Good morning and welcome to the Broadwind Energy’s Third Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jason Bonfigt, Vice President, CFO and Treasurer of Broadwind. Mr. Bonfigt, please go ahead.

Thank you Anita, good morning and welcome to Broadwind Energy's third quarter 2019 earnings conference call. With me today are Broadwind’s President and CEO, Stephanie Kushner; and Broadwind’s COO, Eric Blashford. This morning's earnings news release is available on our website at bwen.com. Before we begin today, I would like to caution you that this call will include some forward-looking statements regarding our plans and market outlook and also will reference some non-GAAP financial measures. Actual results may differ materially from these forward-looking statements. Please refer to our SEC filings and consider the incorporated risks and uncertainties disclosed there, including our Form 10-Q and our Form 8-K in the attachments we filed with the SEC this morning. We assume no obligation to update any forward-looking statements or information. Having said that, I'll turn the call over to Stephanie Kushner.

Thanks, Jason. Good morning. Orders were healthy again in the third quarter raising our quarter end backlog to a $175 million. Power bookings were strong and margins affirming and we booked a record $9 million in orders for other Heavy Fabrications distributed across a number of end markets. Our revenue of $46.1 million was up 47% from a year ago and 12% higher sequentially. All of our operating segments were profitable. Our net loss per share was $0.06 mainly due to interest expense and corporate overhead. We reported EBITDA of $1.9 million just above the top end of our guidance. We faced some significant supply chain challenges during the quarter and I’m proud of the way the team works through these challenges and met our customers’ requirement. Our liquidity improved significantly as we signaled last quarter. Receipts of customer deposits and conversion of steel inventories both contributed to free cash flow generation. At $76.5 million our orders were up nearly fourfold from last year and exceed $205 million for the nine-month period for a year-to-date book-to-bill ratio of 1.6x. In addition to Tower orders for 2020 production, we booked a significant order from a new customer for adapters to support a large wind repowering project and we continue to add importance to new customers as we focus on expanding our production of other large industrial fabrication. Gearing orders remained weak at $5.9 million although up about 5% sequentially. Having said that, we are encouraged by an uptick in October with more than $4 million booked since the beginning of the month. Process systems orders continued to improve modestly mainly due to increased demand for new gas turbine content. I'm excited about our diversification progress. Referring to the chart on the left, recall that our objective is to continue to systematically…

Thanks, Stephanie. Moving to our Towers and Heavy Fabrication segment, orders in our wind tower product line were $56 million with slightly improved margins due in large part to the trade case. This follows a strong Q2 in which we booked orders of $96 million. Coating activity continues to be robust with customers expressing interest in capacity at both tower plants to meet the forecasted increase in installations. Our Heavy Fabrication line which operates in mining, construction, marine and other industrial markets had record orders of $9 million this quarter including our first order in the hydroelectric space. This particular project really demonstrates how our engineering team works with customers to take an innovative design and make it manufacturable. We expect full-year Heavy Fabrication orders for this line to exceed $20 million, which is impressive given that in 2015, our orders for the same line were less than $2million. We sold 243 tower sections during the quarter, an 85% increase versus Q3, 2018 and up 21% sequentially. The increase in tower volume is evident in the graph at the lower left hand side of the slide and we are ramping up production to meet demand. We are pleased with our team's ability to respond to this increasing volume and our production flow has been less spiky in recent quarters albeit with a varying mix of Tower models. We are proud that both our safety metrics and employee retention level continue to improve. And that our quality and delivery remain at our historically high levels. We continue to recruit great people into our plants and are pleased to leverage our internal wealth school to help quickly introduce our new team members to our best practices and processes. We are making investments in both power plants to optimize production of the taller…

Thanks Eric. Q3 consolidated sales were $46.1 million. Our third consecutive quarter of sales above our $40 million guidance we committed to earlier this year. Sales were up nearly 50% year-over-year driven primarily by increases in Tower production levels. Our tower plant utilization has been building throughout the year driven by the industry ramp up to support the wind turbine installation surge that is underway. In Q3, Tower plant utilization was roughly 60% and this will prove again in Q4. Our focus and corresponding growth in our Heavy Fabrication product line and a recent uptick in new gas turbine content in our process system segment more than offset the decline in gearing demand. Growth in other markets has allowed the gearing business to partially offset lower near term demand in oil and gas. Gross profit margins expanded to 8.7% from 4.7% in Q3 last year. Tower plant utilization continues to be an important driver of this margin expansion. Additionally, we have taken price actions on certain product lines and have a better mix of production in gearing and in process systems. Overall, we have had improved operation performance in each of these businesses year-over-year. We are managing through a temporary period of lower margin tower contracts, which are weighing on our financial performance. These tower contracts were executed last year at a time when unfairly priced tower imports were surging into the market. As we move into next year and due to the filing of the trade case, we expect margins to improve. As a majority of these lower margin tower contracts are fulfilled in Q4 and further efficiencies should be realized due to increases in production volume. Operating expenses were $4.3 million during the quarter, a modest increase year-over-year. Operating expenses as a percent of revenue was approximately 9%…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Justin Clare with ROTH Capital Partners. Please go ahead.

