Form 8-K TPI COMPOSITES, INC For: Aug 07

August 7, 2018 4:04 PM
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): August 7, 2018  

TPI Composites, Inc.
(Exact Name of Registrant as Specified in Charter)

DELAWARE 001-37839 20-1590775
(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer Identification Number)

 

8501 N. Scottsdale Rd. Suite 100, Scottsdale, Arizona 85253
(Address of Principal Executive Offices) (Zip Code)

480-305-8910
(Registrant's telephone number, including area code)


(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

  [ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  [ ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  [ ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  [ ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ X ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ X ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On August 7, 2018, TPI Composites, Inc. (the Company) issued a press release announcing its financial results for the three months ended June 30, 2018. A copy of the Company’s press release is furnished herewith as Exhibit 99.1 to this current report on Form 8-K and is incorporated by reference herein. The Company also posted a presentation to its website at www.tpicomposites.com under the tab “Investors” providing information regarding its results of operations and financial condition for the three months ended June 30, 2018. The information contained in the presentation is incorporated by reference herein. The presentation is being furnished herewith as Exhibit 99.2 to this current report on Form 8-K. The Company’s website and the information contained therein is not part of this disclosure.

The information in Item 2.02 of this current report on Form 8-K (including Exhibit 99.1) is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in Item 2.02 of this current report on Form 8-K (including Exhibit 99.1) shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1 – Press Release dated August 7, 2018

99.2 – Presentation dated August 7, 2018


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  TPI Composites, Inc.
     
   
Date: August 7, 2018 By:  /s/ William E. Siwek        
    William E. Siwek
    Chief Financial Officer
   

EXHIBIT 99.1

TPI Composites, Inc. Announces Second Quarter 2018 Earnings Results and Reaches a Record Level of Contract Value of $6.4 Billion

SCOTTSDALE, Ariz., Aug. 07, 2018 (GLOBE NEWSWIRE) -- TPI Composites, Inc. (Nasdaq: TPIC), the only independent manufacturer of composite wind blades with a global footprint, today reported financial results for the second quarter ended June 30, 2018.

Highlights

For the quarter ended June 30, 2018:

KPIs   Q2'18   Q2'17
  Sets1 576   692
  Estimated megawatts² 1,544   1,620
  Dedicated manufacturing lines³ 52   46
  Manufacturing lines installed⁴ 40   39
  Manufacturing lines in startup⁵ 7   9
  Manufacturing lines in transition⁶ 7   -
  1. Number of wind blade sets (which consist of three wind blades) invoiced worldwide in the period.
  2. Estimated megawatts of energy capacity to be generated by wind blade sets invoiced in the period.
  3. Number of manufacturing lines that are dedicated to our customers under long-term supply agreements at the end of the period. Dedicated manufacturing lines for Q2’17 includes seven lines for GE Wind that were not renewed after December 31, 2017.
  4. Number of manufacturing lines installed and either in operation, startup or transition at the end of the period.
  5. Number of manufacturing lines in a startup phase during the pre-production and production ramp-up period.
  6. Number of manufacturing lines that were being transitioned to a new wind blade model during the period.

“We executed against our plan once again and delivered another quarter of strong operational and financial performance,” said Steven Lockard, TPI Composites’ President and Chief Executive Officer. “Since the end of the first quarter, we have signed a multiyear supply agreement with ENERCON for two manufacturing lines in our Turkey location. We continue to strengthen our relationships with our existing customers with new line additions and contract extensions, most recently with Vestas, GE and Nordex/Acciona. Vestas exercised options for four additional lines in our manufacturing hub in Matamoros, Mexico bringing the total number of lines in that facility to six. GE has agreed to extend our supply agreement in one of our Mexico plants by two years to 2022 and will increase the number of lines in that facility from three to five. In addition, GE has agreed to transition to a larger blade model in our Iowa plant in early 2019 and to eliminate its option to terminate our supply agreement in Iowa prior to its December 2020 expiration.  To accommodate the additional GE lines, we negotiated the removal of three lines for Siemens Gamesa. These were the only lines in our portfolio subject to geographic exclusivity versus a minimum volume obligation. This was a unique situation and we continue to work closely with Siemens Gamesa to close on other opportunities and are collaborating with them on their next generation of turbine blades.  Finally, Nordex/Acciona has agreed to extend our supply agreement in China through 2019. With the addition of ENERCON as a customer, TPI now serves the top six global wind turbine OEMs outside of the Chinese market.  So far this year, with the new agreements, amendments and transitions, we have increased our lines under long-term supply agreements to 50 and increased our potential contract value by $2.5 billion to $6.4 billion over the terms of the agreements.  All in all a pretty strong first half of 2018.”

