SEC Form 10-Q filed by TPI Composites Inc.

06

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-37839

 

 

TPI Composites, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		20-1590775
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

9200 E. Pima Center Parkway, Suite 250

Scottsdale, AZ 85258

(480) 305-8910

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	TPIC	NASDAQ Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer		☐		Accelerated filer		☒
Non-accelerated filer		☐		Smaller reporting company		☐
Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2024, there were 47,468,503 shares of common stock outstanding.

 

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TPI COMPOSITES, INC. AND SUBSIDIARIES

INDEX

 

				Page
PART I. FINANCIAL INFORMATION
ITEM 1.		Condensed Consolidated Financial Statements (Unaudited)		4
		Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023		4
		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023		5
		Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023		6
		Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended March 31, 2024 and 2023		7
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023		8
		Notes to Condensed Consolidated Financial Statements (Unaudited)		10
ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk		31
ITEM 4.		Controls and Procedures		32
PART II. OTHER INFORMATION
ITEM 1.		Legal Proceedings		33
ITEM 1A.		Risk Factors		33
ITEM 2.		Unregistered Sales of Equity Securities and Use of Proceeds		33
ITEM 3.		Defaults Upon Senior Securities		33
ITEM 4.		Mine Safety Disclosures		33
ITEM 5.		Other Information		33
ITEM 6.		Exhibits		34
SIGNATURES				35

 

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, 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,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

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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. We have described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the United States Securities and Exchange Commission (SEC) on February 22, 2024 the principal risks and uncertainties that we believe could cause actual results to differ from 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.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

 

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PART I. FINANCIAL INFORMATION

ITEM l. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

		March 31,				December 31,
		2024				2023
		(in thousands, except par value data)
Assets
Current assets:
Cash and cash equivalents		$	116,850			$	161,059
Restricted cash			12,035				10,838
Accounts receivable			125,870				138,029
Contract assets			93,149				112,237
Prepaid expenses			18,536				17,621
Other current assets			41,003				34,564
Inventories			13,679				9,420
Assets held for sale			22,253				17,787
Current assets of discontinued operations			1,036				1,520
Total current assets			444,411				503,075
Property, plant and equipment, net			126,379				128,808
Operating lease right of use assets			135,858				136,124
Other noncurrent assets			39,205				36,073
Total assets		$	745,853			$	804,080
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued expenses		$	220,300			$	227,723
Accrued warranty			37,500				37,483
Current maturities of long-term debt			78,576				70,465
Current operating lease liabilities			22,373				22,017
Contract liabilities			10,234				24,021
Liabilities held for sale			2,834				1,897
Current liabilities of discontinued operations			1,950				2,815
Total current liabilities			373,767				386,421
Long-term debt, net of current maturities			431,038				414,728
Noncurrent operating lease liabilities			116,755				117,133
Other noncurrent liabilities			8,360				8,102
Total liabilities			929,920				926,384
Commitments and contingencies (Note 12)
Stockholders’ deficit:
Common shares, $0.01 par value, 100,000 shares authorized, 48,514     shares issued and 47,469 shares outstanding at March 31, 2024    and 100,000 shares authorized, 46,990 shares issued and 46,471 shares    outstanding at December 31, 2023			485				470
Paid-in capital			433,924				431,335
Accumulated other comprehensive loss			(8,885	)			(7,627	)
Accumulated deficit			(597,816	)			(536,348	)
Treasury stock, at cost, 1,045 shares at March 31, 2024 and 519 shares at    December 31, 2023			(11,775	)			(10,134	)
Total stockholders’ deficit			(184,067	)			(122,304	)
Total liabilities and stockholders’ deficit		$	745,853			$	804,080

See accompanying notes to our unaudited condensed consolidated financial statements.

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TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three Months Ended
		March 31,
		2024				2023
	(in thousands, except per share data)
Net sales		$	299,062			$	404,066
Cost of sales			307,084				399,381
Startup and transition costs			22,229				1,980
Total cost of goods sold			329,313				401,361
Gross profit (loss)			(30,251	)			2,705
General and administrative expenses			6,699				7,034
Loss on sale of assets and asset impairments			1,830				3,593
Restructuring charges, net			182				75
Loss from continuing operations			(38,962	)			(7,997	)
Other income (expense):
Interest expense, net			(21,385	)			(2,528	)
Foreign currency loss			(640	)			(1,214	)
Miscellaneous income			2,479				453
Total other expense			(19,546	)			(3,289	)
Loss from continuing operations before income taxes			(58,508	)			(11,286	)
Income tax provision			(3,289	)			(3,860	)
Net loss from continuing operations			(61,797	)			(15,146	)
Preferred stock dividends and accretion			—				(15,173	)
Net loss from continuing operations attributable to common stockholders			(61,797	)			(30,319	)
Net income (loss) from discontinued operations			329				(6,981	)
Net loss attributable to common stockholders		$	(61,468	)		$	(37,300	)
Weighted-average shares of common stock outstanding:
Basic			47,204				42,284
Diluted			47,204				42,284
Net loss from continuing operations per common share:
Basic		$	(1.31	)		$	(0.72	)
Diluted		$	(1.31	)		$	(0.72	)
Net income (loss) from discontinued operations per common share:
Basic		$	0.01			$	(0.16	)
Diluted		$	0.01			$	(0.16	)
Net loss per common share:
Basic		$	(1.30	)		$	(0.88	)
Diluted		$	(1.30	)		$	(0.88	)

 

See accompanying notes to our unaudited condensed consolidated financial statements.

