News / TPI Composites, Inc. Announces Third Quarter 2016 Earnings Results
Date: 2016-11-11
TPI Composites, Inc. Announces Third Quarter 2016 Earnings Results
TPI Composites, Inc., the largest U.S.-based independent manufacturer of composite wind blades, reported financial results for the quarter ended September 30, 2016.
Highlights
For the quarter ended September 30, 2016:
Net sales increased 23.1% to $198.9 million
Total billings increased 28.0% to $196.1 million
Net income attributable to common shareholders increased to $2.2 million or $0.08 per diluted share and net income on a pro forma basis was $2.8 million or $0.08 per diluted share
EBITDA increased to $11.3 million from $6.3 million in the comparable period in 2015, with an EBITDA margin of 5.7% in the 2016 period compared to 3.9% in 2015
Adjusted EBITDA increased to $19.6 million from $7.6 million in the comparable period in 2015, with an adjusted EBITDA margin of 9.9% in the 2016 period compared to 4.7% in 2015
Number of wind blade sets (which consist of three wind blades) invoiced worldwide in the period.
Estimated megawatts of energy capacity to be generated by wind blade sets invoiced in the period.
Number of manufacturing lines dedicated to our customers under long-term supply agreements.
Number of manufacturing lines installed and either in operation, startup or transition.
Number of manufacturing lines in a startup phase during the pre-production and production ramp-up period.
Number of manufacturing lines that were being transitioned to a new wind blade model during the period.
“Our strong operational and financial performance in the third quarter of 2016 underscores our commitment to grow, expand margins and continue to drive down the levelized cost of energy. Our results were driven by increased production across three of our geographic segments as we reported year-over-year increases in net sales, total billings, EBITDA and adjusted EBITDA,” said Steven Lockard, TPI Composites’ President and Chief Executive Officer. “We delivered margin expansion due to improved efficiency and plant utilization with 30 manufacturing lines operating at or near 100% capacity, no manufacturing lines in transition and two lines entering the startup phase late during the quarter. In October, we extended two supply agreements with General Electric International (“GE”) in Newton, Iowa and Juarez, Mexico through 2020. We also entered into a new long-term agreement with GE for the supply of wind blades for our third manufacturing facility under construction in Juarez, Mexico through 2020, expecting to begin production in the first quarter of 2017. Furthermore, today we announced that we have signed a long-term supply agreement with Nordex SE for two additional molds in our new Turkey facility. With the extensions and new long-term agreements, as of today we now have over $4.2 billion in contract value across 44 molds through 2023, this is up from $3.1 billion across 38 molds through 2021 at the end of the second quarter. We expect to continue to capitalize on the strong wind industry growth and outsourcing trends from most of the industries OEMs and we will continue to execute on our strategy for global growth, customer diversification, and profitability under new and existing long-term supply agreements with the industry leading OEMs in the wind energy market. Our global pipeline of demand is strong enough to deliver 25% top line annual growth for the next few years.”
Third Quarter 2016 Financial Results
Net sales for the three months ended September 30, 2016 increased by $37.3 million or 23.1% to $198.9 million compared to $161.6 million in the same period in 2015. This was primarily driven by a 30.2% increase in the number of wind blades delivered in the three months ended September 30, 2016 compared to the same period in 2015. These increases were primarily the result of additional wind blade volume in our plants in the U.S., China and Mexico, partially offset by reductions to sales prices as a result of savings in raw material costs, a portion of which we share with our customers and foreign currency fluctuations in Turkey and China of 0.4%. Total billings for the three months ended September 30, 2016 increased by $43.0 million or 28.0% to $196.1 million compared to $153.1 million in the same period in 2015.
