September 2018s21.q4cdn.com/635504763/files/doc_presentations/2018/09/... · 2018-09-14 · TPI’s...
Transcript of September 2018s21.q4cdn.com/635504763/files/doc_presentations/2018/09/... · 2018-09-14 · TPI’s...
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Company PresentationSeptember 2018
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Legal Disclaimer
September 2018 2Company Presentation
This presentation contains forward-looking statements within the meaning of the federal
securities laws. All statements other than statements of historical facts contained in this
presentation, including statements regarding our future results of operations and
financial position, business strategy and plans and objectives of management for future
operations, are forward-looking statements. In many cases, you can identify forward-
looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,”
“could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential” or “continue” or the negative of these terms or other similar words. Forward-
looking statements contained in this presentation include, but are not limited to,
statements about (i) growth of the wind energy market and our addressable market; (ii)
the potential impact of the increasing prevalence of auction-based tenders in the wind
energy market and increased competition from solar energy on our gross margins and
overall financial performance; (iii) our ability to successfully expand our transportation
business and execute upon our strategy of entering new markets outside of wind
energy; (iv) our future financial performance, including our net sales, cost of goods sold,
gross profit or gross margin, operating expenses, ability to generate positive cash flow,
and ability to achieve or maintain profitability; (v) changes in domestic or international
government or regulatory policy, including without limitation, changes in trade policy; (vi)
the sufficiency of our cash and cash equivalents to meet our liquidity needs; (vii) our
ability to attract and retain customers for our products, and to optimize product pricing;
(viii) our ability to effectively manage our growth strategy and future expenses, including
startup and transition costs; (ix) competition from other wind blade turbine
manufacturers; (x) the discovery of defects in our products; (xi) our ability to
successfully expand in our existing wind energy markets and into new international wind
energy markets; (xii) worldwide economic conditions and their impact on customer
demand; (xiii) our ability to maintain, protect and enhance our intellectual property; (xiv)
our ability to comply with existing, modified or new laws and regulations applying to our
business, including the imposition of new taxes, duties or similar assessments on our
products; (xv) the attraction and retention of qualified employees and key personnel;
and (xvi) the potential impact of GE’s acquisition of LM Wind Power upon our business.
These forward-looking statements are only predictions. These statements relate to
future events or our future financial performance and involve known and unknown risks,
uncertainties and other important factors that may cause our actual results, levels of
activity, performance or achievements to materially differ from any future results, levels
of activity, performance or achievements expressed or implied by these forward-looking
statements. Because forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified, you should not rely on
these forward-looking statements as guarantees of future events. Further information on
the factors, risks and uncertainties that could affect our financial results and the forward-
looking statements in this presentation are included in our filings with the Securities and
Exchange Commission and will be included in subsequent periodic and current reports
we make with the Securities and Exchange Commission from time to time, including in
our Annual Report on Form 10-K for the year ended December 31, 2017.
The forward-looking statements in this presentation represent our views as of the date
of this presentation. We anticipate that subsequent events and developments will cause
our views to change. However, while we may elect to update these forward-looking
statements at some point in the future, we undertake no obligation to update any
forward-looking statement to reflect events or developments after the date on which the
statement is made or to reflect the occurrence of unanticipated events except to the
extent required by applicable law. You should, therefore, not rely on these forward-
looking statements as representing our views as of any date after the date of this
presentation. Our forward-looking statements do not reflect the potential impact of any
future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
This presentation includes unaudited non-GAAP financial measures including total
billings, EBITDA, adjusted EBITDA, net cash (debt) and free cash flow. We define total
billings as the total amounts we have invoiced our customers for products and services
for which we are entitled to payment under the terms of our long-term supply
agreements or other contractual agreements. We define EBITDA as net income (loss)
attributable to the Company plus interest expense (including losses on the
extinguishment of debt and net of interest income), income taxes and depreciation and
amortization. We define Adjusted EBITDA as EBITDA plus any share-based
compensation expense, plus or minus any gains or losses from foreign currency
remeasurement. We define net cash (debt) as the total principal amount of debt
outstanding less unrestricted cash and cash equivalents. We define free cash flow as
net cash flow generated from operating activities less capital expenditures. We present
non-GAAP measures when we believe that the additional information is useful and
meaningful to investors. Non-GAAP financial measures do not have any standardized
meaning and are therefore unlikely to be comparable to similar measures presented by
other companies. The presentation of non-GAAP financial measures is not intended to
be a substitute for, and should not be considered in isolation from, the financial
measures reported in accordance with GAAP. See the appendix for the reconciliations
of certain non-GAAP financial measures to the comparable GAAP measures.
This presentation also contains estimates and other information concerning our industry
that are based on industry publications, surveys and forecasts. This information involves
a number of assumptions and limitations, and we have not independently verified the
accuracy or completeness of the information.
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Introduction to TPI Composites
Only independent manufacturer of composite wind blades
for the high-growth wind energy market with a global
footprint
Provides wind blades to some of the industry’s leading
OEMs such as: Vestas, GE, Siemens/Gamesa, Nordex,
Senvion and ENERCON
Operates nine wind blade manufacturing plants, with two
more under construction, and three tooling and R&D
facilities across four countries:
• United States • Mexico
• China • Turkey
Applying advanced composites technology to production of
clean transportation solutions, including electric buses
Long-term supply agreements with customers, providing
contracted volumes that generate significant revenue
visibility and drive capital efficiency
Founded in 1968 and headquartered in Scottsdale, Arizona
Approximately 9,000 employees globally
September 2018 3Company Presentation
Business Overview Strong Historical Financial Results
Revenue
CAGR
44%
2013-2017
Adjusted
EBITDA
CAGR
86%
2013-2017
Adjusted
EBITDA
Margin Growth
10.5%
2013 - 2017
3.9%
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Investment Thesis
September 2018 4Company Presentation
Capitalizing on Wind Market Growth, Blade Outsourcing and Improving Economics
Only Independent Blade Manufacturer with a Global Footprint
Advanced Composite Technology and Production Expertise Provide Barrier to Entry
Collaborative Dedicated Supplier Model to Share Gain and Drive Down LCOE
Long-Term Supply Agreements Provide Significant Revenue Visibility
Compelling Return on Invested Capital
Seasoned Management Team with Significant Global Growth Experience
• Renewables and wind energy are mainstream, large, growing, competitive and desired by customers.
