Good morning, and welcome to the Broadwind Energy Q4 2018 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. Please note that this event is being recorded. At this time, I would like to turn the conference over to Jason Bonfigt, Vice President and CFO. Please go ahead, sir.

Thank you, Denise. Good morning, and welcome to Broadwind Energy's fourth quarter 2018 earnings conference call. With me today are Broadwind President and CEO, Stephanie Kushner; Broadwind COO and President of Broadwind Towers, Eric Blashford. 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 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 10-K and our Form 8-K in the attachments we filed with the SEC this morning. We assume no obligation to update any forward-looking statements or information. Having said that, I'll turn the call over to Stephanie Kushner.

Thanks, Jason, and good morning. In a difficult year, we achieved our targeted $40 million in diverse orders, which helps position us to be a stronger less concentrated company. We reduced our net debt by 18% and at year end had $11 million drawn on our $25 million credit line. And we announced last night that we've expanded our line of credit with CIBC from $25 million to $35 million and extended it for another three years. They have been a good partner for us. The added capacity will support our significant sales recovery in 2019 and also help us with financing a more complicated supply chain due to the ongoing steel tariffs and expansion of our customer base. 2018 proved to be the first profitable year for our Gearing segment, I am proud of the way the team took control of the business, improving productivity and on time delivery, while reducing manufacturing variances and adding important new customer diversification. Full year results were depressed by supply chain and equipment difficulties in the first half. However second half results with sales of $21 million and EBITDA of $2.6 million are more representative of where we now believe we can operate systematically. Broadwind's fourth quarter revenue of $27 million was up from last year and in line with our guidance, while our tower plants were running at low production levels, our Gearing and Heavy Fabrications performed well. Our EBITDA loss of $1.7 million was similarly in line with guidance and improved from last year when our tower plants were all bit [ph] shutdown. The headwinds introduced by the imposition of steel tariffs last March have boosted U.S. steel prices about 50% and import prices have risen to match. We're fighting the advantage this gives to foreign manufacturers of wind towers. Our…

Thank you, Stephanie and good morning, everyone. Orders for the - I'll first talk about our Towers and Heavy fabrication segment. Orders for the quarter were $2.4 million and were comparable to Q4 2017. Fourth quarter tower orders remain depressed, reflecting delays in wind tower project releases. Our heavy fabrication line, which operates in mining, construction and other industrial markets, continues to see increasing demand. We are considering further capital investments to support our growth and diversification. We sold 64 tower sections during the quarter, more than double the prior year quarter, but still only about 20% of our capacity due to the timing of steel deliveries. As a result, Q4 sales were $10.7 million versus $4.2 million in Q4 2017 with an EBITDA loss of $1.3 million versus $3 million loss in Q4 2017. While we're now pleased with any EBITDA loss, the Q4 2018 versus 2017 improvement reflects our progress in growing the heavy fabrications product line, the impact of our operational improvements and our cost reduction efforts. Furthermore, we incurred certain cost in Q4 to maintain the critical core of highly skilled workers needed to support sharply increasing tower production levels at both of our plants through at least Q2 of 2019. Our 2019 priorities remain consistent with the previous call. We are working with our primary tower customer to win additional orders, collaborate on cost out efforts and support their development of new models. As we've discussed on previous calls, the pricing pressure resulting from the PTC run-off, competitive PPAs and tariff driven cost increases on steel and other components continue. We have been able to pass through most of these steel cost increases on to our customers, but given that it's just a pass through there is no incremental margin benefit, especially with the continuing…

Thanks, Eric. Q4 consolidated sales were up nearly $9.4 million year-over-year and in line with our guidance as sales were up in each of our businesses. The year-over-year improvement was a relatively easy comparison for us as a major tower customer was rebalancing inventories in the prior year and our plants were nearly idled. We continue to see improved performance in the Gearing business, also driving the top line improvement is the result of our diversification efforts notably in Gearing and in our other fabrications product line. Our backlog to support 2019 production is much stronger than in past years Gearing backlog is diversified and provides solid visibility into the first half of production. Orders for our fabrications product lines in 2018 exceeded $15 million and we expect further growth in 2019. And tower purchase orders received for 2019 production are markedly improved over the visibility we had this time in 2018. In Q4 year-over-year gross margins improved from negative 17.4% to negative 1.8%. This improvement was driven by higher tower plant utilization, including both tower and fabrication production and greater leverage in our Gearing business. The Gearing business demonstrated consistent operating results in the second half of 2018, with notably improved productivity, better material management, and overall improved operational manufacturing variances, including lower maintenance, scrap and rework. These areas continue to be managed well and are a testament to the continuous improvement efforts to-date and we are seeing the benefit of our ability to flux our manufacturing resources between producing towers to other fabrications. This not only allows us to offset margin pressure to increase the lower tower production, but also helps us to retain our core workforce and leverage our competencies in adjacent markets. Recurring operating expenses were $4.1 million during the quarter, down from $4.3 million in…

Thank you, sir. [Operator Instructions] And the first question will come from Justin Clare of Roth Capital Partners. Please go ahead.

