Broadwind (BWEN) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Eric Blashford
• Vice President and Chief Financial Officer - Thomas Ciccone

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TAKEAWAYS

• Revenue -- $22.3 million, representing 48% year-over-year growth driven by increased demand in both the Gearing and Industrial Solutions segments.
• Adjusted EBITDA -- $0.5 million, an improvement from an adjusted EBITDA loss of $1.2 million in the prior-year third quarter reflecting higher volumes and operating leverage.
• Total Orders -- $33.7 million, increasing 13% year over year with power generation-related orders accounting for more than 70% of the quarterly book.
• Industrial Solutions Orders -- $19.6 million, up 42% year over year to a record level as natural gas turbine demand remains strong.
• Industrial Solutions Backlog -- $57 million, marking a new record and a ninth consecutive quarter of growth for the segment.
• Gearing Orders -- $9.8 million, a decrease from $15.9 million in the prior-year period due to the absence of a one-time $6 million gas turbine order received last year.
• Gearing Backlog -- $37.8 million, representing a fifth consecutive quarter of backlog growth for the division.
• Industrial Solutions Revenue -- $10.4 million, an increase of 32% year over year supported by growing backlog and demand for natural gas turbine content.
• Gearing Revenue -- $9.6 million, rising 36% year over year due to robust activity across power generation, industrial, and oil and gas end markets.
• GAAP Loss from Continuing Operations -- $1.0 million, or $0.04 per diluted share, compared to income of $5.2 million in the prior-year third quarter.
• Industrial Solutions Adjusted EBITDA Margin -- 13%, moderating from high-teens levels in recent quarters due to shifts in product mix and operating profile.
• Pro Forma Liquidity -- $16.5 million, consisting of cash and credit facility availability following the acquisition of MCM and related debt amendments.
• Pro Forma Debt -- $13 million, adjusted for the MCM acquisition compared to $5.9 million of debt and finance leases at quarter end.
• Oil and Gas Orders -- Nearly $6 million in the Gearing segment, representing more than double the level recorded in the prior-year period.
• Pressure Reducing Systems Orders -- Over $4 million, contributing to the overall order growth and momentum in the third quarter.
• Gearing Operating Income -- $0.1 million, marking the first operating profit for the segment since the second quarter of 2024.
• Frac Spreads -- 13% year-over-year increase, providing a lift to the traditional oil and gas business and pressure pumping growth.
• Adjusted Liquidity -- $30.9 million at quarter end, after accounting for the $8.8 million minimum excess availability requirement on the credit facility.

SUMMARY

Broadwind, Inc. (NASDAQ:BWEN) reported a 48% increase in total revenue for the third quarter as it continues a strategic transition into a precision manufacturing business focused on domestic power generation and critical infrastructure. Management attributed the performance to record order intake and backlog growth in the Industrial Solutions segment, alongside a return to operating profitability in the Gearing division. On October 30, 2026, the company completed the acquisition of MCM, a vertically integrated supplier for the electrical transmission and distribution market, which is expected to be immediately accretive. Management stated the acquisition aligns with efforts to diversify into higher-margin revenue streams while maintaining a long-term target of reducing net leverage below 2.0x through earnings growth and debt repayment.

• MCM operates a 37,000-square foot facility in Alabama and provides precision-engineered components for major utilities that must meet stringent conductivity and corrosion resistance standards.
• The company is pursuing Cybersecurity Maturity Model Certification (CMMC) Level 2, with certification expected in early 2027 to provide a competitive advantage in the defense market for programs involving controlled unclassified information.
• Industrial Solutions added 30% manufacturing capacity this year, and CEO Blashford noted the segment could further increase output by adding a second shift within its current brick-and-mortar footprint.
• Management optimized the Gearing segment by vacating 4,000 square feet of underutilized space in its Illinois facility, a move intended to improve production flow without reducing the capacity needed for a $65 million to $70 million annual revenue run rate.
• The demand for natural gas turbines is supported by broad electrification trends, including the increasing power needs of data centers.
• Management reported that Gearing order activity in the early fourth quarter is on pace to exceed the levels achieved in the third quarter.

INDUSTRY GLOSSARY

• Pressure Reducing Systems (PRS): Equipment designed to lower the pressure of natural gas as it moves from high-pressure transmission lines to lower-pressure distribution systems.
• CMMC Level 2: A cybersecurity standard required by the Department of Defense for contractors to demonstrate they can protect sensitive defense information.
• Frac Spread: A complete set of equipment, including pumps and power units, used to conduct hydraulic fracturing operations at a well site.
• Accretive: An acquisition that increases the purchasing company's earnings per share.
• Combined Cycle Natural Gas Turbine: A high-efficiency power plant configuration that uses both a gas turbine and a steam turbine to produce electricity.

