TPI Composites Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 2, 2024

There are 9 speakers on the call.

Operator

Good afternoon, and welcome to the TPI Composites First Quarter 2024 Earnings Conference Call. At this time, I'd like to turn the conference over to Jason Wegman, Investor Relations for TPI Composites. Thank you. You may begin.

Speaker 1

Thank you, operator. I would like to welcome everyone to TPI Composites' Q1 2024 earnings call. We will be making forward looking statements during this call that are subject to risks and uncertainties, which could cause actual results to differ materially. A detailed discussion of applicable risks is included in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, tpicomposites.com. Today's presentation will include references to non GAAP financial measures.

Speaker 1

You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non GAAP measures to the comparable GAAP financial measures.

Speaker 2

With that, let me turn

Speaker 1

the call over to Bill Siwek, TPI Composites' President and CEO.

Speaker 3

Thanks, Jason, and good afternoon, everyone, and thank you for joining our call. In addition to Jason, I'm here with Ryan Miller, our CFO. Please turn to Slide 5. I'm pleased to announce the publication of our 2023 Sustainability Report in March of this year. We remain committed to our publicly stated goals of fostering a zero harm culture and achieving carbon neutrality by 2,030 through 100 percent renewable energy procurement.

Speaker 3

Wind blades produced by us in 2023 are estimated to prevent approximately 346,000,000 metric tons of CO2 emissions over their 20 year lifespan. We are advancing towards our 2,030 goal of carbon neutrality, achieving an 18% reduction in overall market based scope 1 and 2 CO2 emissions. In Turkey, we invested in 2 wind turbines and additional solar panels. Further to enhance on-site renewable energy use, we signed a power purchase agreement in India. We reduced total annual waste generated by 12%.

Speaker 3

Our behavior based safety program continued to yield safety results outperforming industry standards and our internal goals and we have fully embraced our IDEA program and were recognized with numerous awards for our commitments to inclusion and diversity around the globe. In the U. S, our LEAP For Women program was recognized with a GRID Award for Best Affinity Group. In Mexico, we were recognized as a top employer. In India, we were recognized as one of the 100 Best Companies for Women.

Speaker 3

And in Turkey, we were awarded the Silver Stevie Great Employers Award for achievement in diversity and inclusion. Advancing our sustainability goals remains a priority in 2024. We're actively negotiating a purchase power agreement in Mexico to ensure 100% renewable energy for our facilities there. Additionally, we're working to expand on our recent PPA in India. These investments go beyond environmental benefits.

Speaker 3

They also make strong economic sense contributing directly to the improvement of our financial performance. Please turn to Slide 7. Consistent with the guidance we provided during our 2023 Q4 earnings call, sales and adjusted EBITDA in the Q1 of 2024 were lower than in the prior year due to the timing of production line start ups and transitions across several of our facilities. However, they were slightly ahead of our plan, so we are still on track for the full year. Let me remind you that we expect to go back to positive EBITDA margins and positive free cash flow in the second half of the year after we get through the process of ramping up the ten lines that are in start up or transition in the first half of the year.

Speaker 3

I'm confident in our ability to achieve mid single digit adjusted EBITDA margins in the second half of the year given the excellent operational execution we are seeing today in most of our plants. The 23 $23,000,000 adjusted EBITDA loss in the Q1 included $22,000,000 related to start up and transition costs, dollars 9,000,000 of unanticipated losses from the Nordex Matamoros plant due to temperature and humidity issues as well as decreased volume requirements and we recorded an $8,000,000 charge to account for the inflationary impact of completing pre existing warranty claims. Without these items, our adjusted EBITDA margin would have been over 5% and that's at a 67% factory utilization level. I'm not expecting these items to impact us in the second half of the year, which is why we will return to solid margin performance in the 3rd and 4th quarters when our utilization climbs well above 80%. Activity to transition the Matamoros plant back to Nordex are in full swing and we are on track to return the facility by June 30 as planned.

