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Q3 Investor Call Presentation
October 30, 2014
© 2014 Broadwind Energy, Inc. All rights reserved.
© 2014 Broadwind Energy, Inc. All rights reserved. 2
Industry Data and Forward-Looking Statements DisclaimerBroadwind obtained the industry and market data used throughout this presentation from our own research, internal surveys and studies conducted by third parties, independent industry associations or general publications and other publicly available information. Independent industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. Forecasts are particularly likely to be inaccurate, especially over long periods of time. We are not aware of any misstatements in the industry data we have presented herein, but estimates involve risks and uncertainties and are subject to change based on various factors beyond our control.
This presentation includes various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks, uncertainties and assumption, such as statements regarding our future financial condition or results of operations or prospects and strategies for future growth. Statements in this presentation that are not historical are forward-looking statements. These statements are based on current expectations and we undertake no obligation to update these statements to reflect events or circumstances occurring after this presentation. Such statements are subject to various risks and uncertainties that could cause actual results to vary materially from those stated. Such risks and uncertainties include, but are not limited to: expectations regarding our business, end-markets, relationships with customers and our ability to diversify our customer base; the impact of competition and economic volatility on the industries in which we compete; our ability to realize revenue from customer orders and backlog; the impact of regulation on end-markets, including the wind energy industry in particular; the sufficiency of our liquidity and working capital; our restructuring plans and the associated cost savings; the ability to preserve and utilize our tax net operating loss carry-forwards; and other risks and uncertainties described in our filings with the Securities and Exchange Commission, including those contained in Part I, Item A “Risk Factors” of our Annual Reports on Form 10-K.
This presentation contains non-GAAP financial information. We believe that certain non-GAAP financial measures may provide users of this financial information meaningful comparisons between current results and results in prior operating periods. We believe that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain infrequently occurring or non-operational items that impact the overall comparability. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, our reported results prepared in accordance with GAAP. Please see our earnings release dated October 30, 2014 for a reconciliation of certain non-GAAP measures presented in this presentation.
10/30/2014
© 2014 Broadwind Energy, Inc. All rights reserved. 3
Q3 2014 Overview
10/30/2014
End Market Environments Wind – Strong fundamentals from
cost and demand perspective Oil & Gas – strong demand for
gearing and fabrications Steel – strong demand for gearing Mining – demand remains flat for
gearing and fabrications
Q3 2014 Highlights Booked $66M in new orders Challenges in Towers ramping up
production and adding new design Inventory reduction of $3.5M from
Q2 2014 as expected Gearing cut operating loss by >50% Services strong revenue and order
intake
2012 2013 2014$30
$40
$50
$60
$70
Q3 Revenue $M
2012 2013 2014-0.40
-0.20
0.00
0.20
Q3 Op. (Loss) cents / share
2012 2013 2014$0.0$0.5$1.0$1.5$2.0$2.5$3.0
Q3 Adj. EBITDA $M
© 2014 Broadwind Energy, Inc. All rights reserved. 4
Orders and Backlog
Orders – $M
$52M in Towers & Weldments orders in Q3 14; near tower production capacity for 2015
Strong increase in Oil and Gas orders, down from PY due to timing of a large wind replacement gearing order; YTD well ahead of PY
Services orders up 36% over PY and highest since Q4 2012; strong demand for blade repair, YTD > double PY
