Greetings. Welcome to the Broadwind First Quarter 2020 Results Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Jason Bonfigt, CFO. Please go ahead.

Good morning and welcome to the Broadwind first quarter 2020 results conference call. Leading the call today is our CEO, Eric Blashford, and I am Jason Bonfigt, the Company's CFO. We issued a press release before the market open today detailing our first quarter results. I would like to remind you that management's commentary in responses to question on today's conference call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management current expectations and believes actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release we issued today. At the conclusion of our prepared remarks we will open the line for question. With that, I'll turn the call over to Eric.

Thank you, Jason and welcome to those joining us today. In a matter of a few short months, the novel coronavirus, or COVID-19 has emerged as one of the most consequential public health crisis in modern history, while disrupting global economic activity in ways that remain yet to be fully understood. In the midst of this crisis, we've witnessed uncommon courage from professionals risking their personal wellbeing for the greater good, people committed to going above and beyond to ensure the health and safety of their communities. To that end, I'd like to take a moment to recognize and thank all of the first responders, the medical professionals, the essential workers in factories, transportation, grocery, infrastructure, and so many others, who are doing amazing work in the communities in which we work and live. Here at Broadwind, I'm incredibly proud of our workforce, as they continue to perform admirably in spite of challenging circumstances. We are grateful for you and appreciate your continued efforts. Turning to Slide 4 of the conference call presentation. As for our response to the COVID-19 pandemic, we are closely monitoring the potential impact of the virus on our operations, customers and supply chain. In response to the virus, we've adopted all necessary and appropriate protocols, as recommended by the U.S. centers for Disease Control and Prevention, to ensure the continued wellbeing of our employees. Given that all of our businesses are considered central and critical infrastructure, as defined by the U.S. Department of Homeland Security, our facilities remain open and operational. Should it become necessary, we are prepared to enact a business continuity plan to ensure the continued production and shipment of products to meet our customer's needs. We applied for and received a loan as part of the SBAs PPP program given our status…

Thank you, Eric, and good morning. As expected, we delivered strong first quarter performance, resulting in our first profitable quarter since 2017. Although significant uncertainty remains evident in our markets, we are encouraged by the operational and commercial progress achieved during the past year, together with the improved TTM trend and EBITDA generation at current production levels. First Quarter consolidated sales were $48.6 million, up from $41.7 million in the prior year quarter, due primarily to improved plant utilization in our Heavy Fabrication segment, which benefited from increased tower demand. Demand for wind towers, fabrications for mining equipment and gas turbine components more than offset weakness in gearing demand. Our TTM consolidated sales were more than $185 million exiting the first quarter versus $137 million in the prior year period, as we further diversified our customer and end market exposure. We experienced significant margin expansion during the first quarter with gross margins reaching 12.7%, up from 8.5% in the prior year quarter, due primarily to improved operating leverage, specifically in our Heavy Fabrication segment. We continue to aggressively reduce operating expenses as a percent of sales. In the first quarter operating expenses as a percent of sales was 9.2% and below our long-term target of 10%. And we expect to manage operating expenses near these levels throughout 2020. We generated $3.6 million of EBITDA in the first quarter, an increase of $1.9 million versus the prior year period. On a TTM basis, we have generated $9.1 million of EBITDA, a significant improvement when compared with our performance in the previous 12 month period. Turning to Slides 8 and 9, for discussion of our Heavy Fabrication segment. First quarter sales were $38.4 million, a $10 million increase on a year-over-year basis, primarily due to increased demand as the industry ramps up…

Thanks Jason. Despite the challenges we've all faced since early March, our leadership team has continued to execute on the strategic priorities we first introduced last quarter, which include targeted expansion into both our legacy wind markets as well as nonwind sectors. As before, we remain disciplined in our pursuit of opportunities for our unique value proposition and proven industry experience position us to win. Turning to Slides 14 and 15, for a review of demand conditions within each of the six end markets we serve. Let's begin with the wind sector, which represented approximately 68% of TTM revenue. The outlook for this sector continues to be positive, driven by various economic forces such as the PTC, including the recently announced one-year extension, the competitiveness of wind power versus other sources and the nation's desire for clean energy. While underlying demand conditions continues to support a positive outlook for this sector over a multi-year period, our customers acknowledge that some projects scheduled for this year could be delayed due to the pandemic. In 2020, we expect that nearly 15 gigawatts of wind power will be installed in the U.S. this year, a significant achievement. However, this is 500 megawatts or 3% below previous predictions., an acknowledgement by forecasters of potential project delays. Furthermore, tax equity and other forms of financing remain available to fund projects. Looking ahead, Wood Mackenzie continues to forecast significant near-term strength for onshore installation through 2021, with growing demand in the out years after the PTC term from the combined installations of both onshore and offshore turbines. This long-term projection includes 19 gigawatts of offshore installations consistent with Wood Mackenzie's prior forecast. Although some projects have moved to the right of the forecast, the industry still expects 2023 to be a strong year for offshore wind…

[Operator Instructions] Our first question is from Justin Clare from ROTH Capital Partners. Please proceed with your question.

