TPI Composites, Inc. (NASDAQ:TPIC) Q2 2023 Earnings Call Transcript

Eric Stine: Got it. And when you talked about the two lines in Turkey going from three to – and then it seem in Mexico, I mean, is that – are those plans that are already underway and are kind of are already starting. And so they’re not necessarily subject to kind of the slowdown you’re seeing on the activity side.

Bill Siwek: No, it has nothing to do with that. Let’s be clear. In Turkey, it was – we have two plants there. One is going from four lines to three lines; one is going from seven lines to six lines. And in Mexico, the one plant we have running a smaller blade today when we go to a bigger blade that goes from six lines to four lines. Producing the same number of gigawatts off of 39 lines as we were off of the 44 that we talked about before; so it’s not about a reduction in demand for what we’re doing. It’s a larger blade. Therefore, you need fewer sets to hit the same number of gigawatts. Now over time, might we expand a couple of those plants to add more lines to it, absolutely, or we’ll look for additional capacity in the same geographies or new geographies.

Eric Stine: Got it. All right. That’s helpful. Maybe just quick just on the automotive side. You mentioned strategic alternatives. I mean, it doesn’t sound like that strategic alternative would include selling or monetizing that business; so maybe just some of the thoughts or the more likely forms that might take?

Bill Siwek: No different than we’ve talked about, Eric. We’re looking at all options. It could be partnership, joint venture, separate source of capital, so there’s a multitude of different things we’re looking at. We’re actually looking at probably three different forms today. So those discussions are progressing. We hope to be able to give you more information later in the quarter.

Eric Stine: Okay. Thanks.

Bill Siwek: Yes.

Operator: Your next question comes from Joseph Osha from Guggenheim Partners. Please go ahead.

Joseph Osha: Hi there guys. I just wanted to talk about next year a little bit. You’ve got this Oaktree dividend coming in at $40 million. You have not based on my sort of pass-through your model ever generated that much free cash, at least in 2015 or so. So it would seem to me that you’re going to be burning cash next year to meet all of your obligations? Is that a fair observation?

Ryan Miller: Yes. Joe, I think a lot of this for us; I think we feel pretty comfortable with our liquidity position today. Could we be burning some? If we do, we believe it would be a very modest amount. A lot of this is going to depend on the start-ups and the timing of those start-ups. It’s going to be dependent upon the amount of customer advances that we can get to help fund those startups and transitions. But as we’re currently thinking about 2024, obviously, we’re not yet ready to guide to 2024 yet. But we laid out what we think our sources and kind of uses of cash are next year. And I think the one thing that you may discount a little bit right now is our ability to go generate cash out of our balance sheet. And so you’ll see us focused in a lot on that over the balance of this year and next year to help fund some of that.

We do have some different areas of inefficiency and certainly when you’re in a time period we’re in today, where we’ve had some delays in deliveries and working through some inventory issues when you’re going through that will help – we’ll monetize that as we go through the balance of this year. But we will certainly plan and work to make sure that we can make it through this. And we initially guided back when we put out our kind of mid- to long-term guidance that to light back up all of our idle lines, it’s probably in the $25 million to $35 million range. Still believe it’s in that range and so I kind of contain the CapEx for to that range, probably spending about a third of that this year and then the rest of it will primarily come in 2024.

Bill Siwek: The other thing to think about, Joe, this is the easiest way to think about it, I think, is we eliminate the losses that we’re incurring at our Nordex, Matamoros plant that covers the dividend.

Joseph Osha: So say that again, the losses that you are currently incurring from Nordex, Matamoros that remind me exactly when that goes away?

Bill Siwek: Yes. The contract itself ends June 30, 2024, but we’ve agreed to a bit of a different structure in 2024. So we’ll eliminate virtually the entire loss that you’ll see this year from Matamoros. So that basically pays for the dividend.

Joseph Osha: So that’s $40 million right there.