 

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TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

		Three Months Ended
		March 31,
		2024				2023
		(in thousands)
Net loss from continuing operations attributable to common stockholders		$	(61,797	)		$	(30,319	)
Net income (loss) from discontinued operations			329				(6,981	)
Net loss attributable to common stockholders			(61,468	)			(37,300	)
Other comprehensive income (loss):
Foreign currency translation adjustments			(1,258	)			2,010
Comprehensive loss		$	(62,726	)		$	(35,290	)

 

See accompanying notes to our unaudited condensed consolidated financial statements.

 

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TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT

(Unaudited)

 

		Three Months Ended March 31, 2024
																							Accumulated
		Series A Preferred Stock									Common								Paid-in				other comprehensive				Accumulated				Treasury stock,				Total stockholders'
		Shares				Amount					Shares				Amount				capital				loss				deficit				at cost				deficit
											(in thousands)
Balance at December 31, 2023			—			$	—					46,990			$	470			$	431,335			$	(7,627	)		$	(536,348	)		$	(10,134	)		$	(122,304	)
Net loss			—				—					—				—				—				—				(61,468	)			—				(61,468	)
Other comprehensive (loss)			—				—					—				—				—				(1,258	)			—				—				(1,258	)
Common stock repurchased for treasury			—				—					—				—				—				—				—				(1,641	)			(1,641	)
Issuances under share- based compensation plan			—				—					1,524				15				—				—				—				—				15
Share-based compensation expense			—				—					—				—				2,589				—				—				—				2,589
Balance at    March 31, 2024			—			$	—					48,514			$	485			$	433,924			$	(8,885	)		$	(597,816	)		$	(11,775	)		$	(184,067	)

 

		Three Months Ended March 31, 2023
																							Accumulated
		Series A Preferred Stock									Common								Paid-in				other comprehensive				Accumulated				Treasury stock,				Total stockholders'
		Shares				Amount					Shares				Amount				capital				loss				deficit				at cost				deficit
											(in thousands)
Balance at December 31, 2022			350			$	309,877					42,369			$	424			$	407,570			$	(15,387	)		$	(334,569	)		$	(7,551	)		$	50,487
Net loss			—				—					—				—				—				—				(22,127	)			—				(22,127	)
Preferred stock dividends			—				10,706					—				—				(10,706	)			—				—				—				(10,706	)
Other comprehensive income			—				—					—				—				—				2,010				—				—				2,010
Common stock repurchased for treasury			—				—					—				—				—				—				—				(2,549	)			(2,549	)
Issuances under share- based compensation plan			—				—					627				6				—				—				—				—				6
Share-based compensation expense			—				—					—				—				2,720				—				—				—				2,720
Accretion of Series A Preferred Stock			—				4,467					—				—				(4,467	)			—				—				—				(4,467	)
Capped call transactions			—				—					—				—				(18,590	)			—				—				—				(18,590	)
Balance at    March 31, 2023			350			$	325,050					42,996			$	430			$	376,527			$	(13,377	)		$	(356,696	)		$	(10,100	)		$	(3,216	)

 

See accompanying notes to our unaudited condensed consolidated financial statements.

 

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TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Three Months Ended
		March 31,
		2024				2023
		(in thousands)
Cash flows from operating activities:
Net loss		$	(61,468	)		$	(22,127	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			8,900				9,722
Loss on sale of assets and asset impairments			1,492				5,770
Share-based compensation expense			2,589				2,668
Amortization of debt issuance costs			7,713				79
Paid-in-kind interest			11,017				—
Deferred income taxes			(2,273	)			(267	)
Changes in assets and liabilities:
Accounts receivable			7,657				2,126
Contract assets and liabilities			4,736				(34,588	)
Operating lease right of use assets and operating lease liabilities			244				(8,395	)
Inventories			(5,469	)			(2,514	)
Prepaid expenses			(744	)			(6,466	)
Other current assets			(7,010	)			(5,042	)
Other noncurrent assets			(791	)			4,608
Accounts payable and accrued expenses			(5,871	)			(30,541	)
Accrued warranty			17				626
Other noncurrent liabilities			257				480
Net cash used in operating activities			(39,004	)			(83,861	)
Cash flows from investing activities:
Purchases of property, plant and equipment			(8,285	)			(3,275	)
Net cash used in investing activities			(8,285	)			(3,275	)
Cash flows from financing activities:
Proceeds from issuance of convertible notes			—				132,500
Purchase of capped calls			—				(18,590	)
Payments of debt issuance costs			—				(4,803	)
Proceeds from working capital loans			52,009				34,741
Repayments of working capital loans			(44,556	)			(33,982	)
Principal repayments of finance leases			(297	)			(578	)
Net proceeds from (repayments of) other debt			(1,635	)			1,007
Repurchase of common stock including shares withheld in lieu of income taxes			(1,641	)			(2,549	)
Net cash provided by financing activities			3,880				107,746
Impact of foreign exchange rates on cash, cash equivalents and restricted cash			333				730
Net change in cash, cash equivalents and restricted cash			(43,076	)			21,340
Cash, cash equivalents and restricted cash, beginning of year			172,813				153,069
Cash, cash equivalents and restricted cash, end of period		$	129,737			$	174,409

 

 

See accompanying notes to our unaudited condensed consolidated financial statements.