Full Conference Call Transcript

Operator: Greetings, and welcome to Broadwind's Third Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Tom Ciccone. Thank you. You may begin.

Thomas Ciccone: Good morning, and welcome to the Broadwind Third Quarter 2026 Results Conference Call. Leading the call today is our CEO, Eric Blashford; and I'm Tom Ciccone, the company's Vice President and Chief Financial Officer. We issued a press release before the market opened today detailing our third quarter results. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially.

For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. As we noted last quarter, the results of the Heavy Fabrication segment, excluding pressure reducing systems, have been reflected as discontinued operations. Unless otherwise noted, the discussions today will relate to our continuing operations. At the conclusion of our prepared remarks, we'll open the line for questions. With that, I'll turn the call over to Eric.

Eric Blashford: Thanks, Tom, and welcome to our call. During the third quarter, we continued to execute on a strategic transformation into a pure-play precision manufacturing business focused on domestic power generation and critical infrastructure markets. Our Industrial Solutions segment had yet another strong quarter as orders increased 42% year-over-year to a record $19.6 million, driving backlog to a new record of $57 million. Natural gas turbine demand remains strong, supported in part by broad global electrification trends, which include data centers. Gearing orders were $9.8 million and backlog grew to nearly $38 million. Demand growth within the Gearing segment has been supported by strong customer activity within upstream oil and gas. Quoting activity remains robust in this segment.

Consolidated revenue increased 48% year-over-year to $22.3 million and adjusted EBITDA improved to $0.5 million. Total orders were $33.7 million, an increase of 13% with power generation-related orders representing more than 70% of our third quarter order book. Gearing sales increased 36%, while Industrial Solutions sales increased 32% and Gearing achieved its first operating profit since the second quarter of 2024. Tom will walk through the segment results in more detail. On October 30, we completed our first acquisition in nearly a decade with the purchase of MCM. MCM is a vertically integrated component supplier serving the domestic electrical transmission and distribution market.

Based in Alabama, MCM is a precision manufacturer with a 30-year track record of designing, engineering and fabricating metal components for the electric utility and critical infrastructure markets. From its 37,000-square foot facility in Northport near Tuscaloosa, MCM supplies mission-critical hardware to some of the nation's leading utilities with products engineered to meet stringent standards for corrosion resistance, conductivity and performance under extreme weather conditions in high-power transmission line applications. Through a vertically integrated offering that includes machining, fabrication, assembly, kitting and delivery, MCM has established itself as a leading component provider to the domestic electrical transmission and distribution sector.

MCM is 100% U.S.-based and sources all raw materials through an established domestic supplier network, creating a responsive and reliable supply of products for its customers on demand. The acquisition expands our exposure to sustained investment in grid expansion, hardening and resilience and is consistent with our power generation and critical infrastructure vertical market strategy. MCM aligns with the key criteria of our acquisition strategy. It adds a higher-margin revenue stream, which we expect to be immediately accretive, serves stable growing end markets, has a strong competitive moat and consistent profitability, operates within a fully domestic footprint and offers a clear pathway toward integration.

Our priorities are to integrate MCM successfully, protect customer service and operating continuity and begin capturing the commercial and operational benefits of the combination. During my various visits to MCM, both prior to and immediately after the announcement, I've had the pleasure to meet with each team member and share our core values of commitment, accountability, respect, energy and safety. The MCM team is excited to be part of Broadwind and execute our growth plan, leveraging the opportunities we see in the electrical transmission and distribution market. With that, I'll turn the call over to Tom for a discussion of our third quarter financial performance.

Thomas Ciccone: Thank you, Eric. Turning to Slide 5 for an overview of our third quarter performance. The third quarter was another strong period for Broadwind with significant revenue growth, improved profitability and continued backlog growth across both operating segments. Third quarter consolidated revenues were $22.3 million, up 48% from the prior-year period. The increase reflects strong order activity and backlog conversion across both the Gearing and Industrial Solutions segment, along with higher PRS activity. Adjusted EBITDA improved to $0.5 million compared to an adjusted EBITDA loss of $1.2 million in the prior-year third quarter. Third quarter orders were nearly $34 million, up 13% year-over-year.