“Our customers continue to invest with TPI in adding new outsourced blade capacity ahead of the new line guidance we previously provided for 2018. In addition, they are tooling up new blade models more quickly than initially planned in order to aggressively drive down LCOE in response to economically driven global auction and tender processes.  Given the accelerated pace of the conversion of our prioritized pipeline, the addition of a new customer, ENERCON, with an aggressive start of production date, and accelerated transitions requested by our customers, we are now expecting a total of 17 lines in startup and 17 lines in transition during the course of 2018.  This is up from our previous guidance of 12 lines in startup and 14 lines in transition. We are reaffirming our prior guidance for 2018 net sales and total billings however, the additional startup and transition costs of up to $10 million  are causing us to reduce our EBITDA guidance range for 2018 to $65 to $70 million from our original range of $75 to $80 million.  This additional investment positions us well for 2019 and our long-term goal of doubling the sales of TPI over the next several years and we are confident we will achieve a 20-25% three-year revenue CAGR through 2019.  We remain focused on our strategy to expand globally, diversify our customer base, grow our wind business, improve our operational effectiveness, drive profitability and continue to drive down LCOE while continuing to develop and explore additional opportunities in other strategic markets,” concluded Mr. Lockard.

Second Quarter 2018 Financial Results
Net sales for the quarter decreased by $9.0 million or 3.7% to $230.6 million compared to $239.6 million in the same period in 2017. Total billings increased by $6.3 million or 2.7% to $237.4 million for the three months ended June 30, 2018 compared to $231.1 million in the 2017 period. Net sales of wind blades were $206.4 million for the quarter as compared to $225.8 million in the same period in 2017. The decrease was primarily driven by a 17.3% decrease in the number of wind blades produced during the three months ended June 30, 2018 compared to the same period in 2017 primarily as a result of the increase in transitions and startups, the loss of volume from the expiration of contracts in Mexico and Turkey and a delayed customer startup. This was partially offset by higher average sales prices due to the mix of wind blade models produced during the three months ended June 30, 2018 compared to the same period in 2017 and by foreign currency fluctuations. The favorable impact of the currency movements on consolidated net sales and total billings were both 2.4% for the quarter.

Total cost of goods sold for the quarter was $215.6 million and included aggregate costs of $17.3 million primarily related to startup costs in our new plants in Turkey and Mexico and for a new customer in Taicang, China and costs related to seven lines in transition during the quarter. This compares to total cost of goods sold of $209.7 million for the same period in 2017, which included aggregate costs of $10.5 million related to startup costs in our new plants in Turkey and Mexico and the startup of a new wind blade model for one of our customers in Dafeng, China. Cost of goods sold as a percentage of net sales increased by six percentage points during the three months ended June 30, 2018 as compared to the same period in 2017, driven by the $6.8 million increase in startup and transition costs and unfavorable foreign currency fluctuations, partially offset by improved operating efficiencies and the impact of savings in raw material costs. The unfavorable impact of the currency movements on consolidated cost of goods sold was 0.5% for the quarter.

General and administrative expenses for the three months ended June 30, 2018 totaled $11.0 million, up slightly from $10.8 million for the same period in 2017. As a percentage of net sales, general and administrative expenses were 4.8% for the three months ended June 30, 2018, up from 4.5% in the same period in 2017.

Net loss for the quarter was $4.1 million as compared to a net income of $9.6 million in the same period in 2017. The decrease was primarily due to the reasons set forth above as well as a loss on foreign currency remeasurement and the write-off of debt issuance costs related to the refinancing of our prior credit facility early in the quarter. Diluted loss per share was $0.12 for the three months ended June 30, 2018, compared to earnings per share of $0.28 for the three months ended June 30, 2017.

EBITDA for the quarter decreased to $10.1 million, compared to $23.0 million during the same period in 2017. EBITDA margin decreased to 4.4% compared to 9.6% in the same period in 2017. Adjusted EBITDA for the quarter decreased to $13.5 million compared to $26.2 million during the same period in 2017. Adjusted EBITDA margin decreased to 5.8% compared to 11.0% during the same period in 2017.  The decline was driven primarily by the startup and transition activity and the resultant lost volumes.

Capital expenditures were $30.6 million for the quarter compared to $9.8 million during the same period in 2017. Current year capital expenditures were primarily related to new facilities and expansion or improvements at existing facilities and costs to enhance our information technology systems.

We ended the quarter with $114.0 million of cash and cash equivalents and net debt was $17.4 million as compared to net cash of $24.6 million at December 31, 2017.

2018 Outlook
For 2018, the Company is providing the following guidance:

 

Conference Call and Webcast Information
TPI Composites will host an investor conference call this afternoon, Tuesday, August 7, 2018 at 5:00pm ET. Interested parties are invited to listen to the conference call which can be accessed live over the phone by dialing 1-877-407-9208, or for international callers, 1-201-493-6784. 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 13681393. The replay will be available until August 14, 2018. Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investors section of the Company’s website at www.tpicomposites.com. The online replay will be available for a limited time beginning immediately following the call.