• Emerging markets around the world are growing faster than mature markets.
• Blades are being outsourced to access emerging growth markets, drive cost and efficiently utilize capital.
• Same competitive dynamics in place today that put us in business.
• We’ve made good choices – customers, locations and markets.
• Our factories are low cost, world class hubs that serve large, diverse and growing addressable markets, reducing the effect of individual market fluctuations.
• TPI holds important IP that is difficult to replicate (materials, process, tooling, inspection and DFM)
• >300 engineers and growing, opening new Denmark office to attract even more talent
• 60-70 meter blades, larger than 787 wing span, with tolerances measured in millimeters
• Our business model helps TPI customers to gain market share in a cost effective and capital efficient manner by sharing the investment, spreading overhead, driving down material cost, improving productivity and sharing a large portion of that benefit with our customers.
• Current agreements provide up to $6.4B in potential revenue through 2023
• Volume based pricing and shared investment motivate both parties to keep plants full
• Shared gain/pain protects our margins
• Shared capital investment results in a “capital-light” model for TPI and our customers
• New investments target an initial average five-year ROIC hurdle rate of 25%
• Consolidated ROIC continuing to trend up from ~18% in 2014 to 31% in 2017
• TPI has become a destination for top talent. Pleased with the exceptional leaders and managers that have joined the TPI team
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TPI’s customers account for 99.8% of the U.S. onshore wind market and 54% of the global onshore
market
Current Customer Mix – 50(3) Dedicated Lines
September 2018 5Company Presentation
= TPI Customer
Global Onshore Wind Global Onshore Wind exc.
China
Rank OEM
2015–2017
Share(1) Rank OEM
2015–2017
Share(1)
1 Vestas 15% Vestas 25%
2 SGRE(2) 13% SGRE(2) 21%
3 Goldwind 12% GE Wind 19%
4 GE Wind 11% Enercon 10%
5 Enercon 6% Nordex Group 10%
6 Nordex Group 6% Senvion 5%
7 United Power 5% Suzlon 3%
8 Envision 5% INOX 2%
9 Mingyang 4% Goldwind <1%
Senvion 3% ReGen Powertech <1%
TPI Customer
Market Share ~54%
TPI Customer
Market Share~90%
1
2
4
5
7
3
6
8
9
= Chinese Players
1
2
5
6
3
4
9
7
8
10
Source: MAKE
(1) Figures are rounded to nearest whole percent
(2) Figures for Siemens/Gamesa are pro forma for the Apri l 2017 merger of Gamesa Corporatión Tecnológica and Siemens W ind P ower
(3) Reflects the number of dedicated l ines once the transi tions for GE in Iowa and Mexico are completed.
40%
10%14%
28%
4%4%
Key Customers with Significant Market Share
10
Strong Customer Base of Industry Leaders
| | September 2018 6Company Presentation
Existing Contracts Provide for ~$6.4 Billion in Revenue
through 2023(1)
Minimum Volume
Visibility Mitigates
Downside Risk
Minimum Volume Obligations (MVOs) in place
requiring the customer to take an agreed upon
percentage of total production capacity or pay TPI
its equivalent gross margin and operating costs
associated with the MVO
Incentivized
Maximum
Customer Volume
Pricing mechanisms encourage customers to
purchase 100% of the contract volume, as prices
progressively increase as volumes decrease
Customers fund the molds for each production line
incentivizing them to maximize TPI’s production
capability to amortize their fixed cost
Attractive
Contract
Negotiation
Dynamic
TPI typically renegotiates and extends contracts
more than a year in advance of expiration in
conjunction with blade model transitions
Provisions allowing for reductions in lines generally
provide for adequate time to replace a customer if
a line reduction option is exercised
Demand in locations where TPI already has a
foothold (China, Turkey, Mexico) provides a
substantial opportunity for synergies in the
construction of new facilities
TPI continues to expand its manufacturing facilities
globally to meet increased demand
2017 2018 2019 2020 2021 2022 2023
Iowa
Turkey
Mexico
China
Note: Our contracts with some of our customers are subject to termination or reduction on short notice, generally with substantial penalties, and contain liquidated damages provisions, which may require us to make
unanticipated payments to our customers or our customers to make payments to us.
(1) As of August 7, 2018. The chart depicts the term of the longest contract in each location.
Long-term supply agreements provide for estimated
minimum aggregate volume commitments from our customers
of ~$4.5 billion and encourage our customers to purchase
additional volume up to, in the aggregate, an estimated total
contract value ~$6.4 billion through the end of 2023(1)
Key Contract Terms Long-term Supply Agreements (1)
Long-term contracts with minimum volume obligations provide strong revenue visibility
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Prioritized Pipeline
September 2018 7Company Presentation
Annual Revenue Potential – Wind Only > $2.0 Billion Pipeline Opportunities
Prioritized Pipeline represents those opportunities
we have prioritized to close by the end of 2019
Prioritized Pipeline – 13 lines
• 60-70m+ blades, >$45M/yr/line
• New and Existing Customers
• New and Existing Geographies
• Onshore and Offshore
Long-term
Revenue
Potential
Size of Total
Addressable
Market
OEM(s)
Share
(1) Annual revenue potential based on 50 lines under contract at the end of 2018 (assumes no more lines contracted during the balance of 2018t) at an revenue per year per line at
full production of $36 million.
