Broadwind, Inc. Q1 FY2026 earnings call

Strategic Transformation

• The company is executing a decisive strategic shift away from policy-dependent, unpredictable wind tower production, with full exit expected to complete in Q3 2026.
• Post-exit, core businesses will be Gearing and Industrial Solutions, which are higher-growth, more predictable, more profitable, and have improved earnings quality.
• Management plans to use the two core segments as a platform to grow scale and profitability, and is actively evaluating inorganic expansion opportunities aligned with its focus.

Demand Drivers

• Strong demand for both core segments is driven primarily by the AI data center boom, which has increased demand for power generation and natural gas turbine components.
• Additional growth drivers include global electrification, critical infrastructure development, and early green shoots in aerospace and defense end markets.
• Early signs of improvement are visible in the oil and gas fracking aftermarket, as customers reactivate older rigs and replace worn components.

Operational Investments

• In Gearing, new high-precision grinding and mechanical balancing equipment was commissioned, improving quality and reducing lead times for high-speed reduction gearing and making the company one of the most vertically integrated manufacturers of these components in the U.S.
• In Industrial Solutions, a 30% expansion of production space at the North Carolina facility is on track to complete in Q2 2026 to accommodate strong backlog and projected future growth.
• The company is progressing on industry-specific certifications including AS9100 for aerospace and CMMC 2.0 for defense, with CMMC 2.0 completion expected by the end of 2026.

Financial Position

• End-of-Q1 total cash and credit facility availability was over $25 million; pro forma for the Abilene facility sale, liquidity will improve by approximately $10 million after required debt payments.

Consolidated revenue for Q1 2026 was $34.1 million, an 8% year-over-year decrease. Adjusted EBITDA was $2.2 million, a slight decline from $2.4 million in the prior year period, but up 16% sequentially.

1. Heavy Fabrication: Q1 2026 revenue was $16.4 million, down 35% year-over-year, accounting for 48.1% of total consolidated revenue. Adjusted EBITDA was $1.7 million, down from the prior year. Orders reached $9.7 million, primarily for remaining wind tower production and PRS activity. Backlog is on track to wind down as the segment exits wind tower production.

2. Gearing: Q1 2026 revenue was $8.5 million, up 42% year-over-year, accounting for 25% of total consolidated revenue. Orders increased 66% year-over-year to $13.2 million, ending the quarter with a backlog of $30.5 million, the highest level since 2023. Adjusted EBITDA was $0.6 million, a reversal from the prior year's $0.2 million adjusted EBITDA loss, driven by improved capacity utilization and operating leverage.

3. Industrial Solutions: Q1 2026 revenue was $9.2 million, up 64% year-over-year, accounting for 26.9% of total consolidated revenue. Orders increased 44% year-over-year to $14.6 million, driving a record backlog of $43.3 million (the sixth consecutive quarter of record backlog). Adjusted EBITDA grew to $1.8 million (19% margin) from $0.5 million (8.7% margin) in the prior year, benefiting from improved capacity utilization and favorable product mix.

• Management withdrew all full year 2026 financial guidance in conjunction with the announced sale of the Abilene facility and completion of the wind business exit.
• Management expects steady, ratable revenue growth for the Gearing and Industrial Solutions segments for the remainder of 2026, with Q1 2026 identified as the low revenue watermark for both segments.
• Gearing segment margins are expected to continue improving radically as volume increases and operating leverage improves, given the segment's largely fixed cost structure.
• Industrial Solutions margins are expected to normalize over the remainder of 2026 after two consecutive quarters of unusually strong product mix.
• Management expects the current strong demand growth for natural gas power generation components to be an extended, multi-year super cycle, with demand still in the early stages.

• Forward-looking statements about future growth, demand, and profitability carry inherent uncertainty, and actual results may differ materially from expectations due to factors outside the company's control, as detailed in SEC filings.
• Demand growth in the oil and gas gearing segment remains at low levels after an extended multi-quarter downturn, with recovery limited to the aftermarket rather than new rig demand.
• Customer delivery scheduling for backlogged orders is the primary limiting factor for revenue conversion, with some orders scheduled as far out as 2028, which can create near-term capacity gaps that require filling.
• The company's future performance depends on successful execution of its strategic shift, including completing certifications, ramping core segment capacity, and integrating any potential acquisitions, all of which carry execution risk.

Q: How will the $25 million remaining Heavy Fabrication backlog convert over Q2/Q3, how will inventory/working capital change, and what is the expected impact on operating expenses after exiting the wind business? / A: The vast majority of the remaining backlog is wind tower-related, and will convert at a steady ratable pace over the next five months. Approximately $10 million in operating working capital is tied to the wind business and will decrease as orders are completed, but this decline will be mostly offset by working capital increases for the growing Gearing and Industrial Solutions segments, leading to only muted net liquidity benefit. All operating expenses tied to the Abilene facility will be eliminated after exit, with no expected major consolidated cost impact beyond that, and management is continuing to optimize all remaining costs.

Q: What opportunities exist to expand content per natural gas turbine and wallet share in the natural gas end market for Broadwind? / A: Management is currently engaged with four of the top ten global natural gas turbine producers, with concentration on a couple key customers. For Industrial Solutions, management is investing in new capabilities to grow share and expand content per customer beyond traditional offerings by taking on additional manufacturing work. For Gearing, growth will remain focused on the core reduction gearing products that customers currently source from the business.

Q: When will backlog for Gearing and Industrial Solutions convert to revenue, and what is the breakdown of backlog by delivery year? / A: Q1 2026 is expected to be the revenue low point for both segments, with steady growth through the rest of the year. Orders are now being booked further into the future than in prior years, with deliveries scheduled into 2027 and even early 2028, per customer request to secure capacity. Most non-2026 backlog is scheduled for 2026, with only small amounts earmarked for 2028, and almost all far-dated backlog comes from the Industrial Solutions segment. Management will provide more detailed breakdowns on a future call.

Q: What is the outlook for EBITDA margins for the core segments over the next 12-18 months? / A: Gearing margins will continue to improve drastically as volume increases, because the segment has a high fixed cost base that delivers strong operating leverage as revenue grows. For Industrial Solutions, margins will normalize slightly over the rest of the year after the past two quarters of exceptionally strong product mix, even as revenue continues to grow.