About TPI Composites, Inc.
TPI Composites, Inc. is the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. TPI delivers high-quality, cost-effective composite solutions through long-term relationships with leading global manufacturers. TPI is headquartered in Scottsdale, Arizona and operates factories throughout the U.S., Mexico, China and Turkey.

Forward-Looking Statements
This release contains forward-looking statements which are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements, among other things, concerning: effects on our financial statements and our financial outlook; our business strategy, including anticipated trends and developments in and management plans for our business and the wind industry and other markets in which we operate; our projected annual revenue growth; competition; future financial results, operating results, revenues, gross margin, operating expenses, products, projected costs, warranties, our ability to improve our operating margins, and capital expenditures. These forward-looking statements are often characterized by the use of words such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “seek,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,” “could,” “predict,” “continue” and the negative or plural of these words and other comparable terminology. Forward-looking statements are only predictions based on our current expectations and our projections about future events. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update any of these forward-looking statements for any reason. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements. These factors include, but are not limited to, the matters discussed in “Risk Factors,” in our Annual Report on Form 10-K and other reports that we will file with the SEC.

Non-GAAP Definitions
This press release includes unaudited non-GAAP financial measures, including total billings, EBITDA, adjusted EBITDA, net cash/debt and free cash flow. We define total billings as total amounts billed from products and services that we are entitled to payment and have billed under the terms of our long-term supply agreements or other contractual arrangements. We define EBITDA as net income plus interest expense (including losses on extinguishment of debt and net of interest income), income taxes and depreciation and amortization. We define adjusted EBITDA as EBITDA plus share-based compensation expense plus or minus any gains or losses from foreign currency transactions. We define net cash/debt as the total principal amount of debt outstanding less unrestricted cash and cash equivalents. We define free cash flow as net cash flow generated from operating activities less capital expenditures. We present non-GAAP measures when we believe that the additional information is useful and meaningful to investors. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See below for a reconciliation of certain non-GAAP financial measures to the comparable GAAP measures.

Investor Relations
480-315-8742
investors@TPIComposites.com

 

 TPI COMPOSITES, INC. AND SUBSIDIARIES   
 TABLE ONE - CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
 (UNAUDITED)   
   
    Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(in thousands, except per share data)     2018     2017       2018     2017    
               
Net sales    $   230,610   $   239,582     $   484,591   $   448,197    
Cost of sales      198,235       199,117         409,223       381,655    
Startup and transition costs      17,324       10,540         32,059       16,699    
Total cost of goods sold     215,559       209,657         441,282       398,354    
Gross profit      15,051       29,925         43,309       49,843    
General and administrative expenses     10,989       10,752         22,152       19,058    
Income from operations     4,062       19,173         21,157       30,785    
Other income (expense):            
Interest income     43       11         84       30    
Interest expense     (2,715 )     (2,935 )       (6,053 )     (5,961 )  
Loss on extinguishment of debt     (3,397 )     -          (3,397 )     -     
Realized loss on foreign currency remeasurement      (765 )     (1,233 )       (4,776 )     (2,614 )  
Miscellaneous income     674       258         1,492       578    
Total other expense      (6,160 )     (3,899 )       (12,650 )     (7,967 )  
Income (loss) before income taxes     (2,098 )     15,274         8,507       22,818    
Income tax provision     (1,955 )     (5,697 )       (3,912 )     (8,028 )  
Net income (loss) $   (4,053 ) $   9,577     $   4,595   $   14,790    
               
Weighted-average common shares outstanding:              
Basic       34,164       33,737         34,107       33,737    
Diluted       34,164       33,828         35,766       33,827    
               
Net income (loss) per common share:              
Basic   $   (0.12 ) $   0.28     $   0.13   $   0.44    
Diluted   $   (0.12 ) $   0.28     $   0.13   $   0.44    
               
Non-GAAP Measures (unaudited):            
Total billings $   237,355   $   231,069     $   461,056   $   442,429    
EBITDA   $   10,101   $   22,963     $   31,075   $   37,465    
Adjusted EBITDA $   13,477   $   26,240     $   40,850   $   43,830    
               


 TPI COMPOSITES, INC. AND SUBSIDIARIES   
 TABLE TWO - CONDENSED CONSOLIDATED BALANCE SHEETS   
 (UNAUDITED)   
  June 30, December 31,  
(in thousands)   2018     2017  
Current assets:      
Cash and cash equivalents $   113,995   $   148,113  
Restricted cash      4,431       3,849  
Accounts receivable     119,479       121,576  
Contract assets     131,371       105,619  
Prepaid expenses and other current assets      26,622       27,507  
Inventories     5,593       4,112  
Total current assets     401,491       410,776  
Noncurrent assets:      
Property, plant, and equipment, net     145,348       123,480  
Other noncurrent assets     25,045       22,306  
Total assets $   571,884   $   556,562  
       
