybe if you could just address that. And then so is the goal for the rest of the year to fill the Manitowoc facility with a combination of maybe tower volume and the industrial fabrication volume?

Yes. I wouldn’t say our Abilene facility is certainly more full than the Manitowoc facility, that we still have some production that we’d like to feel in Abilene towards the end of the year in both towers and industrial fabrications. But we certainly have more open capacity in Manitowoc. Fortunately, the Industrial Fabrication business is much stronger in the North. We’re able to take advantage of that capacity as we continue to book through the rest of this year. And the lead times are shorter on the industrial fabrications business, so it’s easier to fill as we move through quarters of the year.

Our next questions come from the line of Eric Stine with Craig-Hallum.

This is Aaron Spychalla on for Eric. First on repowering, it was kind of a source of strength in the first quarter. Can you kind of talk about that? How sustainable is that? Or is it more related to just kind of the pullback in the overall wind business that you’re seeing?

I think repowering is project-based. As the projects arise, developers will collaborate with the OEMs to obtain components. When we refer to repowering, we generally mean adapters, which allow a tower to fit a new nacelle and potentially a larger blade set. These are specific to each project. We have some insight into certain projects, but the timing really depends on the developer, the EPC, and the OEM. So, I would say it will continue, but it will be quite variable.

All right. And then just on PRS, can you just kind of talk a little bit more about that? You mentioned some new products there. Just what’s the outlook for that and kind of contribution as we head into 2023?

Yes. That’s still rather a small product set for us. The reason we highlighted it is because it’s proprietary. The margins are pretty good on that. We can see that—again, I estimate that market to be maybe a $100 million annualized market. We certainly would like to get a nice 20-or-so percent share of that eventually. But again, the profit profile of those products is higher than the other products we have because that’s proprietary to us. We also like the fact that, that’s in the natural gas virtual pipeline space, which we see as a transitional fuel as we progress to a more full renewable energy generation in the U.S. When I’m talking about new products, we have what we call a medium flow, which is the lion’s share of the market, but there’s also a high flow that we’re looking to come up with and possibly even a low flow. And what that allows us to participate in different markets, such as a high flow can unload more trailers at the same time. So it has to be at a site that needs that type of flow in order for us to— them to require that high-flow model.

All right. And then maybe last for me, just kind of as we look to 2023 in an early view there, do you see some of these challenges dragging into next year? Or is there some hope that we can see more normalization there? It kind of sounds like it’s more driven by the PTC and then also just material costs on the customer end.

Yes, I think on the wind side, I think that continues. Lobbyists in Washington are certainly on both the solar and the wind sides lobbying Congress to make sure that they get something done to help our whole energy policy, and the sooner that gets done, the better. We’re encouraged that we’re also seeing, in spite of the PTC pause or delay, these operators are working together, such as MISO and SPP, which are— that’s interconnection. You need to have both the PTC and normalized prices, but also interconnects to make sure that you can distribute this energy from the source of its generation to the source of its use. So we’re encouraged that the market is still moving forward, Aaron. So yes, there is still a pause going on because of the PTC uncertainty. I do expect that to normalize through the end of this year into 2023. And that’s what the Wood Mac forecast indicates is a progressive improvement over the next three or four years, all the way through 2030.

Our next questions come from the line of Amit Dayal with H.C. Wainwright.

Just with respect to the capacity side of things, as your wind tower orders potentially start coming through later in the year, early ‘23 versus the energy market remaining strong. How easy is it to sort of shift, be flexible around managing utilization levels? And if there was sort of an uptick on both the wind side and the energy side for you guys going into ‘23, like will you have to sort of find new capacity? How are you going to manage potential sort of developments along those lines?

Yes. That’s a really good question. We haven’t taken any capacity offline. We still have all the equipment. It’s still there being maintained, some of it is multi-use. We’ve maintained a great core of labor, and that’s the benefit of having these industrial fabrications portion of our business as we can shift labor back and forth. Now if the orders come through very robustly, we would have to go back into the market and rehire. We’ve got great relations with the people that may have left for other opportunities that were in the wind business that we weren’t able to maintain, but we’re confident we can get them back with the right compensation package and the right visibility in the future. So yes, Amit, that is a factor, ramp-up factor. We have great relationships with, as I said before, with the local population, so we can get them back. The other thing that’s of note there is because of the length of the lead times of these things, which can be up to 26 weeks, and we’ve talked about that before, that gives us some time to ramp up. So it’s not like we’d have to turn it back on within a month or two. So we would have time to recruit and retrain, bring them back.

Okay. Understood. And as you get through 2022, should we expect gross margins to show some improvements as maybe utilization levels improve? I’m just trying to think through sort of your cost issues; maybe some of those are still in play for you. But with the visibility you have, should we look to model for maybe sequential improvements in gross margins from here?

I think it’s important to analyze each business individually. The Gearing business is currently performing well, and we are already securing orders for 2023. As we address the ramp-up and training challenges that come with getting these operations fully operational, I expect to see gradual improvement. Additionally, some of the pricing changes we’ve implemented will take time to be fully realized. As we've previously discussed, the margins in that sector are generally higher compared to others due to its technical nature. I would characterize Industrial Solutions as relatively stable. For the Tower business, utilization is crucial, so your models regarding utilization are likely accurate.

Our next questions come from the line of Martin Malloy with Johnson Rice.

The first question I had was related to the industry—wind side. You talk about the AD/CVD investigation potentially having some impact in terms of developer utility spending on types of renewables. Are you hearing from customers that they’re shifting from utility solar over to wind for their projects given what’s the uncertainty around the solar panels?

I have not—I mean I would say there’s a lot of industry buzz there, Marty. I have personally not heard from our OEM customers. Remember, they’re a little bit far down the line. You’ve got developers, EPCs, turbine OEMs and whatnot. So we haven’t heard that, but there’s plenty of industry buzz. And I would say I think it will have an impact all things considered. If you’re a developer with an interconnect, as I mentioned earlier, that’s there, and your financials are relatively the same between the solar and wind projects, you’ve got to figure execution risk. And if there’s execution risk because they can’t get components, maybe there’s a solar panel or component restriction, I think it could give a nod to wind. I think it could give a nod to wind. It’s tough to tell how much that would be, but I think it’s definitely a consideration. Again, execution risk would be much higher on the solar piece at this time.

Okay. And then just on the balance sheet. I think I heard you state that you expect the liquidity position to be roughly similar at the end of this year from the end of the first quarter. And maybe if you could just kind of talk through—I think you also mentioned the inventories are expected to decline. I noticed the receivables were up. And maybe if you could just talk a little bit about the drivers behind that not using any more cash through the end of the year. And then any concern on the bank covenant front?

Sure. Yes. So I think we’re expecting our working capital to continue to fluctuate throughout the balance of the year. But we expect to be about where we’re at right now in terms of working capital. Our inventory balances, they’re a little bit inflated right now as we’re carrying some extra inventory as a result of some supply chain challenges that we’ve had. There was also some timing as we accelerated the receipt of some steel just in an effort to try to avoid any supply chain challenges. So yes, we will be funding ups and downs in working capital. But again, we think we’re going to end up where we’re at now as some of our inventory balances normalize. In relation to the covenant, we’re not anticipating any issues at this point.

Thank you. There are no further questions at this time. I would now like to turn the call back over to Eric Blashford for any closing comments.

Yes. Thanks, everyone. I appreciate your attention and interest in our company. We look forward to coming back and speaking with you again after our Q2. Have a great day, everyone. Bye now.

This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.