Business context and reporting period
Broadwind, Inc. is a precision manufacturer serving clean technology and other specialized markets, including wind energy, mining, infrastructure, oil and gas, and natural-gas power generation. Its segments are Heavy Fabrications, Gearing, and Industrial Solutions. This unaudited Form 10-Q covers the three months ended March 31, 2021; comparisons are with Q1 2020 unless otherwise stated. Wind energy represented 63% of revenue, down from 74%.
Financial results and key metrics
Amounts below are in millions except per-share data and percentages.
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $32.728 | $48.634 |
| Gross profit / margin | $0.282 / 0.9% | $6.172 / 12.7% |
| Operating income (loss) | $(4.311) | $1.680 |
| Net income (loss) | $(1.210); $(0.07) per share | $0.954; $0.06 per share |
| Adjusted EBITDA (non-GAAP) | $1.217 | $3.605 |
| Operating cash flow | $(8.437) | $(1.025) |
| Capital expenditures | $0.612 | $0.670 |
| Free cash flow (non-GAAP) | $(9.393) | $(0.329) |
| Cash at quarter-end | $2.929 | $2.743 |
Revenue fell 32.7%. Lower volume, unfavorable mix, supply-chain disruption, manufacturing inefficiencies, and a temporary weather-related shutdown at the Abilene plant drove the sharp gross-margin decline and operating loss. The $3.372 million employee retention credit (ERC) benefit, recorded in other income, partly offset operating weakness; without it, reported net loss would have been higher. The filing reports total debt of $14.456 million, including $9.151 million of PPP loans, and debt plus finance lease obligations of $17.803 million. Revolver borrowings were $4.468 million, with $18.640 million of additional borrowing availability. Current assets were $65.629 million and current liabilities $57.897 million.
Segments, orders, and balance-sheet changes
- Heavy Fabrications revenue was $22.777 million versus $38.368 million; operating loss was $1.700 million versus operating income of $3.541 million. Tower sections sold fell 46% to 169, while wind-tower orders doubled year over year.
- Gearing revenue was $5.349 million versus $6.227 million; operating loss widened to $0.989 million from $0.261 million.
- Industrial Solutions revenue rose 14% to $4.604 million, but it recorded a $0.014 million operating loss versus $0.192 million operating income.
- Total orders increased slightly to $34.214 million from $33.809 million; book-to-bill was 1.0 versus 0.7. Quarter-end backlog was $94.4 million versus $127.4 million.
- Compared with December 31, 2020, inventory increased to $40.276 million from $26.724 million, accounts payable to $25.836 million from $18.180 million, and revolver and other current notes payable to $5.076 million from $1.406 million. The company’s defined operating working capital measure was $11.711 million versus $8.844 million in Q1 2020.
Outlook, liquidity, risks, and unusual items
Management expects available cash, operating cash generation, the credit facility, expected ERC proceeds or savings, equipment financing, and potential securities sales to meet liquidity needs for at least 12 months. This is a liquidity assessment, not quantified revenue or earnings guidance. Management cautions that weaker production, sales, collections, customer deposits, or new orders could create liquidity pressure; a deterioration in operations could also threaten covenant compliance and access to the credit facility.
A February 2021 credit-facility amendment waived fixed-charge coverage testing for the March and June 2021 quarters and added a March-quarter liquidity covenant and minimum EBITDA covenants for the March and June quarters. The company reported compliance with its covenants as of March 31, 2021. The $35 million asset-based facility matures July 31, 2023. The company issued 1.1 million shares under an equity distribution agreement during the quarter, receiving approximately $6.101 million net cash proceeds; the program permits sales of up to $10 million in aggregate.
The company attributes continuing disruption to COVID-19, supply constraints, staffing constraints, lower demand in some markets, and project timing. The ERC benefit was recognized as a receivable; eligibility and collection remain relevant to liquidity. The company submitted applications for forgiveness of its $9.151 million PPP loan balance but cannot assure full forgiveness. Other risks include customer and supplier concentration, backlog conversion, wind-market policy and competition, potential dilution from further equity issuance, and limitations on use of net operating losses following ownership changes. Ordinary-course legal proceedings are disclosed; management does not expect them to have a material adverse effect, while acknowledging litigation uncertainty. No reserve for liquidated damages was recorded. Disclosure controls were judged effective, and no material change in internal control was reported.
Important facts for investors to verify
- Whether the ERC receivable is collected and the reported credit benefit is sustained, and whether PPP loans are forgiven in full.
- Whether supply-chain, staffing, and customer-project issues resolve and Heavy Fabrications margins recover from the 0.9% consolidated gross margin.
- Whether orders convert to revenue and backlog, particularly given the year-over-year backlog decline and segment order timing.
- Whether operating cash flow and working-capital needs improve, and whether the stated 12-month liquidity outlook remains supported by facility availability and covenant compliance.
- The impact of additional equity sales and dilution, and the company’s ability to preserve and use its tax-loss carryforwards.