Broadwind, Inc. — FY2021 Form 10-K
Reporting period: Year ended December 31, 2021; comparisons are to FY2020 unless noted. Dollar amounts below are in millions, converted from the filing’s thousands. Broadwind manufactures wind towers, heavy fabrications, precision gearing and industrial supply-chain solutions, primarily for U.S. energy, mining and infrastructure markets.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $145.6 | $198.5 |
| Gross profit / margin | $5.5 / 3.8% | $18.0 / 9.1% |
| Operating income (loss) | $(12.6) | $0.4 |
| Net income (loss) | $2.8 | $(1.5) |
| Basic and diluted EPS | $0.15 | $(0.09) |
| Adjusted EBITDA | $13.2 | $8.0 |
| Cash from (used in) operations | $(12.8) | $5.3 |
| Capital expenditures | $1.7 | $1.5 |
| Free cash flow | $(2.0) | $7.0 |
Revenue fell 26.6%, chiefly because wind-tower customers paused or delayed orders amid uncertainty over incentives and elevated steel prices. Lower volume, supply-chain and staffing constraints, and a temporary weather-related shutdown at the Abilene plant reduced gross margin; operating expenses rose to 12.4% of sales from 8.9%.
Reported net income included $9.2 million of PPP loan forgiveness and $7.0 million of Employee Retention Credit benefits. These items substantially supported reported earnings despite the operating loss. The PPP loans were forgiven in 2021; the filing says they could still be subject to government audit.
Segments, orders and backlog
- Heavy Fabrications: Revenue $102.0 million, down 34%; operating loss $3.2 million versus operating income of $10.4 million. Tower sections sold declined to 747 from 1,150. Industrial fabrication orders increased 72%, partly offsetting weaker tower orders.
- Gearing: Revenue $28.6 million, up 14%; operating loss narrowed to $2.6 million from $3.9 million. Orders rose 83%, mainly from oil and gas and mining customers.
- Industrial Solutions: Revenue $15.4 million, down 16%; operating loss was $0.4 million versus operating income of $0.9 million. Orders increased 10%.
- Net new orders were $159.0 million, up from $148.9 million; book-to-bill was 1.1. Year-end backlog was $106.4 million, up 15% from $92.9 million.
Cash, debt and liquidity
Cash was $0.9 million at year-end, down $2.5 million. Operating working capital increased to $18.6 million from $5.1 million, driven principally by higher inventory and lower customer deposits; this contributed to operating cash use. Total debt was $6.8 million, including $6.35 million drawn on the revolving facility. Debt and finance-lease obligations together totaled $11.4 million, of which $8.7 million was current. The company reported $14.0 million of remaining borrowing capacity and $14.9 million of available liquidity including cash.
During 2021 Broadwind raised approximately $9.3 million net from an equity issuance, issuing 1.90 million shares. Its lender waived or suspended certain covenant tests and imposed EBITDA requirements and an availability reserve. A February 2022 amendment reduced the credit line from $35 million to $30 million, extended maturity to January 31, 2024, and revised covenant terms. Management said available resources and expected financing sources should meet cash needs for at least twelve months.
Outlook, risks and unusual matters
- The filing provides no specific revenue or earnings guidance. Management reported resuming expansion of manufacturing capabilities late in 2021 and said it believed steel and other raw materials would be adequate for 2022, while acknowledging ongoing supply and labor constraints.
- Customer concentration remains significant: the five largest customers generated 71% of FY2021 sales; wind energy represented 61%. Siemens Gamesa and GE Renewable Energy each exceeded 10% of consolidated revenue.
- Key risks include wind-market demand and changing tax incentives, customer order volatility, steel and supply-chain availability and cost, workforce constraints, COVID-19 impacts, competition, and the company’s ability to diversify and use manufacturing capacity effectively.
- Management tested Heavy Fabrications and Gearing long-lived assets after identifying impairment indicators; no impairment was recorded. The auditor identified these assessments as a critical audit matter because of the judgment involved in projected revenue, margins and capital spending.
- Ordinary-course legal proceedings were disclosed; management did not expect their outcomes to have a material adverse effect, while noting litigation outcomes remain uncertain. No liquidated damages were incurred in 2021 or 2020.
- Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2021. The auditor issued an unqualified opinion on the financial statements.
Important facts for investors to verify
- Whether operating performance and cash generation improve without the one-time PPP forgiveness and ERC benefits that supported FY2021 net income.
- Execution against the $106.4 million backlog, including conversion timing, cancellations, customer acceptance and margins.
- Liquidity, borrowing-base availability and compliance with revised lender covenants, particularly given negative operating cash flow and elevated working capital.
- Progress in reducing wind and top-customer concentration, and whether growth in gearing and industrial fabrication can offset tower-market volatility.
- Whether management’s assumptions supporting the no-impairment conclusion remain reasonable as segment performance and forecasts develop.