Broadwind, Inc. Q1 FY2026 Earnings Call

Greetings and welcome to Broadwind's First Quarter 26 Results Conference Call. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Thomas A. Ciccone.

Thank you. You may begin. Good morning, and welcome to the Broadwind First Quarter 26 Results Conference Call. Leading the call today is our CEO, Eric Blashford and I am Thomas A. 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 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 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 will turn the call over to Eric.

Thank you, Tom. And welcome to our call today. During the first quarter, we advanced our business transformation strategy while delivering strong revenue growth, margin realization, and order momentum in our core Gearing and Industrial Solutions segments. Higher demand in the power generation and critical infrastructure end markets drove revenue growth of more than 40% in Gearing and more than 60% in Industrial Solutions year over year. We anticipate our strategic exit from wind tower production will be complete in 2026. So Gearing and Industrial Solutions will represent our core businesses moving forward. Excluding the divested product lines within the heavy fabrication segment, Broadwind generated approximately $64 million of revenue on a trailing 12-month basis through the end of the first quarter. Our remaining businesses are higher growth, more predictable, more profitable and not policy dependent, with meaningfully improved earnings quality. Over time, we will use our core Gearing and Industrial Solutions segments as a platform to grow a business of increasing scale and profitability. Within the Gearing segment, Q1 orders increased more than 65% to $13.2 million supporting a backlog of $30.5 million. Demand growth within the Gearing segment has been largely driven by strong customer activity in power generation, driven by the AI data center boom as well as industrial and mining markets. Quoting activity remains robust, with green shoots now forming in defense. Our Industrial Solutions segment had yet another strong quarter as orders increased 44% year over year to $14.6 million driving backlog to a record $43.3 million. Natural gas turbine demand remains very strong, also driven by the AI data center boom as well as global electrification, representing key growth drivers for this segment, and we are happy to meet that demand. Operationally, we continue to invest in equipment and technology to increase our process capabilities, reduce costs, and improve our profitability. In Gearing this quarter, we commissioned new very high precision grinding and mechanical balancing equipment to improve quality and reduce lead times in the production of high-speed reduction gearing such as the gearing used on natural gas turbines. These technology improvements make us one of the most vertically integrated manufacturers of these types of critical components in the U.S. In the Industrial Solutions segment, we continue to make investments to improve our capacity and capabilities in order to meet the strong customer demand that we are experiencing from our key gas turbine equipment customers. We are on track to expand our local footprint in our North Carolina facility in Q2. This expansion will increase production space in North Carolina by 30%, which is necessary to service our strong backlog and will position us to handle the future growth projected in this market. Within our heavy fabrication segment, Q1 revenue decreased by 35% reflecting the sale of the Manitowoc Industrial Fabrications business last year, lower PRS demand, and the residual impact of the OEM-directed raw material supply issue we experienced late last year. Revenue in our Gearing segment increased 42% year over year to $8.5 million given the steady ramp up in power generation-related demand. Within Industrial Solutions, revenue grew 64% year over year to $9.2 million primarily due to stronger shipments of natural gas turbine components. In summary, the team and business continued to perform well as we sharpen our focus within adjacent higher-margin precision manufacturing verticals. Our progress on industry-specific certifications such as AS9100 for aerospace and defense and the Cybersecurity Maturity Model Certification, CMMC 2.0, for the defense market, combined with targeted investments in capacity and capability, is yielding the results we expected and more. Our decision to strategically pivot from the unpredictable, uncertain, and policy-dependent wind tower business and repurpose that capital toward higher growth, more predictable, more profitable markets positions us well for the future. With that, I will turn the call 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 versus the prior year period. First quarter consolidated revenues were $34.1 million representing an 8% decrease. As expected, we experienced a decrease in our heavy fabrication segment. However, outside of the heavy fabrication segment, first quarter revenues within our Gearing and Industrial Solutions segments increased more than 40% and 60%, respectively, reflective of the strong order activity levels we have been recognizing. Adjusted EBITDA declined slightly to $2.2 million versus the prior year of $2.4 million. However, adjusted EBITDA increased approximately 16% sequentially driven by improved capacity utilization and a more profitable mix. First quarter orders remained strong at $37 million. Orders increased within our Gearing and Industrial Solutions segments driven by strength in the power generation and natural gas turbine verticals, while orders decreased within our heavy fabrication segment, reflective of our exit of the Manitowoc facility late in 2025. Turning to Slide 6 for a discussion of our heavy fabrication segment. As expected with the wind down of the Manitowoc operations, we continue to see decreases in revenue, orders and backlog. We anticipate this to continue going forward especially in light of our recently announced sale of our Abilene facility pursuant to which we strategically exited the wind market. First quarter orders of $9.7 million primarily consist of wind tower production that will continue through 2026 out of the Abilene facility as well as some baseline PRS activity. As a reminder, we will retain the PRS business and we are evaluating segment reporting following the divestiture. We will provide additional detail as the process is finalized. First quarter revenues of $16.4 million and adjusted EBITDA of $1.7 million are both down versus the comparative prior year period due to the wind down of our Manitowoc operations, the resolved raw material supply issue, and lower PRS demand. Turning to Slide 7, Q1 Gearing orders remained strong at $13.2 million, an increase of 66% versus the prior year and 36% sequentially. We ended Q1 with over $30 million in backlog, a level we have not reached since 2023. As we noted in prior quarters, we continue to see strong orders from power generation and oil and gas customers and that momentum continued into Q2 as we booked more than $6 million in orders in April alone. Segment revenue was $8.5 million, an increase both sequentially and versus the prior year, reflective of the stronger recent order intake levels. We recognized adjusted EBITDA of $600 thousand compared to an adjusted EBITDA loss of $200 thousand in the prior year period. As our volumes continue to recover, we are improving our capacity utilization driving improved operating leverage. Turning to Slide 8, Industrial Solutions booked $15 million of new orders during the first quarter, a 44% increase over the prior year. During the first quarter, the segment set a new record for both orders and backlog, and is on track to do so again in Q2 as it has already recorded over $10 million in orders during April alone. The $43 million backlog total is more than $5 million above the previous high watermark set in Q4. Q1 represents the sixth straight quarter setting a record backlog level. Q1 segment revenue was $9.2 million, up over 60% versus the prior year reflective of the elevated order levels received recently. As we noted last quarter, we expect this business will operate at these elevated revenue levels over the medium term. First quarter adjusted EBITDA was $1.8 million or 19% of revenue. This represents a significant increase from the $500 thousand in adjusted EBITDA and 8.7% EBITDA margin in the prior year, as the segment benefited from improved capacity utilization and a more favorable mix of products sold. Turning to Slide 9, we ended the first quarter with total cash and availability on our credit facility of more than $25 million, or $16.4 million after adjusting for the minimum excess availability requirement in place effective Q1. Pro forma for the sale of the Abilene facility our liquidity improves approximately $10 million reflective of credit availability adjustments and required debt payments. During Q1, operating working capital increased slightly as a decrease within our heavy fabrication segment was more than offset by increases within our Gearing and Industrial Solutions segments in line with their increasing activity levels. Finally, with respect to our financial guidance, as noted last week, with the sale of the Abilene facility, we have elected to withdraw our full year 2026 financial guidance. That concludes my remarks. I will turn the call back over to Eric to continue our discussion.

