Good afternoon and welcome to TPI Composites' Fourth Quarter and Full Year 2019 Earnings Conference Call. Today's call is being recorded, and we have allocated 1 hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Christian Edin, Investor Relations for TPI Composites. Thank you. You may begin..

Thank you, Operator. I'd like to welcome everyone to TPI Composites' fourth quarter and full year 2019 earnings call. We will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risks and uncertainties.

Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect because of other factors discussed in today's earnings news release and the comments made during this conference call or in our annual reports on Form 10-K that we will file with the Securities and Exchange Commission, or in our latest reports filings with the Securities and Exchange Commission each of which can be found on our website www.tpicomposites.com.

We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures.

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. With that, let me turn the call over to Steve Lockard, PBF Composites' CEO..

Thanks, Christian, and good afternoon, everyone. Thanks for joining our call. In addition to Christian, I'm joined today by Bill Siwek, our President; and Bryan Schumaker, our CFO. On this call, Bill and I will provide summary of the year and comment on our path forward.

Bryan will then review our financial results in detail and then we'll open up the call for Q&A. Please turn to Slide 5. We delivered very good results in the fourth quarter with adjusted EBITDA of $31.8 million, up 226% increase over Q4 2018 and net sales of $422 million, a 46% increase over Q4 of 2018.

For the full year we delivered adjusted EBITDA of $81.9 million, a 20% increase over 2018 and net sales of $1.4 billion or 40% increase over 2018.

We ended the year with cash of $70 million and net debt of $72 million and total liquidity of $167 million including the additional debt capacity added yesterday with the exercise of the accordion feature under our senior credit facility.

We have 52 windblade lines currently under contract in world-class locations around the world representing 15 gigawatts dedicated capacity and we'll have total capacity under root with 18 gigawatts with the completion of our new Chennai, India facility during 2020.

With anticipated late model transitions along with startups over the next several years we are planning to run at an 80% annual utilization rate to produce about 15 gigawatts blades per year and achieve our long-term target of $2 billion in annual wind revenue and double digits adjusted EBITDA with an estimated average of 75 gigawatts of on and offshore wind installed each year through 2028 we expect to have about 20% global market share in the coming years.

Our pipeline remains strong with the potential to add onshore lines as well as offshore lines once the offshore volumes reach levels to provide critical mass for efficient outsourcing. During 2019 we grew our global market share to approximately 18%.

We stabilized our operations globally including our new plants in Matamoros, Mexico and Yongzhou, China. Our new plant in Chennai, India began operations earlier this year and we fully expect that all the additional efforts put into the startup planning and team building during 2019 will results in one of our best startups ever.

We are pleased to be serving Vestas from each of these new TBI locations and growing our business with them. We executed a joint development agreement with GE to cooperatively develop advanced blade technology for future wind turbines.

We signed an agreement with Nordex to transition multiple lines in Turkey to longer blades and extended our contract with them through 2022.

We acquired the former Euros team based in Berlin that's focused on blade design, tooling materials and process technology development strengthening our technical capabilities in support of our global operations and growth. We have secured our transitions very well with ramp times better than planned and overall costs less than budget.

We executed an agreement with workforce to develop and produce a prototype chassis and cap structure for a purpose-built electric delivery vehicle and continue to gain ground our target of $500 million annual diversified markets revenue over time.

We added key members to our senior leadership team to add depth and breadth in both wind and diversified markets as well as the spearhead of our global service and recycling initiative and we continue to evolve our board of directors adding global automotive experience, independence and diversity. We plan to continue this process in 2020.

We continue to remain focused on building long-term sustainable value by capitalizing on two major macros; decarbonizing the electric sector and electrifying the vehicle fleet. Trends driven more and more by economics, what customers want to buy, what investors want to invest in and the need to positively affect climate change.

Now let's turn the call over to Bill to provide a more detailed business and market update.

Bill?.

Thanks Pete. I'd like first give a brief update on the global and U.S. wind markets. Please turn to Slide 6.

We continue to be pleased with the growth of wind energy as a cost-effective and reliable source of clean electricity as we in the industry continue to drive down levelized cost of energy while consumers and corporate customers increased the demand for renewable energy.

We see the future of low electricity growth as a strong combination of cost-effective and reliable wind, solar storage and transmission. The U.S. wind market remains strong and we believe it will continue through the decade driven by consumer and industrial demand and decarbonization goals set by state, cities and utilities.

The additional year added to the PTC will also like to be a net positive for the wind market over the next four to five years. I'd now like to update the comments I made at our Investor day regarding the Coronavirus or COVID-19.