Current liabilities:      
Accounts payable and accrued expenses $   167,314   $   167,175  
Accrued warranty     33,979       30,419  
Current maturities of long-term debt     39,528       35,506  
Contract liabilities     1,820       2,763  
Total current liabilities     242,641       235,863  
Noncurrent liabilities:      
Long-term debt, net of debt issuance costs and      
current maturities     90,332       85,879  
Other noncurrent liabilities     4,818       4,938  
Total liabilities     337,791       326,680  
Total stockholders' equity     234,093       229,882  
Total liabilities and stockholders' equity $   571,884   $   556,562  
       
Non-GAAP Measure (unaudited):      
Net cash (debt) $   (17,380 ) $   24,557  
       


 TPI COMPOSITES, INC. AND SUBSIDIARIES 
 TABLE THREE - CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
 (UNAUDITED) 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
(in thousands)     2018     2017       2018     2017  
             
Net cash provided by operating activities $   5,567   $   15,932     $   2,535   $   25,870  
Net cash used in investing activities     (30,596 )     (9,805 )       (42,310 )     (26,727 )
Net cash provided by financing activities     2,202       7,731         6,692       4,922  
Impact of foreign exchange rates on cash, cash
  equivalents and restricted cash
      (839 )     227         (453 )     164  
Cash, cash equivalents and restricted cash,
  beginning of period
      142,567       120,007         152,437       129,863  
Cash, cash equivalents and restricted cash,
  end of period
  $   118,901   $   134,092     $   118,901   $   134,092  
             
Non-GAAP Measure (unaudited):          
Free cash flow   $   (25,029 ) $   6,127     $   (39,775 ) $   (857 )
       


 TPI COMPOSITES, INC. AND SUBSIDIARIES   
 TABLE FOUR - RECONCILIATION OF NON-GAAP MEASURES   
 (UNAUDITED)   
             
             
Total billings is reconciled as follows: Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(in thousands)   2018     2017       2018     2017    
Net sales $   230,610   $   239,582     $   484,591   $   448,197    
Change in contract assets     (1,356 )     (6,460 )       (25,752 )     (3,722 )  
Foreign exchange impact     8,101       (2,053 )       2,217       (2,046 )  
Total billings $   237,355   $   231,069     $   461,056   $   442,429    
             
EBITDA and adjusted EBITDA are reconciled as follows: Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(in thousands)   2018     2017       2018     2017    
             
Net income (loss) $   (4,053 ) $   9,577     $   4,595   $   14,790    
Adjustments:            
  Depreciation and amortization      6,130       4,765         13,202       8,716    
  Interest expense (net of interest income)      2,672       2,924         5,969       5,931    
  Loss on extinguishment of debt      3,397       -          3,397       -     
  Income tax provision     1,955       5,697         3,912       8,028    
EBITDA     10,101       22,963         31,075       37,465    
  Share-based compensation expense      2,611       2,044         4,999       3,751    
  Realized loss on foreign currency remeasurement      765       1,233         4,776       2,614    
Adjusted EBITDA  $   13,477   $   26,240     $   40,850   $   43,830    
             
Free cash flow is reconciled as follows: Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(in thousands)   2018     2017       2018     2017    
Net cash provided by operating activities $   5,567   $   15,932     $   2,535   $   25,870    
Capital expenditures     (30,596 )     (9,805 )       (42,310 )     (26,727 )  
Free cash flow $   (25,029 ) $   6,127     $   (39,775 ) $   (857 )  
             
Net cash (debt) is reconciled as follows: June 30, December 31,        
(in thousands)   2018     2017          
Total cash and cash equivalents $   113,995   $   148,113          
Less total debt, net of debt issuance costs     (129,860 )     (121,385 )        
Less debt issuance costs     (1,515 )     (2,171 )        
Net cash (debt) $   (17,380 ) $   24,557          
             

Exhibit 99.2

 

Q2 2018 Earnings Call

 