Thanks, Tom. Now allow me to provide some thoughts as we move into Q2 and beyond. We continue to make a decisive shift toward increasingly stable, growing power generation and critical infrastructure markets. The strategic moves we have made with our tower facilities position us to focus on higher growth and higher margin opportunities that leverage our precision manufacturing expertise, and to do so with a strengthened balance sheet. We will complete our remaining wind tower orders through Q3 and then direct our full attention to our growth strategy. Our remaining facilities in Chicago, Pittsburgh, and Sanford, North Carolina near Raleigh, have more than 450 thousand square feet of manufacturing space ready to serve our customers. Quarter upon quarter of strong order growth within the Gearing and Industrial Solutions segments from power generation—specifically within distributed power—as well as growing opportunities in both small frame and utility-scale natural gas turbines support our strategy to expand in this market. Quote activity continues to increase in both Gearing and Industrial Solutions, generated by our ability to solve complex precision manufacturing and sourcing challenges faced by our customers in this growing market. We have prudently added resources to meet this demand in both divisions. In our Gearing segment, we continue to execute our strategy to move beyond traditional gearing for new opportunities in other precision machine products for power generation, aerospace, and defense. We see the continuing strength in incoming orders from the power generation sector as the beginning of a super cycle for which we are prepared. Expansion of our very high precision and vertically integrated capabilities to serve the high-speed gear segment I mentioned earlier increases our value add to key customers. We are pleased with the increasing level of customer activity we are seeing in various new infrastructure-related opportunities such as material processing and defense. We expect further inroads in defense as we complete our CMMC 2.0 certification later this year, which is a requirement when producing certain defense-related products. Lastly, there is also improving order activity in traditional gearing markets supporting oil and gas, specifically the fracking aftermarket as certain customers begin putting older rigs back in service. In Industrial Solutions, our commercial performance continues to set new records in both orders and backlog. The strong demand that we began experiencing in 2025 continues to accelerate in 2026. As the global demand for natural gas power generation equipment grows, and as our customers bring additional production capacity online, we believe this is an extended period of growth. Some of our key customers have sold out their production capacity for the remainder of the decade, which gives us confidence that this period of strong demand is still in its early stages. In summary, I am pleased with the order growth and the strategic actions we have taken over the last year and I am excited to execute our plan. Our divisions are 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 ability to solve complex manufacturing challenges for our customers continue to help us win new opportunities. We have refocused our business, are investing wisely, and are taking decisive strategic actions towards higher value growing end markets. We are encouraged that our order intake continues to grow, positioning us for improved utilization of our reduced manufacturing footprint in 2026 as we strengthen our foundation for steady, profitable growth serving the power generation, critical 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 will turn the call over to the moderator for the Q&A session.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. Our first question comes from Justin Clare with ROTH Capital Partners. Your line is now live.