(2) Annual revenue potential based on $45 million per line per year and that all lines are in full production.
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
$ B
illio
ns
LinesUnderContract
48
Prioritized Pipeline
13
Lines Under Contract50
(2)
(1)
$1.80
$0.60
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TPI Financial Targets
September 2018 8Company Presentation
20%-25%Revenue Growth2016 A – 2019 E
12+%Adj. EBITDA Margin
35+%ROIC(1)
.
(1) ROIC target is based on an estimate of tax effected income from operations plus implied interest on operating leases divided by beginning
of the period capital which includes total stockholders’ equity less cash and cash equivalents plus total outstanding debt and the net present
value of operating leases.
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Global Cumulative Installed Wind Capacity – 2000-2017 (GW)(1)
Rapid growth driven by:
Increasing cost
competitiveness through
technological advancement
Supportive global policy
initiatives
Global population growth
and electricity demand
Increasing C&I and utility
demand
Coal/nuclear
decommissioning
Repowering
EV trends
From 2008 to 2017, the cumulative global power generating capacity of wind turbine installations has gone up more than 4.5 times, with compound annual growth in cumulative global installed wind capacity of 24% since 2000
Wind Power Generation Has Grown Rapidly and
Expanded Globally in Recent Years
Source: Bloomberg New Energy Finance
(1) Regional onshore and worldwide offshore figures presented for 2017 only
EMEA onshore
Americas onshore
Asia and rest of the world
onshore
Offshore
166
122
232
18
15 22 29 36 44 5469
89116
155
191
232
279
312
361
423
477
538
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Wind energy is a large and rapidly growing worldwide business
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Global Market Growth
September 2018Company Presentation 10
232
Wind energy is a large and rapidly growing worldwide business
49.5
60.6 62.9
60.7 57.4
54.9 57.6 58.2 58.7 60.1
4.2
5.0
6.3 6.8
10.0
9.7
11.3 13.7 12.8
13.8
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Source: MAKE Q2 2018 Global Wind Power Market Outlook Update
Annual Installed Global Wind Capacity (GW): 2018E – 2027E
Onshore Offshore
CAGR
20%(2017 – 2027)
CAGR
8%(2017 – 2027)
Annual installed wind capacity growth is projected to average 67GW between 2018 and 2027 and is propelled by offshore – 20% CAGR – and
Emerging Markets - 26.7% CAGR. TPI is well positioned to participate in this growth
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U.S. Onshore Market Growth
September 2018Company Presentation 11
166
122
232
18
Wind energy is a large and rapidly growing worldwide business
8.4
11.0
12.9
6.7
3.2 2.9 3.2 3.5
11.0
12.5 12.8
8.0 7.7 8.08.5
9.0
2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5
UBS
Source: MAKE Q2 2018 Global Wind Power Market Outlook Update and UBS Securities LLC
• Economics of Onshore Wind
• Corporate and Industrial Buyers
• Utilities
• Decarbonization
• Economics of Offshore Wind
• Repowering
• Vehicle Electrification
• State RPS/Country Renewable
Goals
Key Demand DriversMAKE
The U.S. wind market is expected to experience consistent near-term growth
U.S. Annual Installed Wind Capacity (GW): 2018E – 2025E
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Declining LCOEAllows Wind Energy to be More Competitive with Conventional Power
Generation
September 2018Company Presentation
Source: Lazard Level ized Cost of Energy Analysis (version 11.0).
(1) Costs are on an unsubsidized basis. Ranges reflect di fferences in resources, geography, fuel costs and cost of capital , among other factors.
(2) U.S. Department of Energy National Renewable Energy Laboratory (NREL)
$169
$148
$92 $95 $95
$81$77
$62 $60
$101 $99
$50 $48 $45$37 $32 $32 $30
$0
$63
$125
$188
$250
2009 2010 2011 2012 2013 2014 2015 2016 2017
Onshore wind
LCOE Mean
Onshore wind
LCOE Range
Global Onshore Wind LCOE Over Time(1)
— ($/MWh)
67%Eight year percentage
decrease
$0
$50
$100
$150
$200
$250
Onshorewind
Solar PVutility
CCGTgas
Bioenergy Geo-thermal
Coal Solarthermal
w/storage
Fossil Fuels
Onshore Wind
Other Renewables
Global LCOE for onshore wind generation has become increasingly competitive and is now on par with new combined cycle
gas turbines with an additional 50% decline expected by 2030(2)
Unsubsidized Global Levelized Cost of Power
Generation Ranges by Technology(1)
— ($/MWh)
Global LCOE for onshore wind generation has become increasingly competitive and is now on par with new
combined cycle gas turbines, unsubsidized, with an additional 50% decline expected by 2030(2)
12
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U.S.
