Good morning and welcome to the Broadwind Energy Q4 2017 earnings conference call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. And please note that this event is being recorded. I would now like to turn the conference over to Joni Konstantelos, Director of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Broadwind Energy's fourth quarter and full-year 2017 earnings conference call. With me today are Broadwind's President and CEO, Stephanie Kushner and Broadwind's Vice President and CFO, Jason Bonfigt. This morning's earnings news release is available on our website at bwen.com. Before we begin today, I would like to caution you that this call will include some forward-looking statements regarding our plans and market outlook and also we will reference some non-GAAP financial measures. Actual results may differ materially from these forward-looking statements. Please refer to our SEC filings and consider the incorporated risks and uncertainties disclosed there, including our Form 8-K and the attached news release filed with the SEC this morning and our Form 10-K, which will be filed later today. We assume no obligation to update any forward-looking statements or information. Having said that, I will turn the call over to Stephanie Kushner.

Good morning and thank you. 2017 was a challenging year for us commercially, although we did make some notable progress with our product and customer diversification plan. We booked revenue of $147 million for the year, down $34 million from 2016. Our tower business was down more than $57 million, but we saw healthy growth in gearing sales and we benefited from the acquisition of Red Wolf. We experienced serious commercial headwinds in two areas. In wind towers, after starting the year producing at full capacity, our primary customers merged and underwent an inventory correction and dropped down to minimum annual purchase volumes in the back half of the year. We are just coming out of that downturn and the business is positioned to be healthier in 2018. The gas turbine market, where Red Wolf is concentrated, was weak in 2017, in part because gas turbines are losing out to wind and the after market demand was soft as well. We are seeing some recovery in orders in 2018 and although it is too early to say for sure, we believe the low 2017 order rate represented, in part, an inventory correction on the part of our predominant customer. On the positive side, the gearing market remained strong following a 150% year-over-year increase in orders in 2017. The strength reflects a significant demand from oil and gas customers and some encouraging positive signs from our mining and construction equipment customers. We invested capital to complete the expansion of our Abilene tower plant and to enhance our broader coatings and manufacturing capabilities to reposition us to grow and diversify our heavy fabrications offerings. We renamed the tower and weldments segment, towers and heavy fabrications to reflect our improved capabilities and broader commercial strategy for this business. We booked $12 million of…

Thank you Stephanie. Q4 was a challenging quarter for the businesses to manage through as historically low tower demand, supply chain disruptions in our gearing segment and continued weakness in the compressed natural gas market weighed on our topline in the quarter. Q4 consolidated sales were $17.8 million compared to $48.2 million in the prior year million, primarily driven by lower tower demand from our customers. Offsetting the year-over-year lower tower demand were the additional sales from the Red Wolf acquisition and higher gearing shipments. During the second half of the year, tower margins were compressed because we retained key personnel in the face of what we believe was a rapid but temporary slow down in purchases. We are seeing already that this has made it easier for us to ramp back up production in 2018. Q4 operating expenses were down $0.5 million year-over-year, or a 12% decrease. This highlights the swift cost reduction efforts we have taken to right size our cost structure. Our EBITDA loss for the quarter was $4 million versus $2.5 million generated in the prior year and EPS was $0.45 loss. Following a profitable year in 2016 and strong operating performance in our tower segment in the first half of the year, second half tower demand was limited by excess customer inventories. For the year, consolidated sales were $146.8 million compared to $180.8 million in the prior year. Plant underutilization led to a decline in gross margins to 5.6% and EBITDA was $2.8 million for the year. EPS was $0.21 loss compared to earnings per share of $0.09 in the prior year. I will note that the current year EPS includes a one-time $0.34 tax benefit associated with the Red Wolf acquisition. Moving to our towers and heavy fabrication segment. Orders for the year were…

[Operator Instructions]. And our first questioner today will be Justin Clare with ROTH Capital Partners. Please go ahead.

Hi everyone. Thank you for taking my questions.

Hi Justin.

Good morning.

Hi. Morning. So first off, Siemens Gamesa has indicated they are seeing strong growth in the U.S. backlog in Q1 so far. And that's on top of solid bookings in Q4. I was wondering if you could just give us an update on the communications you are having with Siemens Gamesa and just give us a sense for how you see order flow progressing ahead?

Siemens is, I think the announcement came out today, they are actually the largest global turbine manufacturers. So they are a very critical partner for us, very, very important customer and I think they are gaining some momentum after a year of consolidation. So I think it's very positive and we remain their largest supplier for the U.S. market. So I think it bodes well.

Okay. Great. And then last quarter, you had talked about building a prototype for a tower customer in Q4. Can you just share how that relationship has progressed and whether you could see orders from that customer this year?

So the prototype was completed and I think it's actually just been shipped and I think it's a successful project. So we will definitely be under consideration for volumes that they would want this year. So that's a relationship that we would also like to develop and deepen.

Okay. And then moving to the steel tariffs. So U.S. pricing for steel has moved higher in anticipation of tariff. Just wanted to see if you could help us understand how that's affecting your cost structure right now? Are you able to pass some of that cost increase through to your customers? And then, is it becoming more challenging to compete with imports at this point in time because of the increased steel pricing in the U.S.?