Hey, good morning. Thanks for taking our questions here. I wanted to start out with Heavy Fab. Just wanted to see how you would frame the conversion of the remaining backlog for Heavy Fab, the $25 million—how do you expect that to convert between Q2 and Q3? And then just wanted to see how you are thinking about the inventory levels for the overall business as you convert the remaining orders for Heavy Fab here and then what the effect could be on your overall liquidity, because I am imagining you may have a lower inventory level as you convert the remaining orders here.

Yes. Thanks, Justin. So of the $25 million of backlog, the overwhelming majority of this is towers-related that will be completed out of the Abilene facility here. That should be very ratable over the next two quarters. Think of it as roughly spread over the next five months—about one-fifth per month—so you can call that fairly ratable post-close. The other thing I would mention is overall, when we are looking at not just inventory balances but our operating working capital, we had maybe $10 million of operating capital associated with our wind business at the end of the quarter. So we expect that will obviously decrease, but we are expecting that to be partially offset by increases within our Gearing and Industrial Solutions segments as those continue to ramp up over the balance of the year. So there may be some benefit, but I think it will be muted.

Yeah. Got it. Okay. And then with the sale of Abilene, just wondering how we should think about the overall operating expenses for the business here and how you anticipate that changing as you exit that wind tower business? And then any other actions we should be looking for in terms of things that you may be looking to do to optimize the business as you shift to a focus on power generation and critical infrastructure?

The operating expenses associated with that facility will go away as we exit the facility. I do not think that their cost structure is significantly different than what we have within the other business units, so we should not see a major consolidated impact there. In terms of other costs that we are looking at, we are reviewing all of our costs and trying to optimize in light of this transaction going forward.

Got it. Okay. And then maybe just one more. You had indicated natural gas content drove order growth for Industrial Solutions and Gearing. Wondering if you could talk about the opportunity for Broadwind to expand content per turbine or wallet share within the natural gas end markets. And then I guess, what you are seeing in terms of order size or project scope and how that is trending?

Yes. Thanks, Justin. We are engaged with a couple different producers of gas turbines, primarily those that are in the utility scale. We are engaged right now with four of the top ten, and of course we have some concentration with a couple of those. As far as content, the content for Industrial Solutions is broad as we discussed before. We tend to support installations on what is called not the hot gas path but surrounding the hot gas path. So we continue to invest in capabilities to grow share within that product set. I think we are growing with our primary customer and another three on top of that. We are also growing content in Industrial Solutions beyond what we currently do by taking more manufacturing on ourselves. With regard to Gearing, we do production gearing, and we are looking at some other components within the natural gas turbine, but it will be limited primarily to that reduction gearing that we discussed before because that is primarily what these turbines need from us as far as precision machined gearing.

Thanks, Justin.

Thanks, Justin.

Our next question comes from Eric Stine with Craig Hallum. Your line is now live.

Hi, Eric. Hi, Tom. Good morning. So, obviously, you are focusing here. You have been investing in Gearing and Industrial Solutions for some time. Curious, could you update us—given you have really strong backlog in both segments—how you would expect that backlog to flow in both businesses, whether that has changed or improved your ability to execute on that, and then just what that implies over the next say 12 to 18 months?