Policy
Initiatives
Global Policy Support Coupled with Corporate Initiatives and
Repowering Expected to Drive Additional Growth
U.S. policy expected to support continued
domestic wind capacity installation
• Extension of the Wind Production Tax
Credit (PTC) through 2019 for both new
turbines and repowering of existing turbines
along with IRS clarifications that expand
PTC eligibility allowing developers 100%
PTC benefit as late as 2021
• Renewable Portfolio Standards
• Increased state programs/targets for
offshore wind
1
Increasing focus in board rooms regarding
the economic and social benefits of adopting
low-cost wind energy
• As of 2014 nearly 50% of Fortune 500
companies have set sustainability goals
• Furthermore, 140 leading multinationals such
as GM, Nike, Walmart, IKEA, BMW, Coca
Cola and Proctor & Gamble have taken the
RE100 pledge, organized by the Climate
Group, to transition to 100% renewable
energy
Corporate
and Utility
Procurement
2
International
Policy
Initiatives
Recent global initiatives aimed at
promoting the growth of renewable energy
including wind
• European Union finalized new climate rules
targeting an uplift in the share of renewable
energy to 32% by 2030
• China is targeting 210 GW of grid-
connected wind capacity by 20203
COP21
Paris
Climate
Talks
Paris Agreement is a landmark deal marking
a significant commitment by the
international community to further reduce
fossil fuel consumption
• Effective in 2020, took effect on November 4,
2016, thirty days after the date on which at
least 55 parties accounting in total for at least
an estimated 55% of the total greenhouse gas
ratified the agreement
• 170 countries have ratified the agreement
4
Source: Bloomberg New Energy Finance, China National Development and Reform Commission, RE100
Longer term policy visibility and an increase in corporate and utility procurement is expected to drive additional
growth over the next decade
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The Industry is Shifting to a Predominantly Outsourced Wind Blade
Manufacturing Model
(1) Source: MAKE – based on % of MW
(2) TPI’s market share based on TPI MW relative to MAKE OEM total onshore MW for 2013, 2016 and 2017
38%51%
62%49%
0%
20%
40%
60%
80%
100%
2009 2017
Outsourced Insourced
Vertically integrated OEMs have begun to outsource wind blade
manufacturing due to:
• global talent constraints
• the need for efficient capital allocation
• the need to accelerate access to emerging markets
• the need for supply chain optimization
Some have sold or shuttered in-house tower and blade manufacturing
facilities in favor of an outsourced manufacturer
Geographically distributed, high precision blade manufacturing is more cost
effective when performed by diversified, specialized manufacturers
TPI is the only independent manufacturer of composite wind blades with a
global footprint and is well positioned to capitalize on global industry trends
Expected to continue to outsource a significant
percentage of blade needs notwithstanding
acquisition of LM Wind Power
TPI selected as manufacturer of Vestas-
designed blades in China, Mexico and Turkey
Currently outsources to TPI in Mexico and
Turkey
3%
9%
13%
2013 2016 2017
TPI Share Increase:
~4X
Future market share increases
expected to be driven by:
Continuation of
outsourcing
LM Wind Power customer
attrition
Advantages from global
footprint
Several of the wind industry’s largest participants have chosen TPI as their leading outsourced blade manufacturer
Outsourcing Trends Global Wind Blade Manufacturing: Outsourced vs. Insourced (1)
TPI Global Wind Blade Market Share 2013 – 2017 (2)
| | September 2018 15Company Presentation
Strong Barriers to Entry Will Allow TPI to Capture
Additional Market ShareWind blades are a critical component of our customers’ strategy and, along with supply chain optimization, plays an integral role bringing
down LCOE
We believe that our extensive experience and track-record in delivering high quality wind blades combined with our established global scale
and strong customer relationships creates a significant barrier to entry and is the foundation of our leadership position
Strong track record of delivering
high quality wind blades to
diverse, global markets, and of
developing replicable and
scalable manufacturing facilities
and processes
Extensive Expertise Reputation for Reliability
Established Global Scale Customer Stickiness
Over 42,000 wind blades
produced since 2001, with an
excellent field performance
record in a market where
reliability is critical to our
customers’ success
We expand our manufacturing
footprint in coordination with our
customers’ needs, scaling our
capacity to meet demand in
markets across the globe
Dedicated capacity and
collaborative approach of
manufacturing wind blades to
meet customer specifications
promotes significant customer
loyalty and creates higher
switching costs
TPI’s ability to capitalize on recent growth trends in the wind energy market and outsourcing trends has allowed it to grow its
revenue by over 300% from 2013 to 2017 while expanding its global manufacturing footprint over the same period
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Multiple development programs in:
• Passenger automotive
• EVs
• Commercial vehicles
Growing with Proterra
Diversification Strategy
September 2018Company Presentation 16
CLEAN TRANSPORTATION: In EVs, lighter weight equates to longer range or
fewer batteries which drives cost
By 2040, 55% of all new car sales and 33% of global fleet will be electric(1)
(1) BloombergNEF – New Energy Outlook 2018
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Asia ~ 2,100
US ~ 1,400
Mexico ~ 3,400
EMEA~ 2,100
High Quality Management Team, Board and Workforce
September 2018Company Presentation
Steve Lockard
President & Chief
Executive Officer
Joined TPI in 1999. Prior to TPI, served as the Vice President of Satloc and was a founding officer of ADFlex solutions, a NASDAQ listed company
Chairman of the Board for the American Wind Energy Association (AWEA)
Joe Kishkill
Chief Commercial
Officer
Joined TPI in 2017. Prior to TPI was President, International and Chief Commercial Officer of First Solar, Inc., President, Eastern Hemisphere and Latin America for Exterran Holdings
Mark McFeely
Chief Operating
Officer
Joined TPI in 2015. Prior to TPI, was SVP and COO of Remy International, VP – Operations of Meggitt Safety Systems, Inc. and held various leadership positions with Danaher Corporation and Honeywell International, Inc.