 

 

 

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TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(Unaudited)

 

		Three Months Ended
		March 31,
		2024				2023
		(in thousands)
Supplemental cash flow information:
Cash paid for interest		$	4,799			$	1,654
Cash paid for income taxes, net of refunds			9,484				3,344
Noncash investing and financing activities:
Right of use assets obtained in exchange for new operating lease liabilities			6,633				786
Property, plant, and equipment obtained in exchange for new finance lease liabilities			170				197
Accrued capital expenditures in accounts payable			4,381				1,814
Paid-in-kind preferred stock dividends and accretion			—				15,173

 

 

Reconciliation of Cash, Cash Equivalents and Restricted Cash:		March 31,				December 31,				March 31,				December 31,
		2024				2023				2023				2022
		(in thousands)
Cash and cash equivalents		$	116,850			$	161,059			$	164,231			$	133,546
Restricted cash			12,035				10,838				8,793				9,854
Cash and cash equivalents of discontinued operations			852				916				1,385				9,669
Total cash, cash equivalents and restricted cash shown in   the condensed consolidated statements of cash flows		$	129,737			$	172,813			$	174,409			$	153,069

 

 

See accompanying notes to our unaudited condensed consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q or in our previously filed Annual Report on Form 10-K for the year ended December 31, 2023, particularly those under the heading “Risk Factors.”

OVERVIEW

Our Company

We are the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. We deliver high-quality, cost-effective composite solutions through long-term relationships with leading original equipment manufacturers (OEM) in the wind and automotive markets. We also provide field service inspection and repair services to our OEM customers and wind farm owners and operators. We are headquartered in Scottsdale, Arizona and operate factories in the U.S., Mexico, Türkiye, and India. We operate additional engineering development centers in Denmark and Germany and a services facility in Spain.

Our business operations are defined geographically into four geographic operating segments—(1) the United States (U.S.), (2) Mexico, (3) Europe, the Middle East and Africa (EMEA) and (4) India. See Note 14, Segment Reporting, to our condensed consolidated financial statements for more details about our operating segments. In December 2022, the Company ceased business operations in China, which comprised the entirety of our Asia reporting segment. Accordingly, the historical results of our Asia reporting segment have been presented as discontinued operations, refer to Note 2 – Discontinued Operations of the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023.

KEY TRENDS AND RECENT DEVELOPMENTS AFFECTING OUR BUSINESS

 

Geopolitical events around the world have accelerated regional needs for energy independence and security. Climate change also continues to drive the need for renewable energy solutions and net-zero carbon emissions. Over the course of the past few years, we have seen numerous government policy initiatives aimed at expanding the use of renewable energy, including the passing of the IRA in the U.S. and several policy initiatives in the EU that are expected to simplify regulations, speed up permitting and promote cross-border projects to accelerate climate neutrality. We expect these recent trends in governmental policy will enable long-term revenue growth in the wind industry. As the majority of our wind blades are installed in the U.S. and Europe, these policy trends are expected to have a material impact on our business and the pace of long-term growth. In recent months, we have also seen announcements from our customers of growing order backlogs that support our long-term growth expectations.

 

Despite these favorable long-term policy trends, we expect reduced demand in the near term while the wind industry awaits clarity on the implementation guidance related to key components of the IRA and clarity around more robust policies in the EU. In addition, permitting, transmission, transmission queues, the ability of the broader wind industry supply chain to ramp volume, elevated interest rates and inflation, and the cost and availability of capital are further factors limiting the timing of the wind market recovery. We expect to have six manufacturing lines in startup and four manufacturing lines in transition during 2024 as our customers prepare for anticipated stronger demand beginning in 2025. Four of the manufacturing lines in startup will be in Juarez, Mexico at a previously idle manufacturing facility and two of the manufacturing lines in startup will be in Türkiye where two longer blade lines will replace three blade lines due to space considerations. The four manufacturing lines in transition will all occur in one of our Matamoros, Mexico manufacturing facilities. For the other Matamoros, Mexico facility, which is a four-line manufacturing facility we took over from Nordex in July 2021, we plan to exit this location at the end of the three-year contract on June 30, 2024. The impact of all these changes, along with near term demand reductions from one of our customers as they consider existing inventory levels and contemplate changes in geographic demand, is expected to result in 2024 sales down slightly from 2023. Sales are expected to be lower in the first half of the year as we work through the ten lines in startup and transition. In the second half of the year, we expect these ten lines in startup and transition will achieve serial production levels resulting in mid-single digit adjusted EBITDA margins and positive free cash flow.

 

Our results of operations have been adversely impacted by the performance of the Matamoros, Mexico manufacturing facility that we took over from Nordex in July 2021. We experienced a loss from operations of $9.5 million and $6.7 million at this facility for the

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three months ended March 31, 2024 and 2023, respectively. The increase in this loss from operations was primarily due to a 27% decrease in the volume of wind blades produced due to environmental conditions including extreme cold temperatures and humidity issues at this facility affecting production. The loss from operations for the three months ended March 31, 2024, was reduced by the impact of a positive cumulative catch-up adjustment of approximately $5.6 million as a result of a change in certain of our estimated total contract values and related costs to complete the performance obligations over the remaining term of the contract.