Total cost of goods sold for the three months ended September 30, 2016 was $176.7 million and included aggregate costs of $5.1 million related to startup costs in our new plants in Mexico and Turkey. This compares to total cost of goods sold for the three months ended September 30, 2015 of $153.7 million, including aggregate costs of $3.0 million related to the transition of wind blades in our U.S., Mexico and Taicang, China plants and startup costs in Dafeng, China. Cost of goods sold as a percentage of net sales of wind blades decreased by 11% in the three months ended September 30, 2016 as compared to the same period in 2015, driven by improved operating efficiencies globally, the impact of savings in raw material costs and the favorable impact of fluctuations of the U.S. dollar relative to the Chinese Renminbi, Turkish Lira, Mexican Peso and Euro of 1.9%. This was somewhat offset by share-based compensation of approximately $1.2 million recorded in the 2016 period.
General and administrative expenses for the three months ended September 30, 2016 totaled $14.1 million as compared to $3.4 million for the same period in 2015. As a percentage of net sales, general and administrative expenses were 7.1% for the three months ended September 30, 2016, up from 2.1% in the same period in 2015. The increase was primarily driven by share-based compensation of $6.9 million recorded in the 2016 period (none was recorded in 2015) as well as additional costs incurred to enhance our corporate support functions to support our growth and public company governance.
Net income for the three months ended September 30, 2016 was $2.8 million, as compared to a net loss of $2.1 million in the same period in 2015.
Net income attributable to common shareholders was $2.2 million during the three months ended September 30, 2016, compared to a net loss attributable to common shareholders of $4.5 million in the same period in 2015. This was primarily due to the increase in net income discussed above. Diluted earnings per share was $0.08 for the three months ended September 30, 2016, compared to a loss of $1.06 for the three months ended September 30, 2015.
EBITDA for three months ended September 30, 2016 increased to $11.3 million, compared to $6.3 million during the same period in 2015. The EBITDA margin improved to 5.7% compared to 3.9% in the 2015 period.
Adjusted EBITDA for three months ended September 30, 2016 increased to $19.6 million compared to $7.6 million during the same period a year ago. The Adjusted EBITDA margin improved to 9.9%, compared to 4.7% during the same period a year ago.
Capital expenditures decreased slightly to $4.7 million for three months ended September 30, 2016 from $4.9 million during the same period a year ago. Capex is primarily related to new facilities or facility expansions and related machinery and equipment.
Net debt for the three months ended September 30, 2016 decreased to $7.1 million from $90.7 million as of December 31, 2015. The reduction was primarily a result of the completion of our IPO during the quarter and the repayment of certain debt with cash flows from operations offset by an increase in financing related to our new facilities in Mexico and Turkey.
2016 Outlook
For 2016, the Company expects:
Total billings between $750 to $760 million (1)
Sets delivered of between 2,147 to 2,162
Estimated megawatts of sets delivered to be between 4,915 to 4,955
Dedicated manufacturing lines under long-term contracts at year end of between 44 and 46, up from our previous guidance of 38 to 46.
Manufacturing lines installed of between 33 and 36
No manufacturing lines in transition
Manufacturing lines in startup to be between 3 and 6
Capital expenditures to be between $50.0 million and $55.0 million
Effective tax rate to be between 25% and 30%
Depreciation and amortization of between $14.0 million and $15.0 million
Interest expense of between $15.0 million and $16.0 million
Income tax expense of between $5.5 million and $6.5 million
Share-based compensation of between $9.5 million and $10.5 million
(1)We have not reconciled our expected total billings to expected net sales as calculated under GAAP because we have not yet finalized calculations necessary to provide the reconciliation, including the expected change in deferred revenue, and as such the reconciliation is not possible without unreasonable efforts.
Conference Call and Webcast Information
TPI Composites will host an investor conference call on November 10 at 5:00pm ET. Interested parties are invited to listen to the conference call which can be accessed live over the phone by dialing 1-877-407-3982, or for international callers, 1-201-493-6780. A replay will be available two hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the live call and the replay is 13648582. The replay will be available until November 16, 2016. Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investor Relations section of the Company’s website at http://www.tpicomposites.com. The online replay will be available for a limited time beginning immediately following the call.
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