Bill Siwek
Chief Financial
Officer
Joined TPI in 2013. Prior to TPI, was CFO for T.W. Lewis Company, EVP of Talisker Inc., President & CFO of Lyle Anderson Company and was a Partner at Arthur Andersen in both Audit and Business Consulting
Steve Fishbach
General Counsel
Joined TPI in 2015. Prior to TPI, was SVP, Deputy General Counsel of Global Cash Access Holdings, Inc. (NYSE: GCA) and various senior roles in the legal department of Fidelity National Information Services, Inc./eFunds Corporation (NYSE: FIS)
T.J. Castle
SVP – N.A. Wind
and Global OpEx
Joined TPI in 2015. Prior to TPI, held a number of positions with Honeywell including most recently VP of Integrated Supply Chain and prior to that was Global VP of the Honeywell Operating System for Aerospace
Ramesh
Gopalakrishnan
SVP – Technology
& Industrialization
Joined TPI in 2016. Prior to TPI, was EVP of Global Manufacturing for Senvion Wind Energy. Prior to that he was COO of Suzlon Energy Composites, Inc. and has also spent time at Haliburton Corp. and GE
Deane Ilukowicz
SVP – Global
Human Resources
Joined TPI in 2016. Prior to TPI, was VP of Organizational Effectiveness at TransUnion, Chief Human Resources Officer for Hypertherm, and held senior level roles at other financial services and manufacturing companies
Joe Kerkhove
SVP – Strategic
Markets
Joined TPI in 2017. Prior to TPI, was Commercial Vice-President with Arconic (ALCOA) and has over 20 years of sales and marketing experience to TPI, including leadership positions in Aerospace, Defense and Automotive markets
Name Affiliation
Steve Lockard• President, Chief Executive Officer and Director
• Chairman of the Board - AWEA
Stephen Bransfield• Director
• Previously VP, General Electric
Michael L. DeRosa• Director
• MD, Element Partners
Jayshree Desai• Director
• President, ConnectGen, LLC
Philip J. Deutch• Director
• MP, NGP Energy Technology Partners
Paul G.
Giovacchini
• Director and Chairman of the Board
• Independent consulting advisor to Landmark Partners
Jack A. Henry• Director
• MD, Sierra Blanca Ventures
James A. Hughes• Director
• Former CEO and board member of First Solar, Inc.
Daniel G. Weiss• Director
• MP, Angeleno Group
~9,000
employees
worldwide
Management Team Board of Directors
Employees at a Glance
17
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FINANCIAL SUMMARY
| |
Financial Results
September 2018Company Presentation 19
$14
$39
$66
$100
($0)
$20
$40
$60
$80
$100
$120
2014 2015 2016 2017
$321
$586
$755
$955
$363
$600
$764
$942
$0
$200
$400
$600
$800
$1,000
$1,200
2014 2015 2016 2017
Sales Billings
1. Total bi l l ings refers to the total amounts we have invoiced our customers for products and services for which we are enti t led to payment under the terms of our long-term
supply agreements or other contractual agreements
2. See appendix for reconci l iations of non-GAAP financial data
3. 2017 as restated per the Company’s retroactive adoption of ASC 606 and is unaudited.
GAAP Net Sales and Total Billings ($ in millions) (1) (2) (3) Adjusted EBITDA ($ in millions) (2) (3)
44%’13–’17 CAGR
86%’13–’17 CAGR
4.2% 6.7% 8.8% 10.5%Margin
| |
Q2 2018 Highlights
September 2018Company Presentation 20
Q2 2018 Highlights and Recent Company News
• Operating results and year-over-year increases compared to
2017
• Net sales were $230.6 million for the quarter down 3.7%
primarily due to startup and transition activity
• Net loss for the quarter of $4.1 million compared to net
income of $9.6 million in 2017 driven by startup and
transition activity and the write-off of debt issuance costs
• Adjusted EBITDA for the quarter was $13.5 million or
5.8% of sales
• Vestas exercised options for 4 additional lines in our
manufacturing hub in Matamoros, Mexico bringing the total
number of lines in that facility to 6
• ENERCON signed a multiyear supply agreement for 2
manufacturing lines in our Turkey location. Adding
ENERCON means TPI customers now represent all of the
top 6 turbine manufacturers on an ex-China basis
• GE has agreed to extend our supply agreement in one of
our Mexico plants by two years to 2022 and will increase the
number of lines in that facility to 5 from the current 3
• GE has agreed to transition to a larger blade model in our
Iowa plant in early 2019 and eliminate its option to terminate
the Iowa supply agreement prior to its December 2020
expiration
• Set a new record high potential contract value of $6.4 billion
across 50 dedicated manufacturing lines
Net Sales and Adjusted EBITDA ($ in millions)
$240$231
$26$13
$0
$200
$400
Q2 '17 Q2 '18 Q2 '17 Q2 '18
Sets
invoiced692 576
Est. MW 1,620 1,544
Dedicated
lines(1) 46 52
Lines
installed(2) 39 40
(1) Number of wind blade manufacturing lines dedicated to our customers under long-term supply agreements
at the end of the quarter.
