TPI Composites, Inc. (TPIC) Misses Q4 EPS by 22c, Revenues Miss; Offers FY19 EPS Guidance Above Consensus, FY19 Revenue Mid-Point Guidance Above Consensus
TPI Composites, Inc. (NASDAQ: TPIC) reported Q4 EPS of ($0.26), $0.22 worse than the analyst estimate of ($0.04). Revenue for the quarter came in at $290.1 million versus the consensus estimate of $301.52 million.
- Net sales of $290.1 million
- Total billings of $304.8 million
- Net loss of $8.8 million or $0.26 per diluted share
- EBITDA of $3.8 million, with an EBITDA margin of 1.3%
- Adjusted EBITDA of $9.8 million, with an Adjusted EBITDA margin of 3.4%
“2018 was a challenging but successful year for TPI as we delivered strong operational and financial performance despite a significant number of startups and transitions,” said Steven Lockard, TPI Composites’ President and Chief Executive Officer. “We achieved a number of strategic milestones over the past year and have continued that momentum thus far in 2019. In early 2018, we continued our global growth with Vestas announcing a new manufacturing facility in Yangzhou, China and then early this year, we announced another new manufacturing hub near Chennai, India that will initially serve Vestas as well. We also added ENERCON as a customer in May of last year, further diversifying our customer base, and got back on the growth path with GE by announcing two new lines and the extension of our agreement with them in Mexico. In addition to our growth into new geographies and diversifying our customer base, we continue to strengthen our relationships with our existing customers. During 2018, with the new agreements and amendments, we increased our lines under long-term supply agreements to 54 and increased our potential revenue under contract by a net of $2.4 billion. We are now at a record $6.8 billion in potential contract value.”
“From a business development standpoint, during 2018 we signed multiyear supply agreements for 16 new manufacturing lines, including the four lines for Vestas in India which went under contract in late December, representing total contract revenue of up to $3.4 billion including amendments and our prioritized pipeline of lines that we plan to convert by the end of 2020 now stands at 19 lines. As it relates to non-wind business development, in early 2018 we announced that we entered into an agreement with Navistar to design and develop a Class 8 truck comprised of composite tractor and frame rails – an important step in continuing our diversification efforts and exploring our opportunities in the transportation space.”
“Our customers continue to invest with TPI through the addition of new outsourced blade capacity as well as transitions to longer blades, both of which have impacted our near-term profitability but we believe position us very well for long-term growth. We believe the investments we made in 2018, and the additional investments that we expect to make in 2019, position us well for our goal of doubling our wind related sales by 2021. However, revenue growth of over 50% doesn’t come without challenges including the execution of multiple startups and transitions, labor unrest in Matamoros, Mexico that is currently creating production challenges as well as concerns about Senvion given their recent announcement of their undertaking of a transformation program to stabilize the company’s operations and strengthen its financial basis.”
“We remain focused on growing our wind business, improving our operational effectiveness, driving improved profitability and continuing to drive down the levelized cost of energy while continuing to develop and explore opportunities in other strategic markets.”
“We are pleased to see the continued growth of wind energy as a cost effective and reliable source of clean electricity as we and the industry continue to drive down LCOE and as consumers and corporate customers demand it. We see the future of global electricity growth as cost effective and reliable wind, solar, storage and transmission,” concluded Mr. Lockard.
TPI Composites, Inc. sees FY2019 EPS of $1.34-$1.45, versus the consensus of $1.29. TPI Composites, Inc. sees FY2019 revenue of $1.5-1.6 billion, versus the consensus of $1.53 billion.
2019 Guidance – We have included the 2019 guidance we provided during our third quarter earnings call, we do want to offer some caution about two matters which may put pressure on these guidance ranges. First is the labor unrest at our manufacturing facility in Matamoros, Mexico. While we are actively working to resolve this situation, any prolonged downtime from this situation will adversely affect our Adjusted EBITDA and net sales for 2019. In addition, the ultimate outcome of the labor negotiations may require us to increase our labor rates in Matamoros beyond what we have forecasted, which could further reduce our Adjusted EBITDA. Secondly, the financial difficulties our customer Senvion announced that they are experiencing could also ultimately impact our 2019 net sales and Adjusted EBITDA. At this point, it is still too early to tell if these two situations, offset by other upside opportunities we have, will have a material impact or not on our 2019 Adjusted EBITDA and net sales guidance. With that being said, we expect:
- Net sales and total billings of between $1.5 billion and $1.6 billion
- Adjusted EBITDA of between $120 million and $130 million
- Fully diluted earnings per share of between $1.34 and $1.45
- Sets invoiced of between 3,300 and 3,500
- Average sales price per blade of between $135,000 and $140,000
- Estimated megawatts of sets delivered of approximately 9,800 to 10,400
- Dedicated manufacturing lines at year end to be between 62 and 65
- Manufacturing lines installed at year end to be between 50 and 52
- Manufacturing lines in startup during the year to be approximately 14
- Manufacturing lines in transition during the year to be approximately 10
- Line utilization (based on 50 lines under contract) of approximately 85%
- Startup costs of between $30 million and $33 million
- Transition costs of between $22 million and $25 million
- Capital expenditures to be between $95 million and $100 million (approx. 85% growth related)
- Effective tax rate to be between 20% and 25%
- Depreciation and amortization of between $40 million and $45 million
- Interest expense of between $8 million and $9 million
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