Q2 2018 Earnings Call Legal Disclaimer This presentation contains forward - looking statements within the meaning of the federal securities laws. All statements other th an statements of historical facts contained in this presentation, including statements regarding our future results of operations and financial position, business strategy and p lan s and objectives of management for future operations, are forward - looking statements. In many cases, you can identify forward - looking statements by terms such as “may,” “ should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negati ve of these terms or other similar words. Forward - looking statements contained in this presentation include, but are not limited to, statements about (i) growth of the wind energy mar ket and our addressable market; (ii) the potential impact of the increasing prevalence of auction - based tenders in the wind energy market and increased competition from solar energy on o ur gross margins and overall financial performance; (iii) our ability to successfully expand our transportation business and execute upon our strategy of entering n ew markets outside of wind energy; (iv) our future financial performance, including our net sales, cost of goods sold, gross profit or gross margin, operating expenses, ability to generate positive cash flow, and ability to achieve or maintain profitability; (v) changes in domestic or international government or regulatory policy, including without limitatio n, changes in trade policy; (vi) the sufficiency of our cash and cash equivalents to meet our liquidity needs; (vii) our ability to attract and retain customers for our products, and to opt imize product pricing; (viii) our ability to effectively manage our growth strategy and future expenses, including startup and transition costs; (ix) competition from other wind blad e t urbine manufacturers; (x) the discovery of defects in our products; (xi) our ability to successfully expand in our existing wind energy markets and into new international wind ene rgy markets; (xii) worldwide economic conditions and their impact on customer demand; (xiii) our ability to maintain, protect and enhance our intellectual property; (xiv) our abi lit y to comply with existing, modified or new laws and regulations applying to our business, including the imposition of new taxes, duties or similar assessments on our products; ( xv) the attraction and retention of qualified employees and key personnel; and (xvi) the potential impact of GE’s acquisition of LM Wind Power upon our business. These forward - looking statements are only predictions. These statements relate to future events or our future financial performa nce and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activity, performance or achievements expressed or implied by these forward - looking statements. Because forward - looking statemen ts are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward - looking statements as guara ntees of future events. Further information on the factors, risks and uncertainties that could affect our financial results and the forward - looking statements in this presentation are included in our filings with the Securities and Exchange Commission and will be included in subsequent periodic and current reports we make with the Securities and Exchange Com mission from time to time, including in our Annual Report on Form 10 - K for the year ended December 31, 2017. The forward - looking statements in this presentation represent our views as of the date of this presentation. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward - looking statements at some point in the future, we undertak e no obligation to update any forward - looking statement to reflect events or developments after the date on which the statement is made or to reflect the occurrence of una nti cipated events except to the extent required by applicable law. You should, therefore, not rely on these forward - looking statements as representing our views as of any date aft er the date of this presentation. Our forward - looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investme nts we may make. This presentation includes unaudited non - GAAP financial measures including total billings, EBITDA, adjusted EBITDA, net cash (de bt) and free cash flow. We define total billings as the total amounts we have invoiced our customers for products and services for which we are entitled to payment under the ter ms of our long - term supply agreements or other contractual agreements. We define EBITDA as net income (loss) attributable to the Company plus interest expense (including lo sse s on the extinguishment of debt and net of interest income), income taxes and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus any share - based compe nsation expense, plus or minus any gains or losses from foreign currency remeasurement. We define net cash (debt) as the total principal amount of debt outstanding le ss unrestricted cash and cash equivalents. We define free cash flow as net cash flow generated from operating activities less capital expenditures. We present non - GAAP measures when we believe that the additional information is useful and meaningful to investors. Non - GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non - GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See the appendix for the reconciliations of certain non - GAAP financial measures to th e comparable GAAP measures. This presentation also contains estimates and other information concerning our industry that are based on industry publicatio ns, surveys and forecasts. This information involves a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of the information . 2 August 7, 2018

 

Q2 2018 Earnings Call Agenda • Q2 2018 Highlights • Industry Update • Q2 2018 Financial Highlights • Guidance for 2018 • Q&A • Appendix – Non - GAAP Information – Impact of ASC 606 on Q2 2017 3 August 7, 2018

 

Q2 2018 Highlights

 

Q2 2018 Earnings Call Q2 2018 Highlights 5 August 7, 2018 Q2 2018 Highlights and Recent Company News • Operating results and year - over - year increases compared to 201 7 • Net sales were $230.6 million for the quarter down 3.7% primarily due to startup and transition activity • Net loss for the quarter of $ 4.1 million compared to net income of $9.6 million in 2017 driven by startup and transition activity and the write - off of debt issuance costs • Adjusted EBITDA for the quarter was $ 13.5 million or 5.8% of sales • Vestas exercised options for 4 additional lines in our manufacturing hub in Matamoros, Mexico bringing the total number of lines in that facility to 6 • ENERCON signed a multiyear supply agreement for 2 manufacturing lines in our Turkey location. Adding ENERCON means TPI customers now represent all of the top 6 turbine manufacturers on an ex - China basis • GE has agreed to extend our supply agreement in one of our Mexico plants by two years to 2022 and will increase the number of lines in that facility to 5 from the current 3 • GE has agreed to transition to a larger blade model in our Iowa plant in early 2019 and eliminate its option to terminate the Iowa supply agreement prior to its December 2020 expiration • Set a new record high potential contract value of $6.4 billion across 50 dedicated manufacturing lines Net Sales and Adjusted EBITDA ($ in millions) $240 $231 $26 $13 $0 $200 $400 Q2 '17 Q2 '18 Q2 '17 Q2 '18 Sets invoiced 692 576 Est. MW 1,620 1,544 Dedicated lines (1) 46 52 Lines installed (2) 39 40 (1) Number of wind blade manufacturing lines dedicated to our customers under long - term supply agreement s at the end of the quarter. (2) Number of wind blade manufacturing lines installed that are either in operation, startup or transition at the end of the quarter Net Sales Adjusted EBITDA

 

Q2 2018 Earnings Call Existing Contracts Provide for ~$6.4 Billion in Potential Revenue through 2023 (1) 6 August 7, 2018 Long - term Supply Agreements (1) 2018 2019 2020 2021 2022 2023 U.S. Turkey Mexico China Long - term supply agreements provide for estimated minimum aggregate volume commitments from our customers of approximately $ 4.5 billion and encourage our customers to purchase additional volume up to, in the aggregate, an estimated total potential revenue of approximately $6.4 billion through the end of 2023 (1) Note: Our contracts with some of our customers are subject to termination or reduction on short notice, generally with substa nti al penalties, and contain liquidated damages provisions, which may require us to make unanticipated payments to our customers or our customers to make payments to us. (1) As of August 7, 2018. The chart depicts the term of the longest contract in each location .