Order Backlog – $M
Q3 2014 ending backlog of $228M
Strong order backlog going into 2015
Q3 2013
Q3 2014
YTD 2013
YTD 2014
Towers & Weldments
$70.3 $51.7 $168.3 $56.5
Gearing 12.8 9.0 29.3 35.6
Services 3.9 5.3 6.1 13.3
Total $87.0 $66.1 $203.7 $105.5
10/30/2014
Q4 11 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 140
50
100
150
200
250
300
350
Up 36% from PY
© 2014 Broadwind Energy, Inc. All rights reserved. 5
Towers Update
10/30/2014
Challenges
12 towers fell out of quarter due to production inefficiencies
Abilene hrs/section nearly 2/3 higher than expected
Abilene first pass yield fell by 5x Additional maintenance spend
$500K + due to poor scheduled maintenance compliance and higher capacity levels in Abilene
Actions Being Taken
Manitowoc plant manager temporarily moved to Abilene
Redeployed key personnel to retrain workforce
Developing redundancies for bottleneck areas
Significant focus on on-time servicing of equipment and additional stocking of spares
Greater support by Manitowoc staff in Abilene
Expect operational improvements in Q4 and full benefit of corrective actions in 2015
© 2014 Broadwind Energy, Inc. All rights reserved. 6
Gearing Fundamentals
Market Trend Highlights
Wind + Replacement Gearing
O&G + Strong Market Drivers
Steel + Increase in Capex Spend
Mining - Little Growth
Productivity
Inventory Turns
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-1450.0%
55.0%
60.0%
65.0%
70.0%
75.0%
10/30/2014
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 140
1
2
3
4
5
6
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 140.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%18.0%
Defect Rate
© 2014 Broadwind Energy, Inc. All rights reserved. 7
Wind Market – Drivers
10/30/2014
Market Drivers 58% reduction in the cost of energy
Regulation 111d retiring older coal generation, creating partial demand for wind
New financing vehicles like Yield Co’s
Larger rotors have opened new geographic areas that weren’t previously economical
More utilities owning wind projects
Commercial customers like Walmart, Google, and Microsoft procuring wind energy
Source: Lazard Capital
$87
$61
Gas Combined Cycle
Fundamental case for wind very strong as viable geography expands
Unsubsidized Levelized Cost of Energy
© 2014 Broadwind Energy, Inc. All rights reserved. 8
Consolidated Financial Results
10/30/2014
Q3 2014 Comments Sales down 1% from Q3 2013 –Towers and Weldments -4%, Services + 36% Gross margin (ex. restructuring) – down 270 bp from Q3 2013 due to lower volumes in
Towers and Weldments Operating expense lower than Q3 2013; lower restructuring and regulatory expense EPS loss of $.12, ahead of Q3 2013; poor Towers and Weldments results pull YTD EPS
to loss position 2014 YTD EPS loss includes $.11 charge related to proposed regulatory settlement
2013 2014 2013 2014Revenue-$M 60.9$ 60.3$ 159.3$ 187.5$ Gross Profit-$M 4.6 3.9 10.2 17.6 -% (ex. Restructuring) 9.4% 6.7% 8.1% 9.9%Operating Expense-$M 6.9 5.7 19.4 18.3 -% (ex. Restructuring) 11.2% 9.2% 11.7% 9.6%Operating Income/(Loss)-$M (2.3) (1.8) (9.3) (0.7) Net (Loss), Continuing-$M (2.5) (1.8) (6.6) (1.0) Adj. EBITDA-$M 2.7 2.0 7.6 10.7 EPS, Continuing (0.18) (0.12) (0.46) (0.07)
Q3 YTD
© 2014 Broadwind Energy, Inc. All rights reserved. 9
Towers and Weldments
10/30/2014
Third Quarter 2014 Highlights
Tower volume down 14% from Q3 2013
EBITDA down $3M; challenges with new tower design and scaling up to full production capacity caused significant cost overruns in Abilene
Maintenance $500K higher
Operating Margin fell to 7%
Q4 results forecast to be similar to Q3; lower margin mix
2012
Avg
/qtr.
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Capac
ity0
20
40
60
80
100
120
140
Quarterly Tower Sales
# o
f T
ow
ers
2013 2014 2013 2014Towers 124 107 282 334Sections 372 334 938 1066Revenue-$M 47.1$ 45.1$ 116.0$ 146.3$ EBITDA-$M 7.7 4.4 17.4 20.6 Op. Income-$M 6.6 3.4 13.8 17.5 Op. Margin 13.9% 7.4% 11.9% 12.0%
Q3 YTD September 30,
© 2014 Broadwind Energy, Inc. All rights reserved. 10
Gearing
10/30/2014
Revenue in-line with Q3 2013
EBITDA better than PY due to higher margin mix and absence of regulatory charge