Speaker 3

Our use of cash in the quarter was primarily to fund our start ups and transitions and was aligned with our expectations. We believe our quarter end cash balance of $117,000,000 along with access to existing credit facilities and the significant impact of the strategic refinancing with Oaktree provides us ample liquidity to navigate current market conditions and ultimately expand to meet our customers' growing needs as we target a return to positive cash flow in the second half of the year. Please turn to Slide 8. Turning to our wind business performance. Our blade facilities in India and Turkey continued to be profitable, delivering 241 blade sets, representing 1.4 gigawatts of capacity during the quarter.

Speaker 3

Most of our Mexico operations performed well even while going through numerous transition start ups and volume adjustments. Overall, our operating performance is benefiting from our renewed focus on lean, embracing lean practices and ensuring they are part of our day to day culture will enable us deliver greater value to our customers while optimizing our cost structure, maximizing productivity and manufacturing the highest quality blades in the industry. Moving on to our field service business. As anticipated, our global service revenue declined year over year. This reflects a temporary reduction in technicians assigned to revenue generating projects due to the warranty campaign announced last year.

Speaker 3

We expect our technicians to return to normal levels of revenue generating work by mid year. Despite continued progress building the automotive segment's order pipeline and operational execution and notwithstanding growth in non Proterra revenue, Q1 revenue fell year over year due to the Proterra bankruptcy. The growth in non Proterra revenue was largely due the launch of a new product line for our largest passenger EV customer. While we've made significant investments in expanding our automotive business over the past years and continue to see strong growth potential for composite products and electric vehicles, we're prioritizing capital allocation towards the wind business. To ensure our automotive segment has the resources and support to execute its growth strategies, we've been exploring strategic alternatives and expect to finalize by the end of the Q2.

Speaker 3

Our supply chain execution and cost performance remained very stable. Raw material costs have decreased compared to this time 2023 with further savings expected due to excess manufacturing capacity in China. Logistics around the Red Sea situation remain well managed with no operational or significant cost impacts to date. Now with respect to the wind market, we are seeing the beginnings of an onshore wind rebound driven by ambitious government action, including the Inflation Reduction Act in the U. S.

Speaker 3

And the EU Green Deal and Repower EU policies in response to the need for greater energy independence and security to address climate change and to meet the increasing global electricity demand fueled by factors like generative artificial intelligence and data centers, EVs and the electrification of buildings. Excluding China, expectations are for global onshore installations to hold steady in 2024 with the growth inflection point in 2025 followed by continued expansion throughout the decade. And the U. S. BNEF is projecting onshore wind installations in 2024 of 8.4 gigawatts and to be nearly 20 gigawatts per year by the end of the decade.

Speaker 3

While favorable long term policies like those in the U. S. And the EU provide optimism and have helped to accelerate orders for our customers, we still don't anticipate increased wind installations in our primary markets to fully materialize until 2025. The industry still awaits some critical details on implementing key components of the Inflation Reduction Act, such as content header, prevailing wage and apprenticeship clarifications, 45 C and the transition from PTC and ITC to the new tech neutral version. Also elevated interest rates, inflation, the cost and availability of capital, permitting hurdles and transmission bottlenecks are also contributing to near term delays.

Speaker 3

There are, however, encouraging signs that the U. S. And EU are addressing permitting and transmission bottlenecks. FAWEN recently announced that permits for projects in Germany soared to a record high in the Q1 of 2024, nearly 40% higher than the same period last year. This progress is largely attributed to new laws and regulations that streamline the permitting process, including granting renewable energy projects overriding public interest status.

Speaker 3

In the U. S, the Department of Energy released a transmission interconnection road map, I2X, tackle challenges in connecting renewable energy to the grid. This road map aims to streamline the process by 2,030, focusing on faster approvals and more consistent costs while maintaining good stability. Additionally, the White House Council on Environmental Quality has finalized a rule to reform, simplify and modernize the federal environmental review process under the National Environmental Policy Act. The new rule will build on more than $1,000,000,000 from President Biden's Inflation Reduction Act to expedite federal agency permitting.