(2) Number of wind blade manufacturing lines installed that are either in operation, startup or transition at the
end of the quarter
Net Sales Adjusted EBITDA
| |
Q2 2018 Financial Highlights(1)
(unaudited)
September 2018Company Presentation 21
(1) See pages 45 – 47 for reconciliations of non-GAAP financial data
($ in millions, except per share data and KPIs) Q2 ’18 Q2 ’17 ∆ YTD ’18 YTD ’17 ∆
Select Financial Data
Net Sales $ 230.6 $ 239.6 -3.7% $ 484.6 $ 448.2 8.1%
Total Billings $ 237.4 $ 231.1 2.7% $ 461.1 $ 442.4 4.2%
Net Income (Loss) $ (4.1) $ 9.6 -142.3% $ 4.6 $ 14.8 -68.9%
Diluted Earnings (Loss) Per Share $ (0.12) $ 0.28 $ (0.40) $ 0.13 $ 0.44 $ (0.31)
Adjusted EBITDA (1) $ 13.5 $ 26.2 -48.6% $ 40.9 $ 43.8 -6.8%
Adjusted EBITDA Margin 5.8% 11.0% -520 bps 8.4% 9.8% -140 bps
Net Cash (Debt) (1) $ (17.4) $ 0.5 $ (17.8) $ (17.4) $ 0.5 $ (17.8)
Free Cash Flow (1) $ (25.0) $ 6.1 $ (31.2) $ (39.8) $ (0.9) $ (38.9)
Capital Expenditures $ 30.6 $ 9.8 $ 20.8 $ 42.3 $ 26.7 $ 15.6
Key Performance Indicators (KPIs)
Sets Invoiced 576 692 (116) 1,145 1,328 (183)
Estimated Megawatts 1,544 1,620 (76) 3,008 3,080 (72)
Dedicated Wind Blade Manufacturing Lines 52 46 6 lines 52 46 6 lines
Wind Blade Manufacturing Lines Installed 40 39 1 line 40 39 1 line
Wind Blade Manufacturing Lines in Startup 7 9 2 lines 7 9 2 lines
Wind Blade Manufacturing Lines in Transition 7 — 7 lines 7 — 7 lines
| |
Income Statement Summary(1)
(unaudited)
September 2018Company Presentation 22
(1) See pages 45 – 47 for reconciliations of Non-GAAP financial data
| |
Key Balance Sheet and Cash Flow Data(1)
(unaudited)
September 2018Company Presentation 23
(1) See pages 46 - 47 for the reconciliations of net cash and free cash flow
| |
GUIDANCE FOR 2018
| | September 2018Company Presentation
Note: All reference to lines is to wind blade manufacturing lines.
(1) We have not reconciled our total expected billings for 2018 to expected net sales under GAAP because we have not yet finalized calculations necessary to provide the
reconciliation and as such the reconciliation is not possible without unreasonable efforts.
Key Guidance Metrics
25
2018 Guidance
Updated
2018 Guidance
Previous
Total Billings (1) $1.0B – $1.05B $1.0B – $1.05B
Net Sales $1.0B – $1.05B $1.0B – $1.05B
Adjusted EBITDA $65M – $70M $75M – $80M
Earnings per Share - FD $0.10 – $0.14 $0.38 – $0.42
Sets 2,450 – 2,480 2,500 – 2,525
Average Selling Price per Blade $125K – $130K $125K -– $130K
Non-Blade Billings $80M – $85M $75M – $80M
G&A Costs as a % of Billings (incl. SBC) 4% – 5% 4% – 5%
Estimated MW 6,800 – 6,900 6,950 – 7,100
Dedicated Lines - EOY 51 – 55 51 – 55
Share-Based Compensation $9M – $10M $10M -– $11M
Depreciation & Amortization $30M – $32M $30M – $35M
Net Interest Expense $14M – $14.5M $11.5M – $12.5M
Capital Expenditures $85M – $90M $85M – $90M
Effective Tax Rate 47% – 49% 40% – 42%
| | September 2018Company Presentation
Note: References to “lines” relate to wind blade manufacturing lines
Sets and Startup & Transition Costs Guidance Metrics
26
| |
Total Billings(1) (2)
Strong Financial Performance and Outlook
September 2018Company Presentation
22%Three-year
CAGR
$363
$600
$764
$942
$1,025
$1,400
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2014A 2015A 2016A 2017A 2018E 2019E
Adjusted EBITDA(1) (2) (3)
$14
$39
$66
$100
$68
$145
$0
$20
$40
$60
$80
$100
$120
$140
$160
2014A 2015A 2016A 2017A 2018E 2019E
Note: Dollars in millions
(1) Estimates for 2018 – 2019 are shown at the midpoint of ranges provided. See appendix for reconciliation of non-GAAP financial data.
(2) We have not reconciled our total expected billings for 2018 - 2019 to expected net sales under GAAP or 2019 expected Adjusted EBITDA to expected Net Income because we have not yet
finalized calculations necessary to provide the reconciliation and as such the reconciliations are not possible without unreasonable efforts.
(3) 2017 as restated per the Company’s retroactive adoption of ASC 606 and is unaudited.
30%Three-year
CAGR
Margin % 4.2% 6.7% 8.8% 10.5% 6.6% 10.4%
27
| |
APPENDIX
| |
Balance Sheets
September 2018Company Presentation
Source: Year end 2015 and 2016 audited financial statements. 2017, as restated per the Company’s retroactive adoption of ASC 606, and the 2018 interim period are unaudited.