Order activity was led by continued strength in Industrial Solutions and increased PRS demand, where we booked over $4 million in orders. Turning to Slide 6 for a discussion of our Gearing segment. Q3 Gearing orders were $9.8 million, down from the $15.9 million in the prior-year period. The year-over-year decline is attributable to the absence of a $6 million order we received last year from a leading OEM of natural gas turbines. Oil and gas orders were nearly $6 million during the quarter, more than double the prior-year level, partially offsetting the impact of that large gas turbine order. We ended Q3 with $37.8 million in backlog, marking our fifth consecutive quarter of backlog growth.

Through the early part of the fourth quarter, Gearing order activity is strong, and we are currently on pace to exceed third quarter order levels. Segment revenue was $9.6 million, an increase both sequentially and versus the prior year, reflective of strong demand across all major end markets served, primarily power gen and industrial. Adjusted EBITDA was $0.7 million compared with $0.1 million in the prior-year period. As we noted previously, as our volumes continue to increase, we expect to benefit from improved capacity utilization and operating leverage, supporting higher margins over time. Turning to Slide 7. Industrial Solutions booked $19.6 million in new orders during the third quarter, an increase of 42% over the prior year and 13% sequentially.

Industrial Solutions maintained its solid momentum, again achieving new records in both orders and backlog while extending its backlog growth streak to 9 consecutive quarters. Third quarter segment revenue was $10.4 million, up 32% versus the prior-year period, reflective of our growing backlog and strong demand for our natural gas turbine content. Third quarter adjusted EBITDA was $1.4 million versus $0.6 million recorded in the prior-year period. This improvement reflects higher capacity utilization and operating efficiencies realized during the quarter. As we discussed last quarter, we expected EBITDA margin to moderate from the high-teens levels we experienced over the previous 3 quarters. Consistent with that expectation, third quarter adjusted EBITDA margin was approximately 13%.

Looking forward, we believe a low double-digit EBITDA margin is a more appropriate expectation based on our current mix and operating profile. We also currently expect our revenue to remain above recent historical levels, subject to customer schedules, product mix and prevailing market conditions. Turning to Slide 8. We ended the third quarter with total cash and availability on our credit facility of nearly $40 million or $31 million after adjusting for our minimum excess availability requirement. On a pro forma basis, after giving effect to the MCM acquisition and the related credit facility amendment announced on November 2, cash and availability under our credit facility was approximately $16.5 million with total debt of $13 million.

We believe our pro forma liquidity position provides us the financial flexibility we need to support our growing businesses in terms of operating working capital and any other growth capital that may be required. Furthermore, with the addition of MCM, we anticipate being able to generate free cash flow moving forward and bring net leverage below our long-term target of 2.0x through earnings growth and debt repayment. That concludes my remarks. I'll turn the call back over to Eric to continue our discussion.

Eric Blashford: Thanks, Tom. As we look ahead, our priorities are clear: successfully integrate and grow MCM, continue optimizing our asset base around our vertical market strategy and drive focused organic growth with new and existing customers in power generation and critical infrastructure. In Industrial Solutions, we continue to see strong demand for natural gas turbine components and related products. Our customers are filling our expanded capacity with new orders as they bring additional capacity online. This activity reinforces our view that investment in reliable generation capacity represents a durable multiyear opportunity.

In Gearing, we remain focused on converting stronger demand into consistent earnings improvement through higher utilization, efficient production flow and continued expansion beyond traditional gearing for new opportunities in precision machine components for power generation, defense, aerospace and other critical applications. As part of our strategy, our progress towards CMMC 2.0, or the Cybersecurity Maturity Model Certification Level 2, continues, and we expect to have that certification early next year. CMMC Level 2 certification represents a meaningful qualification advantage for programs involving controlled unclassified information and creates an additional barrier to entry for competing suppliers in the defense market. Additionally, we are seeing improved activity from our traditional oil and gas customers.

The MCM acquisition extends our platform into electrical transmission and distribution and provides Broadwind with a complementary higher-margin product offering. Our integration approach will be measured and customer-focused with an emphasis on preserving the capabilities and relationships that have supported MCM's consistent performance. Our capital allocation approach remains focused on long-term shareholder value. Our priorities are to invest in profitable organic growth, integrate MCM and improve operations and reduce debt while maintaining healthy liquidity. Near term, our focus is integration and bringing net leverage below 2.0x. Over time, we will stay selective on acquisitions, looking for durable end markets, a clear competitive advantage, solid profitability, a domestic manufacturing footprint and a fair valuation.