 

Ongoing inflationary pressures have caused and may continue to cause many of our production expenses to increase, which adversely impacts our results of operations. The government of Mexico increased minimum wages 20% effective January 1, 2024. The government of Türkiye increased minimum wages 49% effective January 1, 2024. While our customer contracts allow us to pass a portion of these increases to our customers, we will not be able to recover 100% of the increased labor costs caused by this wage inflation. If our manufacturing facilities in these countries continue to experience wage inflation at these levels and the increased costs in local currency are not offset with favorable foreign currency fluctuations or productivity improvements, such elevated wages will have a material impact on our results of operations.

 

We have made significant investments to expand the automotive business during the last several years. While we believe there is increasing demand for composite products for electric vehicles, we intend to prioritize capital for growth in the wind blade business in the near term. As a result, we are in the process of exploring strategic alternatives to ensure our automotive business is sufficiently funded to execute on its growth strategies. We expect to complete this process no later than June 30, 2024, which could result in a material non-cash impairment of the business's assets.

KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE

In addition to measures of financial performance presented in our condensed consolidated financial statements in accordance with GAAP, we use certain other financial measures and operating metrics to analyze our performance. These “non-GAAP” financial measures consist of EBITDA, adjusted EBITDA, free cash flow and net cash (debt), which help us evaluate growth trends, establish budgets, assess operational efficiencies, oversee our overall liquidity, and evaluate our overall financial performance. The key operating metrics consist of wind blade sets produced, estimated megawatts of energy capacity to be generated by wind blade sets produced, utilization, dedicated manufacturing lines, manufacturing lines installed, and weighted-average sales price (ASP) per wind blade, all of which help us evaluate our operational performance. Weighted-average sales price per wind blade represents the average sales price during the period for a single wind blade that we manufacture for our customers. We believe that these measures are useful to investors in evaluating our performance. For a detailed discussion of our key financial measures and our key operating metrics, refer to the discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Metrics Used By Management To Measure Performance” included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

KEY FINANCIAL MEASURES

		Three Months Ended
		March 31,
		2024				2023
		(in thousands)
Net sales		$	299,062			$	404,066
Net loss from continuing operations			(61,797	)			(15,146	)
EBITDA (1)			(28,223	)			964
Adjusted EBITDA (1)			(22,982	)			8,399
Capital expenditures (2)			8,285				3,275
Free cash flow (1)(2)			(47,289	)			(87,136	)

 

		March 31,				December 31,
		2024				2023
		(in thousands)
Total debt, net of debt issuance costs and debt discount		$	509,614			$	485,193
Net debt (1)			(391,912	)			(323,218	)

 

 

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The following tables reconcile our non-GAAP key financial measures to the most directly comparable GAAP measures:

EBITDA and adjusted EBITDA are reconciled as follows:

		Three Months Ended
		March 31,
		2024				2023
		(in thousands)
Net loss attributable to common stockholders		$	(61,468	)		$	(37,300	)
Net loss (income) from discontinued operations			(329	)			6,981
Net loss from continuing operations attributable    to common stockholders			(61,797	)			(30,319	)
Preferred stock dividends and accretion			—				15,173
Net loss from continuing operations			(61,797	)			(15,146	)
Adjustments:
Depreciation and amortization			8,900				9,722
Interest expense, net			21,385				2,528
Income tax provision			3,289				3,860
EBITDA			(28,223	)			964
Share-based compensation expense			2,589				2,553
Foreign currency loss			640				1,214
Loss on sale of assets and asset impairments			1,830				3,593
Restructuring charges, net			182				75
Adjusted EBITDA		$	(22,982	)		$	8,399

 

Free cash flow is reconciled as follows:

 

		Three Months Ended
		March 31,
		2024				2023
		(in thousands)
Net cash used in operating activities		$	(39,004	)		$	(83,861	)
Capital expenditures			(8,285	)			(3,275	)
Free cash flow		$	(47,289	)		$	(87,136	)

 

Net cash (debt) is reconciled as follows:

		March 31,				December 31,
		2024				2023
		(in thousands)
Cash and cash equivalents		$	116,850			$	161,059
Cash and cash equivalents of discontinued operations			852				916
Total debt, net of debt issuance costs and debt discount			(509,614	)			(485,193	)
Net debt		$	(391,912	)		$	(323,218	)

KEY OPERATING METRICS

		Three Months Ended
		March 31,
		2024				2023
Sets			488				655
Estimated megawatts			2,050				2,948
Utilization			67	%			84	%
Dedicated manufacturing lines			36				37
Manufacturing lines installed			36				37
Wind blade ASP (in $ thousands)		$	183			$	195

 

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RESULTS OF OPERATIONS

The following table summarizes our operating results as a percentage of net sales for the three months ended March 31, 2024 and 2023 that have been derived from our condensed consolidated statements of operations:

