TPI Composites, Inc. is a leading manufacturer of composite wind blades, serving the global wind energy market. With a global manufacturing footprint and a strong focus on innovation, TPI Composites has positioned itself as a premier provider of wind blade solutions.
Company History and Overview TPI Composites was founded in 1968 and is headquartered in Scottsdale, Arizona. The company started as a small player in the wind blade manufacturing industry, facing significant challenges in a highly competitive market. However, through investments in innovation and forming strong partnerships with OEM customers, TPI Composites established itself as a reliable supplier of wind blades. A significant milestone was reached in 2001 when the company opened its first wind blade manufacturing facility in the United States.
Over the following decade, TPI Composites expanded its global presence, opening additional facilities in Mexico, Turkey, and India. This expansion allowed the company to better serve its OEM customers and leverage local talent and cost structures in these regions. However, the company also faced challenges such as rising raw material costs and increasing competition from Chinese manufacturers.
In 2018, TPI Composites made a strategic decision to exit its automotive business to focus solely on the wind energy market. This move, while difficult, was necessary as the automotive segment was underperforming and distracting the company from its core wind blade operations. The divestiture allowed TPI Composites to streamline its operations and concentrate on its strengths in wind blade manufacturing.
Throughout its history, TPI Composites has demonstrated resilience in the face of industry headwinds, weathering commodity price fluctuations, trade tensions, and the impact of the COVID-19 pandemic. The company has maintained its position as a leading independent wind blade manufacturer by continuously improving operational efficiency, investing in new technologies, and fostering strong relationships with its customers.
Today, TPI Composites is the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. The company's core business revolves around the design, manufacture, and delivery of high-quality composite wind blades, partnering with leading OEMs in the wind energy industry to provide customized blade solutions. In addition to wind blade production, the company also offers field service, inspection, and repair services to wind farm owners and operators.
Financials and Liquidity
Financial Performance and Ratios Over the past three years, TPI Composites has experienced fluctuations in its financial performance. In 2021, the company reported annual revenue of $1.47 billion and a net loss of $159.5 million. This was followed by a slight improvement in 2022, with annual revenue of $1.52 billion and a net loss of $65.3 million. In the most recent fiscal year (2023), TPI Composites reported revenue of $1.46 billion, with a net loss of $201.78 million.
For the third quarter of 2024, TPI Composites reported revenue of $380.76 million, a 2.8% increase compared to the same period in 2023. This growth was driven by higher average sales prices of wind blades due to changes in the mix of models produced, as well as an increase in wind blade inventory included in contract assets. However, the company still reported a net loss of $40.07 million for the quarter.
Financials Looking at the company's liquidity and solvency ratios, TPI Composites has maintained a current ratio of around 1.4 over the past three years, indicating a healthy ability to meet short-term obligations. As of September 30, 2024, the current ratio stood at 1.03, with a quick ratio of 0.94. The company's debt-to-equity ratio has been elevated, ranging from 1.7 in 2021 to 2.0 in 2022. As of September 30, 2024, the debt-to-equity ratio was -4.96, reflecting the company's challenging financial position.
In terms of profitability, TPI Composites has struggled to maintain consistent profitability, with negative net profit margins in both 2021 (-10.9%) and 2022 (-4.3%). The company's return on equity (ROE) has also been negative, reflecting the challenges it has faced in generating profitable growth.
Liquidity As of September 30, 2024, TPI Composites had cash and cash equivalents of $125.87 million. The company also had $19.1 million of remaining availability for cash borrowing under its various credit facilities. In terms of cash flow, TPI Composites reported operating cash flow (OCF) of -$80.97 million and free cash flow (FCF) of -$117.11 million for the fiscal year 2023. For the third quarter of 2024, OCF improved to $1.07 million, while FCF was -$5.61 million.
Recent Operational Execution and Strategic Initiatives TPI Composites operates in two main segments: Wind Blade, Tooling and Other Wind Related Sales, which accounts for over 95% of total net sales, and Field Service, Inspection and Repair Services. In the third quarter of 2024, the company saw a 45.8% increase in field service, inspection and repair services sales due to an increase in technicians deployed to revenue-generating projects.