Speaker 3

Technical advances are also being made. Recent research shows reconductoring existing transmission lines with advanced conductors can double capacity existing rights of way in just 18 to 36 months. Now before I turn it over to Ryan, our financial outlook hasn't changed over the past couple of quarters as we still expect 2024 to be a year of transition. We're currently running 36 production lines, including those for Nordex and Matamoros, which are on track to transition back to them by the end of the second quarter. We are progressing nicely on the start ups and transitions, all of which will impact production volume and utilization in the first half of the year, but significant improvement is expected in the second half as these lines achieve cereal production.

Speaker 3

Despite lower utilization in 2024 compared to 2023, we still expect strong improvement in profitability as we have addressed the operational challenge faced in 2023. As such, we are reconfirming our 2024 revenue guidance of $1,300,000,000 to 1,400,000,000 dollars with an EBITDA margin between 1% 3%. In 2025, we continue to expect a significant step up in profitability with EBITDA exceeding $100,000,000 putting us back on track to achieve our high single digit EBITDA margin target in 2026 and beyond. With that, I'll turn the call over to Ryan to review our financial results.

Speaker 4

Thanks, Bill. Please turn to Slide 10. In the Q1 of 2024, sales were $299,100,000 compared to $404,100,000 for the same period in 2023, a decrease of 26%. Net sales of wind blades, tooling and other wind related sales, which hereafter I'll refer to as just wind sales, decreased by $98,700,000 in the Q1 of 2024 or 25.5 percent compared to the same period in 2023. Flight sales this quarter were negatively affected by startup and transition activities at our Mexico and Turkey facilities, expected volume declines based on market activity level and a decrease in average sales prices due to changes in the mix of wind blade models produced.

Speaker 4

This decrease was partially offset by favorable foreign currency fluctuations and an increase in tooling sales in preparation for manufacturing line startups and transition. Field service revenue declined by $1,100,000 in the Q1 of 2024 compared to the same period in 2023. Our Q1 is typically the low point for service revenue due to seasonally weather seasonal weather patterns and the nature of the work performed and this year was also impacted by the warranty campaign announced last year. We expect a full transition back to revenue generating activity by the second half of this year. Automotive sales decreased by $5,300,000 in the Q1 of 2024 compared to the same period in 2023.

Speaker 4

This decrease was primarily due to a reduction in bus body deliveries due to Proterus bankruptcy partially offset by an increase in sales of other automotive programs and the launch of the new product line for our largest passenger EV customer. Adjusted EBITDA for the Q1 of 2024 was a loss of $23,000,000 compared to adjusted EBITDA of $8,400,000 during the same period in 2023. The decrease in adjusted EBITDA for the Q1 of 2024 as compared to the same period in 2023 was primarily driven by lower sales, higher start up and transition costs and changes in estimate for pre existing warranty claims, partially offset by favorable foreign currency fluctuations. Moving to Slide 11. We ended the quarter with $170,000,000 of unrestricted cash and cash equivalents and $510,000,000 of net debt.

Speaker 4

As planned, we had negative free cash flow of $47,300,000 in the Q1 of 2024 compared to negative free cash flow of $87,100,000 in the same period in 2023. The year over year improvement was primarily driven by the absence of payments tied to the closure of our operations in China and the growth of contract assets in the Q1 of last year. The net use of cash in the Q1 of 2024 was primarily due to our EBITDA loss, capital expenditures and interest and tax payments. As previously communicated, we expect the Q2 to be the low watermark for cash. We've had much success improving the efficiency of our balance sheet over the past couple of quarters and we will remain focused on preserving cash and optimizing working capital to ensure we have the resources to execute key initiatives and restart idle capacity moving forward.

Speaker 4

A summary of our financial guidance for 2024 can be found on Slide 12. There are no changes to our original financial guidance earlier in the year and I want to reiterate that the results from the Q1 for sales, adjusted EBITDA and cash flow were in line with our plans. We continue to anticipate sales from continuing operations in the range of $1,300,000,000 to $1,400,000,000 for the year. We also continue to believe 2024 will be the tail of 2 halves. In the first half, we will be ramping up 10 lines that are either in start up or transition.