 

Q2 2018 Earnings Call Contract Value Walk from December 31, 2017 ($ in billions) $6.4 ($0.5) $2.5 $4.4 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 12/31/2017 Q1 & Q2 Billings New Deals Current 7 August 7, 2018

 

Industry Update

 

Q2 2018 Earnings Call Global Market Growth 9 August 7, 2018 49.5 60.6 62.9 60.7 57.4 54.9 57.6 58.2 58.7 60.1 4.2 5.0 6.3 6.8 10.0 9.7 11.3 13.7 12.8 13.8 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Annual installed wind capacity growth is projected to average 67GW between 2018 and 2027 and is propelled by offshore and an increase in developing wind markets, including Turkey and Mexico where TPI Composites is well positioned to succeed Source: MAKE Q2 2018 Global Wind Power Market Outlook Update Annual I nstalled G lobal W ind C apacity (GW): 201 8E – 202 7 E Onshore Offshore CAGR 8% (2017 – 2027 ) CAGR 20% (2017 – 2027)

 

Q2 2018 Earnings Call U.S. Onshore Market Growth 10 August 7, 2018 8.4 11.0 12.9 6.7 3.2 2.9 3.2 3.5 11.0 12.5 12.8 8.0 7.7 8.0 8.5 9.0 2018 2019 2020 2021 2022 2023 2024 2025 UBS Source: MAKE Q2 2018 Global Wind Power Market Outlook Update and UBS Securities LLC • Economics of Onshore Wind • Corporate and Industrial Buyers • Utilities • Decarbonization • Economics of Offshore Wind • Repowering • Vehicle Electrification Key Demand Drivers MAKE The U.S. wind market is expected to experience consistent near - term growth U.S. Annual I nstalled W ind C apacity (GW): 201 8E – 2025E

 

Q2 2018 Financial Highlights

 

Q2 2018 Earnings Call Q2 2018 Financial Highlights (1) (unaudited) 12 August 7, 2018 (1) See pages 20 – 22 for reconciliations of non - GAAP financial data ($ in millions, except per share data and KPIs) Q2 ’18 Q2 ’17 ∆ YTD ’18 YTD ’17 ∆ Select Financial Data Net Sales $ 230.6 $ 239.6 -3.7% $ 484.6 $ 448.2 8.1% Total Billings $ 237.4 $ 231.1 2.7% $ 461.1 $ 442.4 4.2% Net Income (Loss) $ (4.1) $ 9.6 -142.3% $ 4.6 $ 14.8 -68.9% Diluted Earnings (Loss) Per Share $ (0.12) $ 0.28 $ (0.40) $ 0.13 $ 0.44 $ (0.31) Adjusted EBITDA (1) $ 13.5 $ 26.2 -48.6% $ 40.9 $ 43.8 -6.8% Adjusted EBITDA Margin 5.8% 11.0% -520 bps 8.4% 9.8% -140 bps Net Cash (Debt) (1) $ (17.4) $ 0.5 $ (17.8) $ (17.4) $ 0.5 $ (17.8) Free Cash Flow (1) $ (25.0) $ 6.1 $ (31.2) $ (39.8) $ (0.9) $ (38.9) Capital Expenditures $ 30.6 $ 9.8 $ 20.8 $ 42.3 $ 26.7 $ 15.6 Key Performance Indicators (KPIs) Sets Invoiced 576     692     (116) 1,145     1,328     (183) Estimated Megawatts 1,544     1,620     (76) 3,008     3,080     (72) Dedicated Wind Blade Manufacturing Lines 52     46     6 lines 52     46     6 lines Wind Blade Manufacturing Lines Installed 40     39     1 line 40     39     1 line Wind Blade Manufacturing Lines in Startup 7     9     2 lines 7     9     2 lines Wind Blade Manufacturing Lines in Transition 7     —     7 lines 7     —     7 lines

 