29
June 30,
($ in thousands) 2015 2016 2017 2018
Assets
Current assets:
Cash and cash equivalents 45,917$ 119,066$ 148,113$ 113,995$
Restricted cash 1,760 2,259 3,849 4,431
Accounts receivable 72,913 67,842 121,576 119,479
Inventories 50,841 53,095 4,112 5,593
Inventories held for customer orders 49,594 52,308 — -
Contract assets — — 105,619 131,371
Prepaid expenses and other current assets 31,337 30,657 27,507 26,622
Total current assets 252,362 325,227 410,776 401,491
Noncurrent assets:
Property, plant, and equipment, net 67,732 91,166 123,480 145,348
Goodwill and other intangibles, net 3,226 3,072 3,915 5,085
Other noncurrent assets 6,600 17,741 18,391 19,960
Total assets 329,920$ 437,206$ 556,562$ 571,884$
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses 101,108$ 112,281$ 167,175$ 167,314$
Accrued warranty 13,596 19,912 30,419 33,979
Current maturities of long-term debt 52,065 33,403 35,506 39,528
Deferred revenue 65,520 69,568 — —
Contract liabilities — — 2,763 1,820
Customer deposits and customer advances 8,905 1,390 - —
Total current liabilities 241,194 236,554 235,863 242,641
Noncurrent liabilities:
Long-term debt 77,281 89,752 85,879 90,332
Other noncurrent liabilities 3,812 4,393 4,938 4,818
Total liabilities 322,287 330,699 326,680 337,791
Convertible and senior redeemable preferred shares and warrants 198,830 — — —
Total stockholders’ equity (deficit) (191,197) 106,507 229,882 234,093
Total liabilities and stockholders’ equity 329,920$ 437,206$ 556,562$ 571,884$
Non-GAAP Metric:
Net cash (debt) (90,667)$ (6,379)$ 24,557$ (17,380)$
December 31,
| |
Income Statements
September 2018Company Presentation
Source: Year end 2015 and 2016 audited financial statements. 2017 periods, as restated per the Company’s retroactive adoption of ASC 606, and the 2018 interim periods are unaudited.
30
($ in thousands) 2015 2016 2017 2017 2018 2017 2018
Net sales 585,852$ 754,877$ 955,199$ 239,582$ 230,610$ 448,197$ 484,591$
Cost of sales 528,247 659,745 804,099 199,117 198,235 381,655 409,223
Startup and transition costs 15,860 18,127 40,628 10,540 17,324 16,699 32,059
Total cost of goods sold 544,107 677,872 844,727 209,657 215,559 398,354 441,282
Gross profit 41,745 77,005 110,472 29,925 15,051 49,843 43,309
General and administrative expenses 14,126 33,892 40,373 10,752 10,989 19,058 22,152
Income from operations 27,619 43,113 70,099 19,173 4,062 30,785 21,157
Other income (expense)
Interest income 161 344 95 11 43 30 84
Interest expense (14,565) (17,614) (12,381) (2,935) (2,715) (5,961) (6,053)
Loss on extinguishment of debt - (4,487) - - (3,397) - (3,397)
Realized loss on foreign currency remeasurement (1,802) (757) (4,471) (1,233) (765) (2,614) (4,776)
Miscellaneous income 246 238 1,191 258 674 578 1,492
Total other expense (15,960) (22,276) (15,566) (3,899) (6,160) (7,967) (12,650)
Income (loss) before income taxes 11,659 20,837 54,533 15,274 (2,098) 22,818 8,507
Income tax provision (3,977) (6,995) (15,019) (5,697) (1,955) (8,028) (3,912)
Net income (loss) 7,682 13,842 39,514 9,577 (4,053) 14,790 4,595
Net income attributable to preferred shareholders 9,423 5,471 - - - - -
Net income (loss) attributable to common shareholders (1,741)$ 8,371$ 39,514$ 9,577$ (4,053)$ 14,790$ 4,595$
Non-GAAP Metrics:
Total billings 600,107$ 764,424$ 941,565$ 231,069$ 237,355$ 442,429$ 461,056$
Adjusted EBITDA 39,281$ 66,150$ 100,111$ 26,240$ 13,477$ 43,830$ 40,850$
Year Ended December 31,
Three Months Ended
June 30,
Six Months Ended
June 30,
| |
Cash Flow Statements
September 2018Company Presentation
Source: Year end 2015 and 2016 audited financial statements. 2017 periods, as restated per the Company’s retroactive adoption of ASC 606, and the 2018 interim periods are
unaudited
31
($ in thousands) 2015 2016 2017 2017 2018
Cash flows from operating activities
Net income 7,682$ 13,842$ 39,514$ 14,790$ 4,595$
Depreciation and amortization 11,416 12,897 21,697 8,716 13,202
Share-based compensation expense - 9,902 7,124 3,751 4,999
Amortization of debt issuance costs and debt discount 4,319 4,681 573 286 260
Loss on extinguishment of debt - 4,487 - - 3,397
Loss on disposal of property and equipment 187 2 334 - -
Deferred income taxes (765) (2,782) (1,068) - -
Changes in assets and liabilities 8,454 10,812 6,426 (1,673) (23,918)
Net cash provided by operating activities 31,293 53,841 74,600 25,870 2,535
Cash flows from investing activities
Purchase of property and equipment (26,361) (30,507) (44,828) (26,727) (42,310)
Proceeds from sale of assets 146 - 850 - -
Net cash used in investing activities (26,215) (30,507) (43,978) (26,727) (42,310)
Cash flows from financing activities
Proceeds from issuance of common stock sold in initial public
offering, net of underwriters discount and offering costs - 67,199 - - -
Net proceeds from (repayment of) debt 1,554 (15,370) (8,095) 4,922 5,938
Debt issuance costs (1,113) - (454) - (281)
Payment on acquisition of noncontrolling interest (1,875) - - - -
Proceeds from exercise of stock options - - 1,430 - 1,307
Repurchase of common stock including shares withheld in lieu
of income taxes - - (1,264) - (272)
Restricted cash (989) (499) - - -
Net cash provided by (used in) financing activities (2,423) 51,330 (8,383) 4,922 6,692
Impact of foreign exchange rates on cash and cash equivalents (330) (1,515) 335 164 (453)
Net change in cash and cash equivalents 2,325 73,149 22,574 4,229 (33,536)
Cash and cash equivalents, beginning of year 43,592 45,917 129,863 129,863 152,437
Cash and cash equivalents, end of period 45,917$ 119,066$ 152,437$ 134,092$ 118,901$
Non-GAAP Metric:
Free cash flow 4,932$ 23,334$ 29,772$ (857)$ (39,775)$
Year Ended December 31,
Six Months Ended
June 30,
| |
Non-GAAP Reconciliations
Net sales is reconciled to total billings as follows:
September 2018Company Presentation
Source: Year end 2015 and 2016 audited financial statements. 2017 periods, as restated per the Company’s retroactive adoption of ASC 606, and the 2018 interim periods are
unaudited.