In summary, we exited the third quarter with strong organic revenue growth, improved profitability in both reporting segments, robust order momentum and a broader, more diversified platform following the MCM acquisition. We believe Broadwind is increasingly well positioned to serve the growing needs of domestic power generation and critical infrastructure customers and to build a more consistent, higher-quality earnings profile over time. With that, I'll turn the call over to the moderator for the question-and-answer session.

Operator: [Operator Instructions] Our first question comes from Eric Stine with Craig-Hallum.

Eric Stine: So just maybe starting with Industrial Solutions. Obviously, great order trajectory, backlog. But just thinking about this going forward, I know that a big part of that business is tied to GE Vernova. And I know you've got a bit of a lag, but given what's happened with their order book and backlog, just curious if you could talk about capacity needs down the road. I know you've expanded in North Carolina here recently, but it would seem like you may need to do that again.

Eric Blashford: Yes. Eric, thank you. You're correct. Primary customers certainly are growing. GE Vernova even said their orders were up 178%. So we are expanding to match that capacity requirement. But keep in mind, the 30% we added this year, that's still only one shift. So we can move to a second shift to expand that quite a bit. And as we talked about before, if we need to, we can move our manufacturing to an adjacent site. We'd have to find that site to open up more capacity with that within our Sanford facility. So we feel confident that we can grow materially and keep up with our customers, at least for the next couple of years.

Eric Stine: Okay. So not -- I mean, it sounds like fairly minimal CapEx and not really a heavy lift to do that to just stay in a good position there?

Eric Blashford: Correct. Correct. Of course, you have to find the people, which isn't always easy, but the brick-and-mortar is there, especially with this expansion, to match the growth of our customers.

Eric Stine: Yes. Okay. Understood. And then maybe Gearing, you talked about -- thinking about the orders there. I mean, it's been elevated for 4 quarters, and you did talk about the step-down this quarter because you didn't have the $6 million order that you had last year, but offset by oil and gas strength. I mean, can you just dig into that a little bit more? I mean, because it is -- I mean, it sounds like things are robust in terms of quoting and that this is probably more of a timing issue than anything else, but maybe a little more detail would be helpful.

Eric Blashford: Sure, 100%. We're pretty -- we're very confident and bullish and constructive on power gen still. Some of the large orders, as we've said before, can be a little bit lumpy because they order quite a bit at a time. So we do expect that to continue. U.S. frac seems to be giving us a little bit of a lift. As we mentioned, frac spreads are up 22 or about 13% year-over-year. So we're starting to see that lift. For a while there, frac spreads were not increasing, but they have increased over the last year, and we're starting to get some lift from that. So we're seeing pressure pumping mid-single-digit growth.

So we are expecting that to continue going forward. So look for us to continue to have growth in orders in power gen and more traditional frac businesses. But of course, material handling and mining is also part of our core product set. And they are also constructive, although they're not growing to the extent that power gen and fracking is.

Thomas Ciccone: Yes. Eric, the only other thing I'll add is while the comps aren't favorable versus the prior year or sequentially, both of those totals around $16 million, those are near record levels for us. So when we compare back to those 2 numbers, it's not going to -- we knew we had a big hurdle here in terms of a comp. But as I pointed out earlier, we're already on pace to exceed that Q3 order total in the Gearing segment. So...

Operator: Our next question comes from Justin Clare with ROTH Capital Partners.

Stefan Thomson: This is Stefan Thomson on for Justin Clare. With the Gearing facility in Illinois stepping down to about 197,000 square feet from 201,000 on December 1, does the remaining space still support the $65 million to $70 million of Gearing revenue you've discussed? Are you looking to replace the capacity? And is there any cost savings associated with the reduction?

Eric Blashford: Great question. Yes, great question. Thanks for that. So the space that we vacated was actually not optimum space. It was actually low ceiling height. So it wasn't optimum to build the products that we build. The space that we've maintained is definitely enough for us to be able to achieve that $65 million, $70 million run rate we've been talking about. What we simply did is optimize some underutilized space that was really not best for producing gearing and moved our equipment into the more optimized space.

Operator: We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Eric Blashford for closing comments.

Eric Blashford: Yes. Thanks, everyone, for listening. We look forward to coming back to you after the year-end to discuss our 2026 results and give you an update on our execution of our strategy going forward. Thank you.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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