		Three Months Ended
		March 31,
		2024				2023
Net sales			100.0	%			100.0	%
Cost of sales			102.7				98.8
Startup and transition costs			7.4				0.5
Total cost of goods sold			110.1				99.3
Gross profit (loss)			(10.1	)			0.7
General and administrative expenses			2.2				1.7
Loss on sale of assets and asset impairments			0.6				0.9
Restructuring charges, net			0.1				0.0
Loss from continuing operations			(13.0	)			(1.9	)
Total other expense			(6.6	)			(0.8	)
Loss before income taxes			(19.6	)			(2.7	)
Income tax provision			(1.1	)			(1.0	)
Net loss from continuing operations			(20.7	)			(3.7	)
Preferred stock dividends and accretion			—				(3.8	)
Net loss attributable to common stockholders from continuing operations			(20.7	)			(7.5	)
Net income (loss) from discontinued operations			0.1				(1.7	)
Net loss attributable to common stockholders			(20.6	)%			(9.2	)%

Net sales

Consolidated discussion

The following table summarizes our net sales by product/service for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Wind blade, tooling and other    wind related sales		$	288,905			$	387,592			$	(98,687	)			(25.5	)%
Automotive sales			5,016				10,261				(5,245	)			(51.1	)
Field service, inspection    and repair services sales			5,141				6,213				(1,072	)			(17.3	)
Total net sales		$	299,062			$	404,066			$	(105,004	)			(26.0	)%

 

The decrease in net sales of wind blades, tooling and other wind related sales (collectively, Wind) for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a 25% decrease in the number of wind blades produced due to the number of lines that we are starting up or transitioning, expected volume declines based on market activity levels, and lower average sales prices of wind blades due to changes in the mix of wind blade models produced. This decrease was partially offset by favorable foreign currency fluctuations, and an increase in tooling sales in preparation for manufacturing line startups and transitions. The decrease in automotive sales for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a decrease in sales of composite bus bodies as a result of Proterra's bankruptcy during the third quarter of 2023, partially offset by an increase in sales of other automotive products due to the launch of a new product line. The decrease in field service, inspection and repair services (collectively, Field Services) sales for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a reduction in technicians deployed to revenue generating projects due to an increase in time spent on non-revenue generating inspection and repair activities. The fluctuating U.S. dollar against the Euro in our Türkiye operations had a favorable impact of 0.4% on consolidated net sales for the three months ended March 31, 2024, as compared to the same period in 2023.

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Segment discussion

The following table summarizes our net sales by our four geographic operating segments for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
U.S.		$	9,218			$	15,620			$	(6,402	)			(41.0	)%
Mexico			152,458				154,640				(2,182	)			(1.4	)
EMEA			96,628				167,513				(70,885	)			(42.3	)
India			40,758				66,293				(25,535	)			(38.5	)
Total net sales		$	299,062			$	404,066			$	(105,004	)			(26.0	)%

U.S. Segment

The following table summarizes our net sales by product/service for the U.S. segment for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Automotive sales			5,016				10,261				(5,245	)			(51.1	)%
Field service, inspection    and repair services sales			4,202				5,359				(1,157	)			(21.6	)
Total net sales		$	9,218			$	15,620			$	(6,402	)			(41.0	)%

 

The decrease in the U.S. segment’s automotive sales for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a decrease in sales of composite bus bodies as a result of Proterra's bankruptcy during the third quarter of 2023, partially offset by an increase in sales of other automotive products due to the launch of a new product line. The decrease in the U.S. segment’s Field Services sales for the three months ended March 31, 2024, was primarily due to a reduction in technicians deployed to revenue generating projects due to an increase in time spent on non-revenue generating inspection and repair activities.

Mexico Segment

The following table summarizes our net sales by product/service for the Mexico segment for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Wind blade, tooling and other    wind related sales		$	152,361			$	154,462			$	(2,101	)			(1.4	)%
Field service, inspection    and repair services sales			97				178				(81	)			(45.5	)
Total net sales		$	152,458			$	154,640			$	(2,182	)			(1.4	)%

 

The decrease in the Mexico segment’s net sales of Wind for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a 10% net decrease in the number of wind blades produced across our Mexico manufacturing facilities, partially offset by higher average sales prices of wind blades in Mexico due to changes in the mix of wind blade models produced and the impact of inflation on wind blade prices. The change in volume was primarily associated with decreased production at one of our Matamoros, Mexico manufacturing facilities due to the transition of several of the manufacturing lines at this facility to larger wind blade models during the three months ended March 31, 2024. The change in volume was also due to a 27% decrease in the number of wind blades produced at the Matamoros, Mexico facility that we took over from Nordex in July 2021 due to environmental conditions including extreme cold temperatures and humidity issues at this facility. This decrease was offset by a combined 23% increase in the number of wind blades produced at our facilities in Juarez, Mexico and a $6.1 million increase in tooling sales in preparation for manufacturing line startups and transitions.

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EMEA Segment

The following table summarizes our net sales by product/service for the EMEA segment for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Wind blade, tooling and other    wind related sales		$	95,786			$	166,837			$	(71,051	)			(42.6	)%
Field service, inspection    and repair services sales			842				676				166				24.6
Total net sales		$	96,628			$	167,513			$	(70,885	)			(42.3	)%

 

The decrease in the EMEA segment’s net sales of Wind for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a 42% decrease in the number of wind blades produced due to reduced market demand for one of our customers' wind blade models at one of our Türkiye manufacturing facilities and the transition of certain manufacturing lines to a different customers' wind blade model at our other Türkiye facility, as well as lower average sales prices of wind blades in Türkiye due to such changes in the mix of wind blade models produced. The decrease was partially offset by favorable foreign currency fluctuations. The fluctuating U.S. dollar relative to the Euro had a favorable impact of 1.2% on the EMEA segment’s net sales for the three months ended March 31, 2024, as compared to the same period in 2023.