So I guess - I wanted to start out. So in Q1, your plant utilization was the highest level since 2017 despite the disruption caused by the coronavirus here. I was wondering if you could quantify how much your margins may have been impacted in the quarter by this disruption. And what could margins have been in a more normalized environment?

Sure. Not a significant impact from the Coronavirus in Q1 just because of all the stay-at-home orders came in very at the back end of the quarter. What I would say is we had to continue to have supply chain I guess delivery issues that impact production. And then we also had six different tower designs going through the plan. So that always creates some disruption as you bring new tower designs on you go through that learning curve. I would say that approximately, I think we lost one to two margin points based on some of those disruptions. So looking at our gross margins for the quarter, we still had near record gross margins at 12.7% for the consolidated business, but I think there was. So if we look at an optimized quarter, you maybe, you're into the mid-teens for gross margins.

Okay, great that's really helpful. And then I know there is a lot of uncertainty still, but looking into Q2, given the different safety measures that you have taken and the disruption that you've seen. How would you anticipate margins trending is there enough of a headwind there where we're going to see a decline sequentially?

I think in the heavy fabrication business, we know - unless if we have any major disruption here towards the end of the quarter, I would expect that to be about in line. I would expect continued pressure in our gearing business just because of the reduced volume and some - frankly some uncertainty with customer offtake in Q2.

Okay, got it. And then you talked about you're planning to fill additional 2020 capacity for the tower business in the coming months here. What is the potential that you could actually get to booking 100% of the capacity? And then do you have the ability to actually deliver all of the towers, if you were to reach that level given the potential supply chain constraints and potential issues with production that maybe could arise?

Justin, this is Eric. Thanks for the question. At this point, supply chain within the tower specifically the tower business can be anywhere between 20 to 26 weeks even a little bit shorter in some cases. The supply chain around the world is starting to come back up. But there certainly is a risk Justin on that supply chain. But as a reminder, due to the truck tariffs [ph] that were put in a couple years ago, that supply chain has become very diversified around the world. So as COVID impacts, normal parts of - and usual parts of the world, other parts of the world become opened up. So with that diversity of the supply chain, as long as we get the orders here within the next I would say two or three months, hopefully shorter than that. We should be able to fill that capacity at the end of this year.

Okay, great. And then you've had success in customer diversification, you're now serving the top three wind OEMs in the U.S. So just wondering, based on the discussions you're having with those customers, can we anticipate consistent orders from all three? You know, given that demand is strong this year, should be strong next year. What are your expectations there?

Well, we're certainly excited to be dealing with those top three of the four, and they all have projects that are talking with us about. Justin it really depends on where they win their projects and when they win their projects depending on how that balances with our open capacity. Yes I do expect that we should be - signed all three of those customers yet again in 2021.

Okay and then maybe just one last one from me. For the tower orders that you're recently booking, how is the pricing and unexpected margins for those bookings evolving? Are we seeing kind of flat pricing relative to what you saw in Q1 or has there been any meaningful change there?

I think the best we can share is, if you look at Q1 versus Q4 in heavy fabrication business, there was a nice improvement in EBITDA. A lot of that was driven by frankly by the tower pricing. And I think for now, I would hold the assumption that - following the hold the Q1 pricing assumptions constant throughout the year.

Okay.

I think it’s always a challenge to talk through that as we're dealing with these supply chain constraints and introducing new tower model but always just puts pressure or can put pressure on margins.

Right, yes it's understandable. Okay, that does it from me. Thanks for the questions.

Yes, thank you, Justin.

And we have reached the end of the question-and-answer session. And I will now turn the call back over to Jason Bonfigt for any closing remarks.

Yes, thank you. This is Eric. I'll just put some closing remarks. And again, thank you for your interest in Broadwind. This is a crazy time we're all going through, but we remain committed to our people and our customers and our communities. We’re excited about our business and our strategy and look forward to updating you on our performance in July. Thank you very much.

This concludes today's conference and you may disconnect your line.