Sure. Sure.

Thanks, Eric. I think what we are seeing is that Q1 is probably the low watermark for our revenues for both of those segments. We do expect these revenues to ramp up, but I do not think we can take our order run rate and extrapolate that directly to revenue because we are probably booking further into the future than we have in the past. In other words, we are booking based on when the customers want product, not on our ability to deliver earlier. That said, I think you can expect steady, ratable growth for the balance of this year. We are booking into 2027 and actually starting to see a little into 2028. That depends on when customers want product, not our capability. Some of our customers are literally booked to the end of the decade and want to secure capacity now instead of waiting.

So I do not want to put words in your mouth, but it sounds like you could execute on this backlog in both segments perhaps over the next 12 or so months, but in some cases when the customers want that production could be the limiting factor. Correct? Which also means there is more capacity you have to fill in the interim. Is that right? And is there a way you can disclose what percentage of the backlog is earmarked for 2027 versus 2028 and 2026?

We could probably provide that on the next call and provide some color there. At this point I would say it is primarily 2027 for anything that is not this year. We are just starting to touch 2028, but we can add some detail on the next call.

Yeah, and you are correct. The customer that is requesting some 2028 delivery dates would be out of the Industrial Solutions segment, not so much out of Gearing.

Could you talk a little bit about Gearing? You mentioned positive trends in oil and gas. Early in the year oil prices were depressed, and some companies say that has weighed on their oil and gas business. Is that something you are concerned about or on the lookout for, or is there a reason that Gearing would be a little bit insulated from what some others are seeing?

Gearing for oil and gas has been at low levels for six or seven quarters now. There are a couple reasons. Customers are being more frugal with capital; rigs are more productive so they do not need to add as many rigs to increase output. What we are seeing now is some customers putting older rigs back to work and replacing components within existing rigs. So demand is more in the aftermarket—quick-turn domestic supply as customers reactivate old equipment—rather than new capital investment. The U.S. rig count remains down; customers are not broadly adding new rigs, but they are replacing wear parts and upgrading existing rigs.

Okay. That is helpful. Last question for me: you signaled you aim to use a stronger balance sheet to add to your business. When you look at your platform, what are some areas where you potentially could fill in? Any higher-level thoughts on M&A targets?

We have been open about wanting to grow inorganically. We plan to use both platforms—Gearing and Industrial Solutions—as platforms to grow. We like precision machining with exposure to defense and aerospace, and we would consider something in power generation that makes strategic sense. We also like grid hardening—transmission and distribution—because much of the U.S. grid is older and in need of upgrades, and we see a position for us to support that upgrade.

Thanks, Eric.

Thanks, Eric.

Our next question comes from Amit Dayal with H.C. Wainwright. Your line is now live.

Thank you. Good morning, everyone. Thanks for taking my questions. It looks like you have a pretty clear strategy in front of you with the new segments you are focused on. In that context, what should we expect EBITDA margins to come through at maybe over the next 12 to 18 months as you clean up the businesses you are exiting and focus on these new segments?

Sure. I will take that one. Within our Gearing segment, we should expect margins to continue to improve. For them, it is really about volume and operating leverage. They have a substantial fixed cost structure, and the more revenue we can produce out of that plant, the more profitable the overall plant becomes. So we should see continued ratable improvement. In Industrial Solutions, we should see our mix normalize. The last two quarters we had a very strong mix of products sold, and we expect that to normalize over the balance of the year. So while revenue should increase, margins may normalize a little bit over the balance of the year.

Understood. And then, you know, with the new fabrication now sort of out of the way, is there a potential rebranding coming for the company overall?

The question really is under consideration. Some of our divisions already operate with different names, like Bradford Gear, which we would not rebrand. The overall company, we are thinking about it. The word 'Broadwind' has meaning beyond just wind, but there is no decision at this point. Stay tuned.

Understood. And then just last one: on the defense side, who are the customers on the defense side?

Some customers prefer not to be disclosed by name. Broadly speaking, we produce parts for weapon systems, naval systems, and helicopters. Those are the kinds of applications where we are supplying components.

Thank you.

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

Yes. Thanks, everyone, for listening today. We are on the move and excited to execute our strategy. Stay tuned on that. We look forward to speaking with you again after Q2 to discuss our results. Have a great day, everyone.

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