India Segment

The following table summarizes our net sales by product/service for the India segment for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Wind blade, tooling and other    wind related sales		$	40,758			$	66,293			$	(25,535	)			(38.5	)%
Total net sales		$	40,758			$	66,293			$	(25,535	)			(38.5	)%

 

The decrease in the India segment’s net sales of Wind for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a 23% decrease in the number of wind blades produced due to a decrease in market demand for one of our customers' wind blades models produced at this facility, and lower average sales prices due to the impact of raw material and logistic cost reductions on wind blade prices.

Total cost of goods sold

The following table summarizes our total cost of goods sold for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Cost of sales		$	307,084			$	399,381			$	(92,297	)			(23.1	)%
Startup costs			6,363				—				6,363			NM
Transition costs			15,866				1,980				13,886			NM
Total startup and transition costs			22,229				1,980				20,249			NM
Total cost of goods sold		$	329,313			$	401,361			$	(72,048	)			(18.0	)
% of net sales			110.1	%			99.3	%							10.8	%

NM – not meaningful

 

Total cost of goods sold as a percentage of net sales increased by approximately 10.8% for the three months ended March 31, 2024, as compared to the same period in 2023, primarily driven by an increase in startup and transition costs associated with four manufacturing lines in startup in Juarez, Mexico at a previously idle manufacturing facility, two manufacturing lines in transition at one of our Türkiye facilities where two longer blade models will replace three blade models due to space considerations, and four

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manufacturing lines in transition at one of our Matamoros, Mexico manufacturing facilities. The increase in cost of goods sold as a percentage of net sales was also due to increased labor costs in Türkiye and Mexico as a result of wage increases, an $8.0 million increase in warranty costs due to changes in estimates, and continued cost challenges at facilities in Matamoros, Mexico, including a $9.5 million loss from operations at our facility that we took over from Nordex in July 2021. These unfavorable items were partially offset by favorable foreign currency fluctuations. The fluctuating U.S. dollar against the Euro, Turkish Lira, Mexican Peso and Indian Rupee had a combined favorable impact of 4.3% on consolidated cost of goods sold for the three months ended March 31, 2024, as compared to the same period in 2023.

General and administrative expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
General and administrative expenses		$	6,699			$	7,034			$	(335	)			(4.8	)%
% of net sales			2.2	%			1.7	%							0.5	%

 

General and administrative expenses remained relatively flat during the three months ended March 31, 2024, as compared to the same period in 2023.

Loss on sale of assets and asset impairments

The following table summarizes our loss on sale of assets and asset impairments for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Loss on sale of receivables		$	1,387			$	3,564			$	(2,177	)			(61.1	)%
Loss on sale of other assets			443				29				414			NM
Total loss on sale of assets    and asset impairments		$	1,830			$	3,593			$	(1,763	)			(49.1	)
% of net sales			0.6	%			0.9	%							(0.3	)%

 

The decrease in loss on sale of assets and asset impairments for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a decrease in the volume of receivables sold through our accounts receivable financing arrangements with certain of our customers.

Income (loss) from operations

Segment discussion

The following table summarizes our income (loss) from operations by our four geographic operating segments for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
U.S.		$	(6,634	)		$	(5,729	)		$	(905	)			(15.8	)%
Mexico			(27,263	)			(21,701	)			(5,562	)			(25.6	)
EMEA			(5,501	)			15,668				(21,169	)			(135.1	)
India			436				3,765				(3,329	)			(88.4	)
Total income (loss) from    continuing operations		$	(38,962	)		$	(7,997	)		$	(30,965	)		NM
% of net sales			(13.0	)%			(1.9	)%							(11.1	)%

 

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U.S. Segment

The increase in the loss from operations in the U.S. segment for the three months ended March 31, 2024, as compared to the same period in 2023 was primarily impacted by increased travel expenses in the first quarter of 2024 and recoveries of COVID-19-related relief for payroll tax credits in the prior comparative period that were not in the current period, partially offset by recoveries of accounts receivable in the current period that were previously written off to bad debt expense related to Proterra’s bankruptcy.

Mexico Segment

The increase in loss from operations in the Mexico segment for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a 10% decrease in the volume of wind blades produced, increased startup and transition costs, increased labor costs, increased warranty costs and continued cost challenges at our facilities in Matamoros, Mexico, and unfavorable foreign currency fluctuations. These unfavorable items were partially offset by higher average sales prices. The fluctuating U.S. dollar relative to the Mexican Peso had an unfavorable impact of 2.1% on the Mexico segment’s cost of goods sold for the three months ended March 31, 2024, as compared to the same period in 2023.

EMEA Segment

The change in loss from operations in the EMEA segment for the three months ended March 31, 2024, as compared to income from operations in the same period in 2023 was primarily due to a 42% decrease in the volume of wind blades produced, increased startup and transition costs, inflation impacting operating costs that we were not able to pass on to our customers, and increased labor costs as a result of wage increases in Türkiye. This decrease was partially offset by an increase in wind blade prices, cost savings initiatives, and favorable foreign currency fluctuations. The fluctuating U.S. dollar relative to the Turkish Lira and Euro had a favorable impact of 18.9% on the EMEA segment's cost of goods sold, for the three months ended March 31, 2024, as compared to the same period in 2023.