Note: Footnote references are on the fol lowing page.
Net income (loss) is reconciled to adjusted EBITDA as follows:
32
($ in thousands) 2015 2016 2017 2017 2018 2017 2018
Net income (loss) 7,682$ 13,842$ 39,514$ 9,577$ (4,053)$ 14,790$ 4,595$
Adjustments:
Depreciation and amortization 11,416 12,897 21,697 4,765 6,130 8,716 13,202
Interest expense (net of interest income) 14,404 17,270 12,286 2,924 2,672 5,931 5,969
Loss on extinguishment of debt - 4,487 - - 3,397 - 3,397
Income tax provision 3,977 6,995 15,019 5,697 1,955 8,028 3,912
Share-based compensation expense - 9,902 7,124 2,044 2,611 3,751 4,999
Realized loss on foreign currency remeasurement 1,802 757 4,471 1,233 765 2,614 4,776
Adjusted EBITDA 39,281$ 66,150$ 100,111$ 26,240$ 13,477$ 43,830$ 40,850$
Six Months Ended
June 30,Year Ended December 31,
Three Months Ended
June 30,
($ in thousands) 2015 2016 2017 2017 2018 2017 2018
Net sales 585,852$ 754,877$ 955,199$ 239,582$ 230,610$ 448,197$ 484,591$
Blade-related deferred revenue at beginning of period (1)(59,476) (65,520) - - - - -
Blade-related deferred revenue at end of period (1)65,520 69,568 - - - - -
Change in contract assets - - (6,499) (6,460) (1,356) (3,722) (25,752)
Foreign exchange impact (2)8,211 5,499 (7,135) (2,053) 8,101 (2,046) 2,217
Total billings 600,107$ 764,424$ 941,565$ 231,069$ 237,355$ 442,429$ 461,056$
Three Months Ended
June 30,
Six Months Ended
June 30,Year Ended December 31,
| |
Non-GAAP Reconciliations (Continued)
September 2018Company Presentation
1. Total billings is reconciled using the blade-related deferred revenue amounts at the beginning and the end of the year as follows:
Source: Year end 2015 and 2016 audited financial statements. 2017 periods, as restated per the Company’s retroactive adoption of ASC 606, and the 2018 interim periods are
unaudited
2. Represents the effect of the difference between the exchange rate used by our various foreign subsidiaries on the invoice dat e
versus the exchange rate used at the period-end balance sheet date.
Net cash (debt) is reconciled as follows:
33
($ in thousands) 2015 2016 2017 2017 2018
Cash and cash equivalents 45,917$ 119,066$ 148,113$ 130,834$ 113,995$
Less total debt, net of debt issuance costs & discount (129,346) (123,155) (121,385) (128,363) (129,860)
Less debt issuance costs & discount (7,238) (2,290) (2,171) (2,004) (1,515)
Net cash (debt) (90,667)$ (6,379)$ 24,557$ 467$ (17,380)$
December 31, June 30,
($ in thousands) 2015 2016
Blade-related deferred revenue at beginning of year 59,476$ 65,520$
Non-blade related deferred revenue at beginning of year - -
Total current and noncurrent deferred revenue at beginning of period 59,476$ 65,520$
Blade-related deferred revenue at end of year 65,520$ 69,568$
Non-blade related deferred revenue at end of year - -
Total current and noncurrent deferred revenue at end of year 65,520$ 69,568$
Year Ended December 31,
| |
Non-GAAP Reconciliations(Continued)
September 2018Company Presentation
(1) Source: Year end 2015 through 2016 audited financial statements. 2017 as restated per the Company’s retroactive adopti on of ASC 606 and the 2018 period are
unaudited.
(2) Figures presented are projected estimates for the ful l year ending December 31, 2018.
Free cash flow is reconciled as follows(1):
A reconciliation of the low end and high end ranges of projected net income under ASC 606
to projected adjusted EBITDA is as follows(2):
34
($ in thousands) 2015 2016 2017 2017 2018
Net cash provided by operating activities 31,293$ 53,841$ 74,600$ 25,870$ 2,535$
Purchase of property and equipment (26,361) (30,507) (44,828) (26,727) (42,310)
Free cash flow 4,932$ 23,334$ 29,772$ (857)$ (39,775)$
Year Ended December 31,
Six Months Ended
June 30,
($ in thousands) Low End High End
Projected net income 3,350$ 4,910$
Adjustments:
Projected depreciation and amortization 30,000 32,000
Projected interest expense (net of interest income) 10,850 10,850
Projected loss on extinguishment of debt 3,400 3,400
Projected income tax provision 3,100 4,540
Projected share-based compensation expense 9,500 9,500
Projected realized loss on foreign currency remeasurement 4,800 4,800
Projected Adjusted EBITDA 65,000$ 70,000$
2018 Adjusted EBITDA
Guidance Range