The company's performance varies across its geographic markets. In the third quarter of 2024, the U.S. segment generated $7.42 million in revenue, up 62.4% year-over-year. The Mexico segment, which is the largest, generated $206.34 million in revenue, up 31.5% year-over-year. The EMEA segment generated $123.95 million in revenue, down 17.0% year-over-year, while the India segment generated $43.05 million in revenue, down 27.7% year-over-year.
TPI Composites has also been actively pursuing strategic initiatives to strengthen its competitive position. In 2024, the company announced plans to reopen its wind blade manufacturing facility in Iowa to support GE Vernova's 2-megawatt platform, which has proven to be a popular option for repowering projects. Additionally, the company is exploring alternatives for the divestiture of its tooling business as part of its continued focus on the core wind blade business.
Risks and Challenges While TPI Composites has made progress in improving its operational execution and profitability, the company still faces several key risks and challenges:
1. Inflationary Pressures: The company has experienced significant cost increases in labor and raw materials, particularly in its Türkiye operations, which have adversely impacted its margins.
2. Competitive Landscape: TPI Composites faces intense competition from Chinese blade manufacturers, who have been aggressively expanding their presence in Europe and other regions outside of North America, supported by government subsidies.
3. Customer Concentration: A significant portion of TPI Composites' revenue is derived from a limited number of large customers, making the company's financial performance heavily dependent on these key relationships.
4. Regulatory and Policy Uncertainty: Changes in government policies and regulations, particularly in the renewable energy sector, can have a significant impact on the demand for wind energy and, consequently, the company's business.
5. Supply Chain Disruptions: Disruptions in the global supply chain, such as those caused by the COVID-19 pandemic, can disrupt the company's ability to source critical raw materials and components, affecting its production and delivery capabilities.
6. Legal Challenges: In January 2021, TPI Composites received a complaint filed by the administrator for the Senvion GmbH insolvency estate in the Hamburg District court, asserting voidance claims against TPI in the aggregate amount of $13.3 million. While the company believes it has meritorious defenses, this legal challenge poses a potential financial risk.
Outlook and Guidance For the full year 2024, TPI Composites expects to generate revenue of approximately $1.35 billion, which is in the middle of the previously guided range of $1.3 billion to $1.4 billion. The company has lowered its adjusted EBITDA guidance to a loss of approximately 2%, down from the previous guidance of a positive adjusted EBITDA margin of approximately 1%.
This adjustment reflects the impact of the company's actual results in the third quarter, as well as the quality-focused moderation of its start-ups and transitions. TPI Composites is also making investments to increase production capacity at its existing facilities in Mexico to support strong demand in the U.S. market. The company expects the fourth quarter of 2024 to be EBITDA positive and the strongest free cash flow generation quarter of the year.
Looking ahead to 2025, TPI Composites faces some headwinds, including continued inflation, particularly in Turkey, and demand declines in Turkey and India from customer Nordex, with volumes expected to be down around 40% compared to previous expectations. The company is working to replace the volume shortfall and exploring strategic alternatives to maximize the value of its Turkey operations.
While the company has faced challenges in the near term, it remains focused on executing its strategic initiatives and capitalizing on the long-term growth opportunities in the global wind energy market. The global demand for clean energy continues to rise, driven by factors such as the growing need for data centers, semiconductor chip manufacturers, the adoption of electric vehicles, and the electrification of buildings. Government policy initiatives aimed at expanding renewable energy, such as the Inflation Reduction Act in the U.S. and initiatives in the EU, are expected to enable long-term revenue growth in the global onshore wind industry.
Conclusion TPI Composites has demonstrated resilience in the face of various market and operational challenges. The company's focus on operational execution, strategic initiatives, and innovation has enabled it to navigate the complexities of the wind energy industry. However, ongoing inflationary pressures, competitive threats, and supply chain disruptions continue to pose risks to the company's long-term growth and profitability. As TPI Composites navigates these challenges, its ability to adapt and capitalize on the growing demand for renewable energy solutions will be crucial to its future success. While the company remains optimistic about achieving its long-term targets, the timing has shifted due to overall market conditions, increased competition outside the US, and a more deliberate approach to transitions and start-ups.