Good morning, and welcome to the Broadwind Energy First Quarter 2018 Earnings Conference Call. [Operator Instructions]. Please note, 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, Steven. Good morning, and welcome to Broadwind Energy's First Quarter 2018 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 new 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 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-Q, 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 the Stephanie Kushner.

Thank you, Joni, and good morning. Following a difficult second half of 2017, Broadwind is on a recovery path. Our operating management in Manitowoc, Wisconsin and Abilene, Texas successfully restarted tower production following very low demand in the fourth quarter of last year. Our revenue recovered to $30 million, up nearly 70% from last quarter, but not sufficient to generate positive EBITDA. We are on track with our customer diversification initiative. We set a target of booking more than $40 million of revenue this year from customers outside of our normal core. $12 million or 42% of our Q1 orders were from what we considered diverse customers, including several new heavy fabrications customers, a new gas turbine manufacturer and growth with a number of mining industry gear customers. We're taking steps to exit the CNG business and consolidate Abilene-based manufacturing facilities later this year, which will eliminate about $2 million annual earnings drag. I'm pleased to announce that we've named Eric Blashford as the COO of Broadwind, following his nearly 4 years managing our towers business. Under his leadership, we've made good progress in towers and heavy fabrications, improving our manufacturing processes and using continuous improvement tools to improve product margins. He will bring this expertise to our other businesses. Eric has more than 30 years' experience in the heavy equipment market and brings a vision for building on our core tower manufacturing design and welding skills to enter other heavy fabrication markets. He will join us in next quarter's call to talk about operational progress. We booked $28 million in new orders, down from a year ago, but up sharply about 75% from the previous 3-quarter average. In Towers and Heavy fab, we booked $7.8 million split between towers and other large fabrication. In gearing, orders about doubled mainly…

Thank you, Stephanie. As expected, we started to see a recovery in our towers business in Q1, primarily the results of increased tower sales following an extremely challenging second half of 2017. Broadwind sales were $30 million, a $12.2 million sequential improvement. As a result of the higher plant utilization, gross profit improved to effectively breakeven from negative 17.5% in Q4. Quarterly operating expenses were up $800,000, however, Q4 was below our normalized run rate due to $700,000 onetime benefit related to releasing an environmental reserve associated with an [indiscernible] facility. As a result, operating expenses were up only modestly when we compared to the sales increase. Our EBITDA loss was $1.6 million, but significantly improved over a challenging fourth quarter. From a year-over-year comparison perspective, our tower factories were essentially sold out in the prior year quarter as our customers were focused on meeting the production tax credit qualification deadline. In the current period, we are beginning to rebuild our workforce to meet higher demand levels from our customers. Last year in our Gearing business was only starting to see a recovery in its end markets, evidenced by increased coding and order levels. And today, our end markets and our backlog are healthy. Resources are now focused on our manufacturing processes and improving the supply chain and building a business that can generate acceptable returns. Our EPS loss was $0.32 for the quarter versus a positive $0.43 in the prior year, primarily driven by the $0.34 onetime benefit related to that Red Wolf acquisition. Moving to our Towers and Heavy fabrication segment. Orders for the quarter were $7.8 million or $5.3 million sequential improvement. The order improvement is encouraging because it's driven by multiple factors, including tower orders in excess of our backlog and growth in our heavy fabrication…

Thanks, Jason. So as we progressed in 2018, which is a recovery year for Broadwind, we're focused on a handful of key initiatives. First, continuing to build momentum with customer diversification. Entering 2017, we were too concentrated with a handful of large customers. When our tower customers merged and rationalized inventory, we were impacted severely. Red Wolf was similarly impacted with business with a large domestic gas turbine manufacturer turned down sharply in early 2017. We've identified about a dozen customers where we're focused on initiating or expanding business with a full year target of more than $40 million. We are preparing to exit an 80,000 square-foot production facility in Abilene, Texas and expected to close the sale next quarter on the idled 159,000 square-foot Cicero gearing facility, where we recently completed environmental remediation actions. These steps will reduce our space by 21% and represent the final phase of a multiyear 40% manufacturing footprint consolidation effort we kicked off several years ago. We're updating our systems configurations to support the change in our sales mix and our Tower and Heavy fab business were adding complexity as we entered new markets for large welded structures, and our systems need to support the added complexity this brings. In gearing, we've added a growing volume of serial gear production, and we are expanding our presence in custom gearbox manufacturing. Again, we need to ensure that our system support both of these growth areas. In Towers, where turbine pricing have been highly competitive, we are working on continuous improvement initiatives to improve the manufacturability of the towers and offset margin pressures. And we moved our corporate CI expert into our Gearing business to do the same with respect to our serial production there. And lastly, as I said, we're managing through steel escalation risk across our businesses to make sure that doesn't have a material impact on our margins. Following a tough 2017, I feel optimistic about our past forward -- and look forward to updating you on our future success. So this completes our prepared remarks, and I'll turn the call over to Steven for Q&A.

[Operator Instructions]. And our first question comes from Justin Clare with Roth Capital Partners.

So first off, if we look beyond Q2 of this year. I think previously you've talked about reaching a quarterly run rate of revenue of $40 million and potentially generating positive EBITDA. Can you just give us an update there on what your expectations are and what we could expect for Q3 and Q4?