Hi, everyone.

Hi Justin.

So I guess first, in the last couple of quarters you've gained traction and adding new customers in the Towers business as well as in Heavy Fabrications. I was wondering if you could just provide an update on the discussions you're having with customers and whether we could see additional customer adds in the coming quarters here especially as demand is expected to ramp up for Towers generally next year?

Well Justin as you know, there are kind of four major OEMs in the United States and we are talking with all of them for [Indiscernible] capacity, we certainly expect to produce for at least two, likely three of those customers in 2020 and it doesn't include the fourth which is it for the repowering. So, I do expect us to produce more additional customers in 2020. Regarding Heavy Fabrications that's a constant effort for us. We do have kind of two people out there on tip of the spear things that are targeting the markets that we're focusing on. As an example, there's marine, solar as I mentioned earlier and so I do expect us to bring on more customers in that area. But they do start to slow Justin, so as we penetrate these larger accounts you'll hear us announce small orders and once we are successful with those, they tend to give us more and more share of their production.

And then, just on the heavy fabrication business, this business is growing nicely and becoming more important to the overall financial picture here. I was wondering if you could talk about the margin profile for Heavy Fabrications and what that looks like as you continue to grow the business, do you get benefits from greater scale here? Can you help us understand that?

Sure. One of the biggest benefits of Heavy Fabrications in addition to the diversification is the use of our flexible workforce and our factories. So, you've heard me mention in previous calls that we've been reclaiming areas of our plants that were previously dedicated to storage of inventories. We're doing a better job with managing inventory so we're reclaiming parts of all the plants to actually generate revenue instead of just having stored parts. Regarding to the margins, I would say that the margins are consistent with Towers. They also kind of vary due to the complexity of what they're asking us to do. For instance, if it's simply a customer that just wants us to do some welding for them that tends to have a lower margin, but you've heard me mentioned, I want to increase the content and as we are able to provide welding and machining and painting and assembly, it tends to not only improve our overall sales, but improve our overall margins within those customers.

Well, let me just add to that Justin. I think what you'll see if you look at industry comps for metal fabrication, you will see the kind of low double-digit margins or the EBITDA margins are the norm. In this particular quarter, and when we say they're comparable to Towers, I would say that's towers over a cycle. Right now Tower margins are quite low, our heavy fab margins are actually higher.

Thanks for the color there. So then, shifting to the Towers business again here, can you provide a bit more detail on the specific components and materials that are driving the supply chain challenges there? I think, you mentioned internal components were a problem, but any more detail would be helpful there?

Yes. Steel plate is not the issue right now. It's really the internals and the internal kits could have upwards of 200 to 400 parts included in those kits in that build and that may come from several global distributors so that we're managing through the delivery of those kits in a timely and efficient manner. Typically, those parts are installed at the very end of the manufacturing process. So what we're really focused on right now is to utilize the really finite resources that we have, our paint boots, our rollers so that we don't lose production slots. So really it just leads to inefficiencies later in our production. We're able to move sections around in our facilities to kind of accommodate if we're missing parts. But it could lead to and it has led to some delays overtime when we don't have a few of parts to complete a build.

So then, considering that what is the risk that the supply chain issues here as well as labor shortages limit your ability to supply customers? Is there potential that you may have to turn down orders because of the supply constraints or what's the risk there?

No. I think what Jason was trying to say is our most scarce resource on the production sites are our paints slots if you will. in the early stage and what we're doing is managing carefully to make sure that we don't lose any of those slots and maybe we're accepting a little pain on the inventory side if we're holding more not fully assembled sections. And then, we are meeting all of our customer requirements.

And then, you indicated that margins for Towers in the backlog are improving. Can you quantify how much improvement you're seeing and then when that improvement will flow through the financials? Will that be as early as Q1 or is that more Q2, Q3 next year?

So, we think it's gradual and we're not really giving guidance for full 2020, but we do see our Tower EBITDA should be up another $1 million to $1.5 million as soon as Q1 next year.

And then, one last question for me. With the ongoing trade case have you seen any change in the level of tower imports at this point whether things are being pulled forward or if there's a reduction due to a concern about tariffs being implemented?

We do Justin, this is Eric, we do monitor that. The imports tend to be spiky and the reporting on them is delayed. So in another month or two we should be able to see any impact, but at this point we haven't seen on the data that's available to us which again is somewhat delayed. I haven't seen an impact.

That's it for me. Thanks very much.

Thank you.

[Operator Instructions] There appears to be no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Stephanie Kushner for any closing remarks.

Thank you and thanks for your interest. We feel good about the quarter and we feel like we're building good momentum for Q4 and 2020 and beyond. So, we look forward to updating you in another quarter. Thank you very much.

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.