India Segment

The decrease in income from operations in the India segment for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a 23% decrease in the volume of wind blades produced and lower average sales prices.

Other income (expense)

The following table summarizes our total other income (expense) for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Interest expense, net		$	(21,385	)		$	(2,528	)		$	(18,857	)		NM
Foreign currency loss			(640	)			(1,214	)			574				47.3	%
Miscellaneous income			2,479				453				2,026			NM
Total other expense		$	(19,546	)		$	(3,289	)		$	(16,257	)		NM
% of net sales			-6.6	%			-0.8	%							5.8	%

 

Total other expense as a percentage of net sales increased by 5.8% for the three months ended March 31, 2024, as compared to the same period in 2023, primarily due to an increase in interest expense and non-cash amortization of debt discount related to the refinancing and issuance of our 11% senior secured term loan in the fourth quarter of 2023.

Income taxes

The following table summarizes our income taxes for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Income tax provision		$	(3,289	)		$	(3,860	)		$	571				14.8	%
Effective tax rate			(1.1	)%			(1.0	)%							(0.1	)%

 

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See Note 9, Income Taxes, to our condensed consolidated financial statements for more details about our income taxes for the three months ended March 31, 2024.

Net loss from continuing operations

The following table summarizes our net loss from continuing operations for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Net loss from continuing operations		$	(61,797	)		$	(15,146	)		$	(46,651	)		NM

 

The increase in the net loss from continuing operations for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to the reasons set forth above.

Net income (loss) from discontinued operations

The following table summarizes our net income (loss) from discontinued operations for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,								Change
		2024				2023				$				%
		(in thousands)
Net income (loss) from    discontinued operations		$	329			$	(6,981	)		$	7,310				104.7	%

 

The change in net income (loss) from discontinued operations for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to the closure of production at our Yangzhou, China facility at the end of 2022.

LIQUIDITY AND CAPITAL RESOURCES

Our primary needs for liquidity have been, and in the future will continue to be, capital expenditures, purchases of raw materials, new facility startup costs, costs related to the Matamoros, Mexico manufacturing facility that we took over from Nordex in July 2021, the impact of line start ups and transitions, working capital, debt service costs, warranty costs and restructuring costs associated with the optimization of our global footprint. Our capital expenditures have been primarily related to machinery and equipment for new facilities or facility expansions. Historically, we have funded our working capital needs through cash flows from operations, the proceeds received from our credit facilities and term debt, and proceeds received from the issuance of stock.

We had net proceeds under all of our various financing arrangements of $5.5 million for the three months ended March 31, 2024 as compared to net proceeds under our financing arrangements of $110.3 million in the comparable period of 2023, primarily due to the issuance of the Convertible Notes in the prior comparative period. As of March 31, 2024 and December 31, 2023, we had $509.6 million and $485.2 million in outstanding indebtedness, net of issuance costs and debt discount, respectively. As of March 31, 2024, we had an aggregate of $60.0 million of remaining capacity for cash and non-cash financing, including $55.0 million of remaining availability for cash borrowing under our various credit facilities. Based upon current and anticipated levels of operations, we believe that cash on hand, available credit facilities, and cash flow from operations will be adequate to fund our working capital and capital expenditure requirements and to make required payments of principal and interest on our indebtedness over the next twelve months.

We anticipate that any new facilities and future facility expansions will be funded through cash flows from operations, the incurrence of other indebtedness and other potential sources of liquidity. The 11% senior secured term loan contains certain covenants and rights including, but not limited to, amount of indebtedness, capital expenditure limitations, a U.S. cash on hand balance requirement of $40.0 million through September 30, 2024 and $50.0 million thereafter.

At March 31, 2024 and December 31, 2023, we had unrestricted cash, cash equivalents and short-term investments totaling $116.8 million and $161.1 million, respectively. The March 31, 2024 balance includes $10.8 million of cash located outside of the United States, including $4.3 million in Türkiye, $1.2 million in India, $2.8 million in Mexico and $2.5 million in other countries. The December 31, 2023 balance included $45.0 million of cash located outside of the U.S., $40.6 million in Türkiye, $1.9 million in India, $1.2 million in Mexico and $1.3 million in other countries. In addition to these amounts, at both March 31, 2024 and December 31,

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2023 we had $0.9 million of unrestricted cash and cash equivalents related to our discontinued operations which is held outside of the U.S.

Financing Facilities

Our total principal amount of debt outstanding as of March 31, 2024 was $622.8 million, including our convertible senior notes, secured and unsecured financing, working capital and term loan agreements and equipment finance leases. See Note 6, Debt, to our condensed consolidated financial statements for more details on our debt balances.

Cash Flow Discussion

The following table summarizes our key cash flow activity for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended
		March 31,
		2024				2023				$ Change
		(in thousands)
Net cash used in operating activities		$	(39,004	)		$	(83,861	)		$	44,857
Net cash used in investing activities			(8,285	)			(3,275	)			(5,010	)
Net cash provided by financing activities			3,880				107,746				(103,866	)
Impact of foreign exchange rates on cash, cash equivalents    and restricted cash			333				730				(397	)
Net change in cash, cash equivalents and restricted cash		$	(43,076	)		$	21,340			$	(64,416	)

Operating Cash Flows

Net cash used in operating activities decreased by $44.9 million for the three months ended March 31, 2024, as compared to the same period in 2023, primarily due to a reduction in wind blade inventory included in contract assets driven by working capital initiatives and higher payments in the prior comparative period related to restructuring activities associated with the shutdown of our China operations at the end of 2022. This was partially offset by an increase in net losses during the current period and cash paid for income taxes.