So I think we -- so we do expect to have positive EBITDA in Q2. I don't think it will be quite up to the $40 million, we're saying $36 million to $38 million. And then we would expect to remain positive for the rest of the year. Our visibility on Q3 is pretty good. Q4, we're not certain how much growth we'll get there. But overall, I think it's going to be a much better series of quarters ahead of us.

Okay, great. And then just moving to U.S. demand in the wind market. Can you help us understand what may be driving this shift in demand toward the PTC exploration year? And what could that mean for your order flow in 2018, '19 and 2020? And then specifically for 2018, can you give us a sense for whether you think your key tower customer could exceed the baseload production of $50 million in year?

Okay. Let's see. So multipart. I do think our large customer is gaining some momentum in the market, which is potentially a good thing for us., but I probably can't say a lot more than that. I do think they will end up purchasing above their minimums in this contract year. You talked about a shift I don't think there is so much a shift on installation. We've had a little bit of a leg down in 2017 because of the tax uncertainty, which going back to Slide 5 caused that to be kind of a steeper kink up from '17 to 2020. I think the good news and maybe I didn't say it very clearly is that, whereas previously we thought the decline in 2021 might be significant, it now looks like there will be new 2021 demand on the range of 10 gigawatts.

Okay, great. And then you talked about pricing pressure in the wind market in terms of the PPAs and that having an effect on the supply chain. Can you just talk about how much prices maybe declining for your towers or towers section. And then how much of this decline can you offset with lower cost?

Okay. Well, for us, the absolute biggest thing is volume. Volume and consistency as well gives us tremendous opportunity to improve margin. So if you look at towers, their margins were down maybe 20% and 15% of that was volume-related. Actually probably less than 5% of it was price because that also included the impact of the startup inefficiencies. So we are -- so we work very, very consistently and persistently on cost out and continuous improvement initiatives that help keep bringing down our tower cost and improving the manufacturability. There is a turbine model that we -- well, you get variability with models as well but there is a turbine model that we've built recently, that we had built maybe a year ago. And the margins were consistent even though there was some reduction in the price.

Okay. And then one more for me. So you've talked about $40 million in orders outside of the core customer base that you're targeting. Can you share what the mix of those orders might be based on your segments? Like, how much of that could be from new tower customers versus Gearing versus Process Systems?

Every segment has a target that they are working to, the smallest target is probably in Red Wolf because they are early along in the process. And the gears, heavy fab and towers also have significant targets. But I guess, I don't really want to share the individual numbers because we're not sure exactly where it's going to come from because we have so many different possibilities out there.

Our next question comes from Chris Morgan with Macquarie.

So you received another waiver from the bank on the credit line covenant. And I was just wondering based on your conversations, how comfortable you are that the bank will continue to grant future waivers, if needed?

I think we've talked about the forecast that we're going to achieve for the year. So we don't believe we're going to have any future issues under our -- receiving any or having any violations under the covenants. But they have been supportive kind of working through this with us. So, I mean, I think the relationship is strong.

Cool. Okay. And then the next question would be, should we be expecting continued constraints on tower production 2Q '18 as you continue to ramp up operations or was most of those constraints are 1Q '18 issue coming off of almost no production in 4Q '17?

Yes, so we were hiring quite a few people kind of to ramp up in specifically in our Abilene facility, where we grew from approximately 80 people only, and then up about 50. So it was a pretty significant growth there. So we have more of a stale population of people right now and the workforce. So we feel confident that we're not going to have those residual issues slipping into Q2.

One of the things that we monitor closely is that -- is our hiring success with welders, because that's probably one of the more skilled occupations that we've been delighted recently to be able to add a number of new welders into the company. Either for towers, either for towers or for some in the heavy fabrication market.

Okay. And then I think you guys had mentioned that there will be a less favorable product mix within Towers and Heavy Fabrications and just if I can get a little bit more color on that what exactly kind of shift are we expecting? And then, secondly, where the risk to margin pressures in 2018 are really stemming coming from? I think you guys had mentioned that volumes matter obviously, but how much of it is that versus steel prices or potentially other factors?

We were talking about an unfavorable mix during Q1. We're not suggesting that, that mix deteriorates in Q2 and going forward.

I would say on the steel question. We haven't seen any impact yet. And we're optimistic that some of the steel pricing ambitions will dissipate depending, of course, on what happens with the tariffs. So some of the -- some of the bilateral settlement deals that are being negotiated so far seem to be fairly moderate. So for us, the main thing is to be absolutely on top of all of our input prices and make sure that we're managing that as aggressively and then in a timely of a manner as we possibly can.

Okay. And then kind of as my last follow-on. Obviously, we were pleased to see the pickup in orders particularly for towers. But curious if you guys have any insights or feel as to how margins at the OEMs are evolving? Add to what extent any changes in those margins might potentially be passed through to your business?

I think what we're seeing in the turbine OEM, I think the margin reset, if you will, is behind them and things have moderated or stabilized. So I think that's a good thing for us.

[Operator Instructions]. I'm showing no further questions. This concludes our question-and-answer session. I'd like to turn the conference back over to Stephanie Kushner for any closing remarks.

Thank you very much. Thank you for your interest. As I said, we're looking forward to making improvements during the course of this year and having some better call -- better things to talk about, okay. Thank you. Bye-bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.