Speaker 4

We expect the first half's volume to be a fair amount lower than the second half and the first quarter will be lower than the second quarter. As we work through these transitions and startups, we are generating modest losses and consuming cash. The first half of the year, we are still expecting our adjusted EBITDA margin to be a mid single digit loss. The Q1 was likely our low point for profitability this year and we should improve somewhat in the second quarter as volumes ramp to cereal production. Our adjusted EBITDA margin improved to mid single digits in the second half of the year and we expect to be generating positive cash flow.

Speaker 4

For the full year, we anticipate capital expenditures of $25,000,000 to $30,000,000 These investments are driven by our continued focus on achieving our long term growth targets and restarting our idle lines. We continue to be confident in our liquidity position, which has improved significantly since we refinanced the Oaktree preferred shares into a term loan. We believe our balance sheet along with the improvement in our liquidity and operating results will enable us to navigate another transition year and will also allow us to invest to achieve our mid and long term growth, profitability and cash flow targets. With that, I'll turn the call back over to Bill.

Speaker 3

Thanks, Ryan. Please turn to Slide 14. The numerous government policy initiatives aimed at expanding the use of renewable energy, the need for energy independence and security and growing OEM backlogs give us confidence in the wind industry short and long term growth. We are an integral part of the Entre wind growth story and we remain focused on managing our business with an acute focus on reinforcing lean principles to enhance our operational and financial performance. We are committed to partnering with our customers by aligning our factories to support their next generation turbine models, while also actively evaluating new geographies and sites to meet their expected needs in the future.

Speaker 3

The process of start ups and transitions is progressing well, and we remain confident in our full year financial expectations as we are planning a return to mid single digit adjusted EBITDA margins and positive free cash flow in the second half of 2024. Long term prospects for TPI remain strong and we are ready to get back to adjusted EBITDA north of $100,000,000 in 2025. Finally, I want to thank all of our TPI associates for their continued commitment, dedication and loyalty to TPI. I'll now turn it back to the operator to open the call for questions.

Operator

We will now begin the question and answer session. The first question comes from Mark Strouse with JPMorgan. Please go ahead.

Speaker 2

Yes, good afternoon. Thank you very much for taking our questions. Yes, congrats on the progress. Sounds like we're getting closer and closer here. I did want to ask something on the guidance outlook.

Speaker 2

I think before you said the utilization percentage was on 36 lines. Now it's on 34. I'm sorry if I missed that, but what drove the difference in two lines?

Speaker 4

Yes. So we have Mark, I'm glad to hear from you. We have a couple of lines that we're kind of working through the contract on that through the Q1. And there are 2 lines in our India location where demand has come down and they're no longer under contract. So still working through filling that up, but it's 2 lines in our India sites that they came down for.

Speaker 4

It didn't impact our guidance or our sales or anything. All of our sales volume and everything still remains the same for 24.

Speaker 3

Okay. Got it.

Speaker 2

And then just following up on the last call, you mentioned some damages that you were seeking from the bad supply that you got. Is there any update on that timing or magnitude?

Speaker 3

Yes, Mark. Again, not going to give you the magnitude, but that claim has been filed and it's in process right now. I would expect that we would have it resolved before the end of the second quarter and it will be positive.

Speaker 2

Okay. And then lastly for me, the GE Juarez ramp, I believe you said that that's still on track. My understanding is that ramps in 2Q. Is that still correct?

Speaker 3

Yes. So we were yes. So the Mexico II facility is ramping as we speak. So that will be ramping through Q2 and into Q3. Yes.

Speaker 3

Okay. I'll take the rest offline.

Speaker 4

Hey, Mark, just to clarify, we had 2 lines up and running today and then the other two lines there are 2 more lines that will come up in Q2. It will be in sale production in the second half of the year in that plan.

Speaker 2

Okay. Thanks, Ryan.