Hi, everyone. Thanks for taking my questions.

Hey, Justin.

Hey. So first off for 2019, you expect quarterly revenue of $40 million or more. I was wondering, if you could share what you expect in terms of the mix of revenue by segment and how that might evolve as we head through the year?

I think most of the growth - I'll let Jason follow-up on this, but most of the growth we're expecting is going to be in the towers, just bringing our capacity utilization from as low as it's been up to something that's a more normal level. Having said that, our Gearing business, we expect that to be fairly flat. Right now we're being pretty cautious about oil and gas for the overall year. So we think we're going to be running that business in the approximately $10 million quarterly run rate. We expect to see some recovery in Red Wolf. And then our Fabrications business that product line, we expect that to be up a little bit as well. But I would say overwhelmingly that the growth will be on the tower side. Jason, I don't know if you want to add to that.

Because, just to note that the heavy fabrications product lines were approximately $12 million of revenue. We've booked orders of $15 million in 2018, so pretty healthy book to bill there. So we expect that to grow as well in 2019.

Okay, great. That's helpful. And then for 2019, you've mentioned approximately $8 million of EBITDA. I was wondering, if you could just talk through, do you expect to all segments to contribute to positive EBITDA in the year? And do you expect the EBITDA to be front half loaded or back half loaded, what should we expect there?

So our Q1 guidance.

Sorry. Go ahead, Jason.

Our Q1 it's been more of a building scenario adjustment throughout the year as we have the tower plants become more full. So Q1 we're projecting to be at $1 million to $1.5 million and then we'd expect to build on that to be above $2 million starting in Q2. The Gearing business generated $2.6 million of EBITDA in 2018, essentially all of that was generated in the second half of the year. So we would expect that to nearly double in 2019.

Okay. And then, just when you look at your Tower business, you expect the utilization to improve in 2019. How much of that is being driven by an increase in orders from your primary tower customer where you have a long-term contract versus potential new customers? Like if you hit utilization of 60% to 70% is that from just seems Gamesa [ph] or is there any expectation for other customers in there?

Yes, I can take this maybe, Stephanie can elaborate. But that would be - Justin, that would be a blend. We do expect consistent orders from our largest customer, we continue to work very closely with them. But as I mentioned coating activity is robust, and we're in active discussions with several others. And they're all interested in capacity at both plants for the remainder of the year. So I would say definitely that's a blend.

Okay. And then it seems like imports are a greater concern here given the steel tariffs. Can you talk about how much market share you think maybe being taken by imports now versus what it was last year? And are you seeing greater competition for imports in in land areas in the U.S.? It seems like historically it's been primarily confined to coasts where you'd see competition from imports. Are you seeing that move Inland at this point?

Well as far as percentages it's very difficult for me to estimate a percentage. But definitely we are seeing - so freight is a component, ocean freight is definitely a component for these towers especially as they get taller and the sections per tower increase. So the competition on the cost is much more fierce than in land. But again with the price of steel, the price of U.S. steel that's required for towers, those imports are becoming more competitive, more near the central U.S. But certainly, we've got a much greater advantage or we're much more competitive when the farms are away from the coasts. And that's both the South Coast and also even coming south of like for instance like superior because some of those imports can come through the Great Lakes as well.

Okay, all right. That's it for me. I will pass it on.

[Operator Instructions] And in showing no additional questions, we will conclude the question-and-answer session. I would like to hand the conference back to Stephanie Kushner for her closing remarks.

Thanks, Denise, and thanks very much for your interest. We look forward to updating you further in 2019 as you can tell from our tone, we feel like we're positioned for a much stronger 2019. And look forward to telling you about it. Thank you.

Thank you. Ladies and gentlemen the conference has concluded. Thank you for attending today's presentation. At this time, you may disconnect your lines.