It's kind of a complicated answer. So first of all, we don't take steel price risk when we sign a tower contract. Either the steel has been purchased in advance or we have a pricing commitment. But the more fundamental risk is that our customer could get that tower less expensively from overseas. And there you could enter the whole, the math that's relative steel prices versus transport costs. And the transport cost dynamics change depending on the amount of goods that are moving from Asia. So freight cost can increase and decrease. Steel prices increase, decrease. And of course, the proximity to the tower plant. But taken on its own, higher U.S. steel prices are the bigger gap between U.S. and Asian prices is a bad thing because on the margin it encourages more imports. Now the imports today, it's uneconomic for them to come from either China or Vietnam but there are other countries that will export towers. So that's why I said, it also depends on how close that wind farm is to the port since that defines how much overland transport cost is going to be. So it's a complicated equation and we are watching it really carefully because, of course the politics instance are pretty exciting.

Great. Okay. Well, thank you for the color. I will pass it on.

Okay. Thanks Justin.

[Operator Instructions]. Our next questioner today will be Angie Storozynski with Macquarie. Please go ahead.

Thank you. Okay. So two things. First on the balance sheet management, so your availability under the revolver. Should we be concerned if it will take a little bit longer for the tower orders to come in? How do you feel about the current availability under the revolver, the unused one? And how much time do you have, say what if it turns out the towers, orders really come in more like fourth quarter of this year versus the third quarter? Does this make a difference and should be concerned about the leverage?

We think we have adequate liquidity to support the business as the towers business volumes increase. And we still think we are going to have probably $20 million to $23 million, probably $23 million against availability on our line. Really the one benefit that we get as we have over $55 million of assets, so we are provided of $10 million of availability under our line for those assets. And certainly we could perform sale-leaseback transactions that could help us improve our liquidity, if needed. I think what we are also seeing in Q1 as we talked a little bit about some of our customers delaying payments into 2018, we are starting to see our DSO decline and our gearing and our Red Wolf business are generating cash. And then lastly, our CapEx requirements aren't significant in the first half of the year. So we are going to manage that pretty tightly until we have more certainty on the tower side.

Okay. The exit from the CNG business, that has to do more with cost efficiencies as opposed to any types of potential sales proceeds from asset sales?

I am sorry. Can you --

One of the slides mentioned that you are exiting the CNG business.

Okay.

And so I am asking if this is an attempt to cut costs? Or is it an attempt to raise funds from some asset sales that are currently related to the CNG business?

Yes. It's really a matter of changing our focus. It's not been a distraction. We have not seen very much traction on it. So it will reduce costs because right now we have got a facility that costs us maybe a $1 million, $1.5 million a year that's dedicated to that. So that will go away later on this year.

And then on the gearing side. Given this strong growth that you have been experiencing, are you looking at this market and thinking that there is a bigger growth potential or addressable markets within your current footprint that could meaningfully surprise to the upside as far as [indiscernible]?

I don't think it will surprise this year because we are trying to be consistent with this $9 million to $10 million we are booking to that level and make sure that it can be a profitable business. I do think though looking forward, we think this has the potential to take another leg off and be in the $50 million plus range. I think our customer diversification successes have been very significant and it's just opened our eyes to the size of the market and the range of opportunities out there.

Okay. Thank you.

Thanks Angie.

[Operator Instructions]. And we do have another question. It is from Al Shams with American Capital Partners. Please go ahead.

Yes. Stephanie did you are discuss how much cash you expect to generate from the sale of that facility you are shutting down?

It's actually a leased facility. So it's really a reduction on the expense stream.

Okay.

On the other side, the gearing plant, we do expect to close on the sale there probably early in the second quarter and that's on our books for about $0.5 million. We will get a little gain on there.

Okay. Now as Jason mentioned, you feel you have got adequate resources to carry forward during the year. And you have got some cushion built in if there are some timing issues?

Yes, we do.

Okay. Thank you very much. Good luck.

Thank you. The final -- I am sorry. Go ahead.

I am sorry. There looks to be no further questions at this time. So I was just going to turn it back to Stephanie Kushner for closing remarks.

Sure. So on the final slide, we are rebuilding our revenues in 2018. In the first quarter, we think will be in the $28 million to $30 million revenue with a small, less than $1 million, negative EBITDA. And then as we move back into the second quarter, we think that revenues will rise to about $40 million and we should start generating positive EBITDA again. So we made some progress in 2017, but certainly the extent of our customer concentration hurt us and this remains a key focus for 2018. In the towers and heavy fabrications, we do expect to build towers for multiple customers this year and we have invested in people and equipment to support sales growth in our other fabricated weldments. We added some key new customers for these products in 2017 and we think we will make further progress in 2018. In gearing, we are making progress stabilizing the supply chain situation and driving for consistent revenues and profitability. We were all disappointed that our gearing segment did not become profitable in Q4 as expected and we have redoubled our efforts to manage our processes more effectively in order to capitalize on a strong market. In process systems, as we have said, we are exiting the CNG market and we are concentrating on the kitting and fabrication business for Red Wolf and particularly to expand our customer base there. Despite the weak gas turbine market, Red Wolf generated nearly $2 million of EBITDA in its first full-year, which was masked by losses in CNG. With the exit of CNG, we are positioned to turn the segment results positive in 2018. So thank you for your interest. Tough 2017, but we planted some important seeds for future growth and diversification and I look forward to updating you on our progress as 2018 unfolds.

And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.