Operating loss reduced by 57% due to higher margin mix, lower restructuring costs and absence of regulatory charge
Inventory reduced as a result of improved processing times; adversely affected operating results due to lower absorption
2013 20140
5
10
15
20
25
30
35YTD Sales by Industry
Other IndustrialMiningSteelO&GWind
Reve
nue
- $M
Third Quarter 2014 Highlights2013 2014 2013 2014Revenue-$M 10.4$ 10.3$ 31.6$ 31.5$ EBITDA-$M (2.3) (0.1) (2.4) (0.3) Op. Loss-$M (5.4) (2.3) (12.3) (7.1) Op. Margin -51.7% -22.2% -39.1% -22.4%
Q3 YTD September 30,
© 2014 Broadwind Energy, Inc. All rights reserved. 11
Services
10/30/2014
Third Quarter 2014 Highlights Industry recovering – quoting activity up;
highest quarterly order rate since Q4 2012
Revenue up 36% from Q3 2013 – continued strong demand for service techs and blade repair
EBITDA loss cut in half due to higher volume and lower SGA expense
Operating loss improved due to higher volume and lower SGA expense and lower non-cash charges
2013 2014 2013 2014Revenue-$M 3.7$ 5.0$ 15.3$ 10.9$ EBITDA-$M (0.8) (0.4) (1.5) (2.3) Op. Loss-$M (1.3) (0.7) (3.2) (3.4) Op. Margin -34.4% -14.6% -21.2% -31.0%
Q3 YTD September 30,
Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 140
102030405060708090
100
Active Service Tech Headcount
© 2014 Broadwind Energy, Inc. All rights reserved. 12
Operating Working Capital
10/30/2014
Q4 2008Q1 2009
Q2 2009Q3 2009
Q4 2009Q1 2010
Q2 2010Q3 2010
Q4 2010Q1 2011
Q2 2011Q3 2011
Q4 2011Q1 2012
Q2 2012Q3 2012
Q4 2012Q1 2013
Q2 2013Q3 2013
Q4 2013Q1 2014
Q2 2014Q3 2014
- 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20
Working Capital Cents per Dollar
9/30/14 OWC decreased $14.4 Million from 6/30/14 to $11.5 Million OWC was 5% of annualized Q3 2014 sales Inventory decreased, trade payables and customer deposits increased
*Operating Working Capital = Trade Receivables + Inventories – Trade Payables – Customer Deposits
© 2014 Broadwind Energy, Inc. All rights reserved. 13
Debt and Liquidity
10/30/2014
Net debt negative Debt and capital leases less than $5M $20M credit line remained undrawn at 9/30/14 BWEN Board authorizes $10M stock repurchase program
2009 2010 2011 2012 2013 Q2 2014 Q3 20140
5000
10000
15000
20000
25000
30000
35000
40000
45000
debt and capital leases low or 0 interest rate debtBrandon, SD mtg
9/30/2014 $MAloStar line of credit - Long-term debt - Capital leases 1.4$ Subtotal: debt ex. grants 1.4 Grants/tax credits 2.8 Total Debt 4.2 Less: Cash and related assets 27.9 Net Debt (23.7)$
© 2014 Broadwind Energy, Inc. All rights reserved. 14
2014 Financial Outlook
10/30/2014
2014 EPS Walk Q4 expected to be in-line with prior year Full year estimates show continued solid improvement over prior year; revenue up
15%, operating loss reduced by >70% 2014 estimated EPS loss includes $.11 charge related to proposed regulatory
settlement
Expect solid 2014 improvement, despite Towers stumble
FY 2010 FY 2011 FY 2012 FY 2013 2014 E Q4 14 Q4 13Revenue-$M 137.0$ 186.0$ 210.7$ 215.7$ $248-250 $58-61 56.4$ Gross Profit-$M 1.9 7.2 6.8 12.3 -% (ex. Restructuring) 1.4% 3.9% 4.0% 8.0% 8-9% 7.8%Operating Expense-$M 30.4 27.6 24.1 25.6 6.1 -% (ex. Restructuring) 22.2% 14.6% 11.1% 11.3% 9-10% 10.3%Impairment Exp. -$M 40.8 Operating Profit (Loss)-$M(69.2) (20.4) (17.3) (13.2) (4-5) (3-4) (4.0) Adj. EBITDA-$M (9.2) (2.1) 5.5 10.3 11-12 0-1 2.8 EPS, Continuing - $ (6.56) (1.79) (1.27) (0.72) (.27-.34) (.20-.27) (0.26)
© 2014 Broadwind Energy, Inc. All rights reserved. 15
Summary
• Q3 Towers challenges were associated with one facility and will be corrected• 2014 financial results should show good improvement over 2013• Solid order backlog to support strong 2015 revenue• Wind market fundamentals are strong• Oil & Gas markets strong … monitoring oil prices closely• Strong liquidity position … supporting repurchase of stock• Gearing continues to grow the backlog and is executing better on production• Services demand for blade repair and other tech services is robust• Reached potential settlement with the SEC; last of legacy issues should be
behind us
10/30/2014
16
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© 2014 Broadwind Energy, Inc. All rights reserved.