Q2 2018 Earnings Call Income Statement Summary (1) (unaudited) 13 August 7, 2018 (1) See pages 20 – 22 for reconciliations of Non - GAAP financial data 2018 2017 $ % 2018 2017 $ % ($ in thousands, except per share amounts) Net sales 230,610$ 239,582$ (8,972)$ -3.7% 484,591$ 448,197$ 36,394$ 8.1% Cost of sales 198,235$ 199,117$ (882)$ -0.4% 409,223$ 381,655$ 27,568$ 7.2% Startup and transition costs 17,324$ 10,540$ 6,784$ 64.4% 32,059$ 16,699$ 15,360$ 92.0% Total cost of goods sold 215,559$ 209,657$ 5,902$ 2.8% 441,282$ 398,354$ 42,928$ 10.8% Cost of goods sold % 93.5% 87.5% 600 bps 91.1% 88.9% 220 bps Gross profit 15,051$ 29,925$ (14,874)$ -49.7% 43,309$ 49,843$ (6,534)$ -13.1% Gross profit % 6.5% 12.5% -600 bps 8.9% 11.1% -220 bps General and administrative expenses 10,989$ 10,752$ 237$ 2.2% 22,152$ 19,058$ 3,094$ 16.2% General and administrative expenses % 4.8% 4.5% 30 bps 4.6% 4.3% 30 bps Income from operations 4,062$ 19,173$ (15,111)$ -78.8% 21,157$ 30,785$ (9,628)$ -31.3% Income (loss) before income taxes (2,098)$ 15,274$ (17,372)$ -113.7% 8,507$ 22,818$ (14,311)$ -62.7% Net income (loss) (4,053)$ 9,577$ (13,630)$ -142.3% 4,595$ 14,790$ (10,195)$ -68.9% Weighted-average common shares outstanding: Basic 34,164 33,737 34,107 33,737 Diluted 34,164 33,828 35,766 33,827 Net income (loss) per common share: Basic (0.12)$ 0.28$ (0.40)$ 0.13$ 0.44$ (0.31)$ Diluted (0.12)$ 0.28$ (0.40)$ 0.13$ 0.44$ (0.31)$ Non-GAAP Metrics Total billings 237,355$ 231,069$ 6,286$ 2.7% 461,056$ 442,429$ 18,627$ 4.2% EBITDA (1) 10,101$ 22,963$ (12,862)$ -56.0% 31,075$ 37,465$ (6,390)$ -17.1% EBITDA margin 4.4% 9.6% -520 bps 6.4% 8.4% -200 bps Adjusted EBITDA (1) 13,477$ 26,240$ (12,763)$ -48.6% 40,850$ 43,830$ (2,980)$ -6.8% Adjusted EBITDA margin 5.8% 11.0% -520 bps 8.4% 9.8% -140 bps Three Months Ended June 30, Change Six Months Ended June 30, Change

 

Q2 2018 Earnings Call Key Balance Sheet and Cash Flow Data (1) (unaudited) 14 August 7, 2018 (1) See page 21 for the reconciliation s of net cash (debt) and free cash flow June 30, December 31, ($ in thousands) 2018 2017 Balance Sheet Data: Cash and cash equivalents 113,995$ 148,113$ Restricted cash 4,431$ 3,849$ Accounts receivable 119,479$ 121,576$ Contract assets 131,371$ 105,619$ Total debt-current and noncurrent, net 129,860$ 121,385$ Net cash (debt) (1) (17,380)$ 24,557$ ($ in thousands) 2018 2017 2018 2017 Cash Flow Data: Net cash provided by operating activities 5,567$ 15,932$ 2,535$ 25,870$ Capital expenditures 30,596$ 9,805$ 42,310$ 26,727$ Free cash flow (1) (25,029)$ 6,127$ (39,775)$ (857)$ Three Months Ended June 30, Six Months Ended June 30,

 

Guidance for 2018

 

Q2 2018 Earnings Call Key Guidance Metrics 16 August 7, 2018 2018 Guidance Updated 2018 Guidance Previous Total Billings (1) $1.0B – $1.05B $1.0B – $1.05B Net Sales $1.0B – $1.05B $1.0B – $1.05B Adjusted EBITDA $65M – $70M $75M – $80M Earnings per Share - FD $ 0.10 – $0.14 $0.38 – $0.42 Sets 2,450 – 2,480 2,500 – 2,525 Average Selling Price per Blade $125K – $130K $125K – $130K Non - Blade Billings $80M – $85M $75M – $80M G&A Costs as a % of Billings (incl. SBC) 4% – 5% 4% – 5% Estimated MW 6,800 – 6,900 6,950 – 7,100 Dedicated Lines - EOY 51 – 55 51 – 55 Share - Based Compensation $9M – $10M $10M – $11M Depreciation & Amortization $30M – $ 32M $30M – $35M Net Interest Expense $14M – $14.5M $11.5M – $12.5M Capital Expenditures $85M – $90M $85M – $90M Effective Tax Rate 47% – 49% 40% – 42% Note: All reference to lines is to wind blade manufacturing lines (1) We have not reconciled our total expected billings for 2018 to expected net sales under GAAP because we have not yet finalize d c alculations necessary to provide the reconciliation and as such the reconciliation is not possible without unreasonable efforts.