Speaker 3

Thanks, Mark.

Operator

The next question is from Pavel Molchanov at Raymond James. Please go ahead.

Speaker 5

Yes. Thanks for taking the question. Let me start with kind of a housekeeping question. Interest expense in Q1, $21,000,000 seemed rather high. Is that going to be the run rate going forward?

Speaker 4

Yes. Pavel, so because we took the we had the fair value, the debt that we had with Oaktree in the Q4 last year and refinanced that. If you recall, we had $118,000,000 discount. And so there's really 2 components of interest and why it's at that elevated level. 1 is just the interest that we're picking.

Speaker 4

And so that for this year, that will probably be in the neighborhood of $46 ish million or so for the full year. And then the discount amortization will be around $31,000,000 And so you will see an elevated level of interest because we need to accrete that discount up. So full year, I'd expect that our interest expense on Oaktree, including that discount, is going to be in the neighborhood of 77 $1,000,000

Speaker 5

Okay. Okay. That's very helpful. On the EV business, you mentioned you're still kind of contemplating its future. Anything changed from the last time we spoke 3 months ago in that regard?

Speaker 3

No, not really. We're in advanced discussions and our plan is to have a transaction completed by the end of the second quarter.

Speaker 4

Okay. We

Speaker 5

will look forward to that. And last question, we've seen a lot of input costs across the CleanTech value chain subsiding, certainly including steel and others, carbon fiber that are relevant from your perspective. What kind of role is that playing in the margin uplift that you're envisioning for the second half of the year?

Speaker 3

Yes. I mean, that we are seeing we have seen decreases in overall raw material costs year over year from last year to this year for sure. Clearly, a portion of that we benefit from. So that's a small portion, I would say, of the uplift. The bigger portion is just getting the lines out of transition and start up into serial production and driving our utilization up north of 80%, 85%.

Speaker 3

That's the biggest driver. But there is some uplift from the commodity cost decline for sure. If you remember, Pavel, we share a bunch of that with our customers. So we get a piece of it, our customer gets a piece of it, but it is helpful for sure.

Speaker 5

Understood. All right. Thanks very much.

Speaker 3

Thank you.

Operator

The next question is from Eric Stine with Craig Hallum. Please go ahead.

Speaker 6

Hi, Bill. Hi, Ryan.

Speaker 3

Hey, Eric. How are you?

Speaker 2

Hey, doing well. Thanks. So maybe just starting on the start up and transitions, given your commentary, obviously going to be heavy again in the second quarter. Is it a kind of a similar number in terms of startup and transition costs in Q2? And then I would think that as part of your guidance that meaningfully subsides in the second half.

Speaker 3

That's correct.

Speaker 2

Okay. So the $22,200,000 I mean, I think did you complete I think it was either 4 or 6. So it's I mean, again, that's a representative number to think about?

Speaker 4

Yes. So we had 6 lines that we had started up by the end of the quarter and yet the $22,000,000 relates to those. We have 4 more lines yet to start up. I think the Q1 is from our internal forecast will probably be the heaviest quarter for start up and transition costs. So I don't expect it to be above that number that you saw in the Q1 and the Q2.

Speaker 2

Okay. That was helpful. And then just on Nordex, good to hear that that's on track to for the handover at the end of June. You called out, I believe, dollars 9,000,000 in kind of one time expenses. And I know that's a big part of your confidence in what the second half looks like.

Speaker 2

Can you just remind us though, I mean, is there a number, I mean, what are the expenses above and beyond what maybe you would call one time that hit you in the Q1?

Speaker 3

Yes, I'm not sure I would characterize them as one time. What they really what they actually were was underutilization of the plant as a result of us having to halt production for a period of time due to temperature and humidity issues in the facility, as well as their reduced demand, reduced volume needs from the customer. And as a result, you know this is a pretty fixed cost business. So that's what's created the challenge in the Q1. We see that Go ahead.

Speaker 4

Sorry.