Investing Cash Flows

Net cash used in investing activities increased by $5.0 million for the three months ended March 31, 2024, as compared to the same period in 2023, primarily due to capital expenditures for the startup and transition of our manufacturing lines at our facilities in Mexico and Türkiye.

Financing Cash Flows

Net cash provided by financing activities decreased by $103.9 million for the three months ended March 31, 2024, as compared to the same period in 2023, primarily due to the proceeds from the Convertible Notes in the prior comparative period.

We are not presently involved in any off-balance sheet arrangements, including transactions with unconsolidated special-purpose or other entities that would materially affect our financial position, results of operations, liquidity or capital resources, other than our accounts receivable assignment agreements described below. Furthermore, we do not have any relationships with special-purpose or other entities that provide off-balance sheet financing; liquidity, market risk or credit risk support; or engage in leasing or other services that may expose us to liability or risks of loss that are not reflected in the condensed consolidated financial statements and related notes.

Our segments enter into accounts receivable assignment agreements with various financial institutions. Under these agreements, the financial institution buys, on a non-recourse basis, the accounts receivable amounts related to our segments' customers at an agreed-upon discount rate.

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The following table summarizes certain key details of each of the accounts receivable assignment agreements in place as of March 31, 2024:

 

Year Of Initial Agreement		Segment(s) Related To		Current Annual Interest Rate
2019		Asia and Mexico		LIBOR plus 1.00%
2020		EMEA		EURIBOR plus 1.95%
2020		India		LIBOR plus 1.00%
2020		U.S.		SOFR plus 0.29%
2021		Mexico		SOFR plus 0.29%
2022		EMEA		EURIBOR plus 1.97%

 

As the receivables are purchased by the financial institutions under the agreements noted above, the receivables are removed from our condensed consolidated balance sheet. During the three months ended March 31, 2024, $95.0 million of receivables were sold under the accounts receivable assignment agreements described above as compared to $224.4 million in the comparative prior year period.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in the ordinary course of our business. These market risks are principally limited to changes in foreign currency exchange rates and commodity prices.

Foreign Currency Exchange Rate Risk. We conduct international operations in Mexico, Türkiye, India and Europe. Our results of operations are subject to both currency transaction risk and currency translation risk. We incur currency transaction risk whenever we enter into either a purchase or sale transaction using a currency other than the functional currency of the transacting entity. With respect to currency translation risk, our financial condition and results of operations are measured and recorded in the relevant functional currency and then translated into U.S. dollars for inclusion in our condensed consolidated financial statements. In recent years, exchange rates between these foreign currencies and the U.S. dollar have fluctuated significantly and may do so in the future. A hypothetical change of 10% in the exchange rates for the countries above would have resulted in a change to income from operations of approximately $3.9 million for the three months ended March 31, 2024.

Commodity Price Risk. We are subject to commodity price risk under agreements for the supply of our raw materials. We have not hedged our commodity price exposure. We generally lock in pricing for most of our key raw materials for 12 months which protects us from price increases within that period, which we believe helps to mitigate the impact of raw material price increases. As many of our raw material supply agreements have meet or release clauses, if raw materials prices decrease, we are able to benefit from the reductions in price.

Resin, resin systems, and carbon fiber are the primary commodities for which we do not have fixed pricing. Approximately 53% of the resin and resin systems, and approximately 71% of the carbon fiber, we use is purchased under contracts either controlled or borne by two of our customers and therefore they receive/bear 100% of any decrease or increase in resin and carbon fiber costs further limiting our exposure to price fluctuations.

Taking into account the contractual obligations of our customers to share with us the cost savings or increases resulting from a change in the current forecasted price of resin and resin systems we believe that a 10% change in the current forecasted price of resin and resin systems for the customers in which we are exposed to fluctuating prices would have an impact to income from operations of approximately $5.6 million for the three months ended March 31, 2024. With respect to our other customer supply agreements, our customers typically receive approximately 70% of the cost savings or increases resulting from a change in the price of resin, resin systems.

Interest Rate Risk. As of March 31, 2024, all remaining secured and unsecured financing and finance lease obligations are fixed rate instruments and are not subject to fluctuations in interest rates.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) promulgated under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the design and operating effectiveness as of March 31, 2024 of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2024.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

See Note 12, Commitments and Contingencies, under the heading “Legal Proceedings” to our condensed consolidated financial statements for a discussion of legal proceedings and other related matters.

Item 1A. RISK FACTORS

There have been no material changes to the Risk Factors (Part I, Item 1A) in our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition, and/or future results.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

Not applicable.

Issuer Purchases of Equity Securities

Not applicable.

Use of Proceeds

Not applicable.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

None.

 

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Item 6. EXHIBITS

 

Exhibit Number		Exhibit Description
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

 

* Filed herewith.

** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		TPI COMPOSITES, INC.
Date: May 2, 2024		By:		/s/ Ryan Miller
				Ryan Miller
				Chief Financial Officer
				(Principal Financial Officer)

 

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