 

Q2 2018 Earnings Call Sets and Startup & Transition Costs Guidance Metrics 17 August 7, 2018 Q1A Q2A Q3F Q4F 2018 Guidance Updated 2018 Guidance Previous Lines Installed – end of period 38 40 40 43 43 47 Lines in Startup – during period 10 7 6 7 17 12 Lines in Transition – during period 4 7 5 7 17 14 Startup and Transition Costs $14.7M $17.3M $20M – $21M $14M – $15M $66M – $68M $58M – $61M Sets 569 576 615 – 630 690 – 705 2,450 – 2,480 2,500 – 2,525

 

Q&A

 

Appendix – Non - GAAP Information This presentation includes unaudited non - GAAP financial measures including total billings, EBITDA, adjusted EBITDA, net cash (de bt) and free cash flow. We define total billings as the total amounts we have invoiced our customers for products and services fo r w hich we are entitled to payment under the terms of our long - term supply agreements or other contractual agreements. We define EBITDA as net income (loss) attributable to the Company plus interest expense (including losses on the extinguishment of debt and net of in ter est income), income taxes, and depreciation and amortization. We define adjusted EBITDA as EBITDA plus any share - based compensation expense, plus or minus any gains or losses from foreign currency remeasurement. We define net cash (debt) as the to tal principal amount of debt outstanding less unrestricted cash and cash equivalents. We define free cash flow as net cash flow g ene rated from operating activities less capital expenditures. We present non - GAAP measures when we believe that the additional informatio n is useful and meaningful to investors. Non - GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non - GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GA AP. See below for a reconciliation of certain non - GAAP financial measures to the comparable GAAP measures.

 

Q2 2018 Earnings Call Non - GAAP Reconciliations (unaudited) Net sales is reconciled to total billings as follows: Net income (loss) is reconciled to EBITDA and adjusted EBITDA as follows: 20 August 7, 2018 ($ in thousands) 2018 2017 2018 2017 Net sales 230,610$ 239,582$ 484,591$ 448,197$ Change in contract assets (1,356) (6,460) (25,752) (3,722) Foreign exchange impact 8,101 (2,053) 2,217 (2,046) Total billings 237,355$ 231,069$ 461,056$ 442,429$ Three Months Ended June 30, Six Months Ended June 30, ($ in thousands) 2018 2017 2018 2017 Net income (loss) (4,053)$ 9,577$ 4,595$ 14,790$ Adjustments: Depreciation and amortization 6,130 4,765 13,202 8,716 Interest expense (net of interest income) 2,672 2,924 5,969 5,931 Loss on extinguishment of debt 3,397 - 3,397 - Income tax provision 1,955 5,697 3,912 8,028 EBITDA 10,101 22,963 31,075 37,465 Share-based compensation expense 2,611 2,044 4,999 3,751 Realized loss on foreign currency remeasurement 765 1,233 4,776 2,614 Adjusted EBITDA 13,477$ 26,240$ 40,850$ 43,830$ Three Months Ended June 30, Six Months Ended June 30,

 

Q2 2018 Earnings Call Non - GAAP Reconciliations (continued) (unaudited) Net cash (debt) is reconciled as follows: Free cash flow is reconciled as follows: 21 August 7, 2018 ($ in thousands) 2018 2017 2018 2017 Cash Flow Data: Net cash provided by operating activities 5,567$ 15,932$ 2,535$ 25,870$ Capital expenditures (30,596) (9,805) (42,310) (26,727) Free cash flow (25,029)$ 6,127$ (39,775)$ (857)$ Three Months Ended June 30, Six Months Ended June 30, June 30, December 31, June 30, ($ in thousands) 2018 2017 2017 Cash and cash equivalents 113,995$ 148,113$ 130,834$ Less total debt, net of debt issuance costs (129,860) (121,385) (128,363) Less debt issuance costs (1,515) (2,171) (2,004) Net cash (debt) (17,380)$ 24,557$ 467$

 

Q2 2018 Earnings Call Non - GAAP Reconciliations (continued) (unaudited) A reconciliation of the low end and high end of projected net income under ASC 606 to projected EBITDA and projected adjusted EBITDA is as follows: 22 August 7, 2018 ($ in thousands) Low End High End Projected net income 3,350$ 4,910$ Adjustments: Projected depreciation and amortization 30,000 32,000 Projected interest expense (net of interest income) 10,850 10,850 Projected loss on extinguishment of debt 3,400 3,400 Projected income tax provision 3,100 4,540 Projected EBITDA 50,700 55,700 Projected share-based compensation expense 9,500 9,500 Projected realized loss on foreign currency remeasurement 4,800 4,800 Projected Adjusted EBITDA 65,000$ 70,000$ (1) All figures presented are projected estimates for the full year ending December 31, 2018. 2018 Adjusted EBITDA Guidance Range (1)

 

Impact of ASC 606

 

Q2 2018 Earnings Call Impact of ASC 606 on Q2 2017 24 August 7, 2018

 

 

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