Speaker 6

Yes, I was just going

Speaker 2

to say, so it's not $9,000,000 plus a number, it's more that's just

Speaker 3

kind of a

Speaker 2

good number to use that will not be there when you get into the second half?

Speaker 3

That's correct. That's correct.

Speaker 2

Okay. All right. And then last one for me just on the EV business. So strategic alternatives and you're talking about targeting a transaction. I mean that implies at least to me that that might no longer be part of your business going forward or is that trend same transaction kind of a catchall could mean an investment, could mean partnering that includes an investment, which is the better way to think about it?

Speaker 3

Yes, it could be any one of those, Eric.

Speaker 7

Okay.

Speaker 3

All right. You'll know by the end of the quarter.

Speaker 4

All right. Thank

Speaker 3

you. Yes. Thank you.

Operator

The next question is from Jeffrey Osborne with TD Cowen. Please go ahead.

Speaker 6

Hey, good afternoon, Bill. Just a couple of questions on my end. On the Iowa facility, as part of the CapEx guidance, can you just remind us what you'll be producing for GE there? Is that a repowering product or one of their newer blades? And then what would be the timing of when that revenue would start?

Speaker 3

Yes. So, not sure yet, Jeff. That's still to be determined. And timing is, I would say, most likely is first as early 2025 would be my best guess at this point in time. But don't have a final blade type nor a final start date yet.

Speaker 3

That's still in discussion.

Speaker 6

But it's in the CapEx guidance, just to be clear?

Speaker 3

No, that's not in the CapEx guidance. Quite frankly, Jeff, it will depend on the blade, right? If it's the same blade, we've been building the CapEx is pretty light. If it's a new blade, depending on the size of the blade, then that will be a different CapEx number. So until we understand what blade type, it's hard to predict that.

Speaker 6

So is there a way to box put bookings on that like what the upside number to CapEx would be just given the strained balance sheet with the low water point here? Because that next year $10,000,000

Speaker 3

Yes, it's probably no more than $10,000,000 would be my guess. Again, it will depend on the blade type ultimately and how many lines.

Speaker 6

Got it. The building is what suitable for is it 5, 6 lines?

Speaker 3

Right now, it's got we the last blade we built was a 62 meter blade and we had 6 lines in there.

Speaker 6

Got it. And then you spoke super fast when you had the 3 items around the EBITDA translation. So $9,000,000 was the Nordex that we talked about just before. I think $8,000,000 was the inflation on the pre existing warranty claims. What was the $22,000,000 for?

Speaker 3

That was the start up and transition costs that we incurred in the quarter.

Speaker 6

Got it. All right, perfect. That's all I had.

Speaker 3

All right, cool. Thanks, Jeff.

Operator

The next question is from Tom Curran with Seaport Research Partners. Please go ahead.

Speaker 3

Hi, guys. Hey, Tom.

Speaker 8

Casting my view out a bit longer term here and allowing us to dream a bit. Are you seeing any green shoots of potential interest that could lead you to reactivating the 2 idle lines in Turkey? And if you are, what might be the earliest we could see you do that?

Speaker 3

We really don't have idle lines in Turkey right now. We have 2 idle lines in India. And the answer is, yes, I mean, we're starting to see order books fill or backlog build. A lot of that backlog, as you probably know, is for the past 2526 and beyond. But I think as things begin to open up a little bit more in Europe, as well as the U.

Speaker 3

S, you could see those lines. So now there is a lot of activity around those lines, Tom. We are actively working or in discussions with multiple parties for those lines. So it's not that there's not activity. So we are optimistic that we fill not only those two lines that got idled, but there's 2 more lines there as well that we can activate.

Speaker 3

So we've got a total of 4 potentially to activate in India, as we move forward through the year.

Speaker 8

And those are all in Chennai, Bill?

Speaker 3

Yes, in Chennai, correct.

Speaker 8

Yes. And sorry, I misspoke when I said Turkey. I didn't mean India. And could we if all went well, would we expect to see the CapEx and production contribution from those most likely in 2025?

Speaker 3

Given where we're at in the year, probably. It's most likely that it would be 25. You start to see the revenue in 2025 as well as contribution. CapEx, again, depending on blade size, number of blades, etcetera, the CapEx will vary there. I mean, that's already an 8 line facility, where we've built it out pretty nicely.

Speaker 3

So there shouldn't be a ton of CapEx as we activate those four lines.

Speaker 8

Maybe like $2,000,000 to $4,000,000 range?

Speaker 3

Again, it will depend on blade size, quite frankly. I hate to keep saying that, but that's pretty important is the blade size. So I mean we sized it for 80 plus meter blades for 8 lines, depending on who the customer is. Just if we fill all eight lines.

Speaker 8

Got it. And then sticking with blade size and how important it is, shifting back to Newton, Iowa and how seriously GE seems to be deliberating whether to stick with the 127 versus shifting to the new workhorse model, in part from my understanding because of its popularity for repowering, especially given the share gains GE seems to have made in the U. S. Market. As you look to the next upcycle in the U.

Speaker 8

S, do you expect repowering to play a bigger role in this next up cycle than it did in the prior one?

Speaker 3

Yes, certainly than it did in the prior one. The numbers I've seen are pretty are fairly significant in the U. S. Between now and kind of 2,030 timeframe. So yes, I mean the bulk of it will still be new installed, but there is a fair amount of repowering that we're seeing in the marketplace.

Speaker 3

So I do think that it will play a much bigger role this time around than it did last time for sure. Got it.

Speaker 8

Thanks for taking my questions.

Speaker 3

Thanks,

Operator

Tom. The next question is from William Griffin with UBS. Please go ahead.

Speaker 7

Hey, good evening. Thanks for the time. Just one for me here. Really curious if you have any comments around what you're seeing in terms of offshore wind discussions with your customers, just given the pullback in a lot of U. S.

Speaker 7

Projects and perhaps is that maybe shift away from offshore creating some opportunities for some of your onshore production?

Speaker 3

So on the first part of the question, not having a lot of active discussions today in the offshore space. And I'm not sure that that really has an impact on what we're doing from an onshore perspective. I will tell you as we look at where onshore growth may be, we're always keeping in mind the off offshore side of it as well. And where we might think about different geographies, we would certainly keep in mind an offshore play at some point in time, but today that's certainly on the back burner.

Speaker 7

Got it. Thanks very much.

Speaker 3

Yes. Thanks, Will.

Operator

The next question is from Patrick Ouellet with Stifel. Please go ahead.

Speaker 7

Hey, it's Pat on for Steven Jagera. Thanks for taking the question. So just a quick one on the ASP side, price came down from last year. Is the expectation still here that you get a rebound in ASP from the better mix of any of those lines coming on from the transition or a pickup in ASP from any of the lines that came on recently? Does the expected increase in ASP look like a step up in flatliner?

Speaker 7

Should we be anticipating somewhat of a gradual increase into 2025?

Speaker 4

Patrick, I think this quarter it was a little bit of an anomaly. I think we had material costs come down a little bit, so that also impacts ASPs for us. But it was really just a mix issue with the mix of the blades we had. It's pretty low volume quarter, so that mix issue can be exasperated when that occurs. The new blades that we're bringing online, they're all bigger, longer, heavier, more expensive blades.

Speaker 4

They're all refreshed blades from the OEMs that we expect to be in production for many years to come. So because of that, they're bigger and longer, they'll be higher ASPs, which drove our guidance when we originally said our ASPs are expected to be up about $8,000 of late or so. So I would expect that you'll see that gap close here in the second quarter. In the second half, you really see a differential there when we're in serial production and all the newer blades.

Speaker 7

All right. Thanks a lot. That's all for me.

Operator

This concludes the question and answer session. I would now like to turn the conference back over to Bill Cielek for any closing remarks.

Speaker 3

Yes. Thank you. And thanks again for your time today and continued interest and support of TPI. Look forward to talking to you again soon. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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TPI Composites Q1 2024
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