Although we cannot predict the full impact of COVID-19 on our businesses or global economy we have a better picture today than we did three weeks ago of how this may impact our plans and our results in 2020.

Our plants in China have now already reopened and we are in the process of ramping up production to normal speed as our associates return and complete quarantine requirements. Our supply chain gets back to full production and logistics challenges get resolved.

Clearly our Q1 results in China will be impacted negatively but we do have plans in place to recover most if not all the volume we expect to lose in Q1 from the temporary shutdowns. We also can increase production at our non-China facilities to fill some of the gap. Another example of where global footprint is such a differentiator.

Our initial estimates of the impact based of what we know today is that the first quarter revenue will be down by approximately $45 million and adjusted EBITDA will be impacted by approximately $15 million.

For the full year we expect to make up most if not all the revenue and although the ultimate impact on adjusted EBITDA could be as much as 10 million we're working with our customers and suppliers to mitigate this as much as possible. Therefore, we are now adjusting our 2020 guidance. Bryan will share more details on the financial impact in a bit.

The overall wind market demand and the impact of COVID-19 on the global wind market supply chain will continue to create some challenges for us during 2020.

However, our global supply team continues to do an excellent job of securing critical raw materials through alternative suppliers and/or locations and the execution of our strategy of regional localization and long-term supply agreements to ensure a consistent supply of the key raw materials.

With respect to the supply chain in China, most of our key suppliers are backed up in producing and logistics challenges have been done to abate. So as of today we don't anticipate any material issues in China or other locations as a result of COVID-19. Moving on to Q4 performance.

We completed the initial startup of lines in our facility in the on Yongzhou China in 2019 and we believe that we are well-positioned entering 2020 to execute operationally, drive improved profitability and fill out the rest of the facilities capacity with new lines.

We will have two lines that start up during the first half of the year to meet the increased demand from one of our customers and notwithstanding the impact of COVID-19 based on what we know today we believe we will make up most if not all the volume we lost during the first quarter while our plants were temporarily shut down.

We also work through our startup challenges including a two-week strike in Matamoros, Mexico during 2019 and we entered 2020 with a more stable labor situation and we recently finalized the 2020 wage negotiations with our union five weeks early without any disruption to our operations or work stoppages.

Although we will have a few transitions in this facility during 2020 we believe we are well positioned to significantly improve the overall operating results with this location in 2020 while meeting or exceeding the blade demands of our customer.

Construction of our new facility near Chennai, India is nearly complete and it is on time and under budget. The initial moment is in place and we are startup phase as we speak.

We built a very strong management team and team of associates more than 25% of whom have previously manufacturing experience with the balance having strong automotive and industrial experience. We are confident that this will be one of our best executed startups and we're looking forward to adding additional lines of this facility soon.

With the addition of our Yongzhou, Matamoros and Chennai plants we have added nearly 2.4 million square feet and 9 gigawatts of manufacturing capacity over the last 18 months.

Turning to slide 7, we now have a total potential contract value of up to approximately $5.2 billion through 2023 and then minimum guarantee volume under our supply agreements is 2.8 billion.

The potential and minimum contract values do not include the two lines of China that we'll be operating under a short term contract in 2020 nor does it include the impact from most of the anticipated new larger blade models that we will produce half for the 2020 transitions.

Moving on to slide 8, as our global capacity is nearing our targeted levels of 18 gigawatts our primary focus has now turned to operational excellence to drive safety, quality throughput and cost reductions to accelerate margin expansion and free cash flow.

Our operating imperatives include turning speed into a competitive advantage, cutting transition times in half and significantly reducing startup times.

Advancing our composite technology to enable operational improvement and overtime better recyclability of blades, partnering even more deeply with our customers on tooling, blade design, design for manufacturability and service, reaching a better balance with our customers on transition economics which will provide the incentive to make transitions more efficient and cost-effective for us and our customers, continuing to leverage our global and regional scale to drive down raw material costs, expand material capacity and in turn maximize our opportunity for continuity of supply of credit raw materials, continuing to build, develop and retain our team to enable world-class execution, compiling continue to drive our ESG vision because it's not only the right thing to do but it will drive business performance.

We are excited to be publishing our first ESG report this March and you will see for the first time that we are a long way down the ESG path and have offered operationalized most of what you will see some time ago but just haven't reported it publicly until now. We remain confident and committed to our overall business model and strategy.

The fundamentals of our business remain strong. Wind markets around the globe continue to grow at an attractive pace. The trend of windblade outsourcing is continuing and our customers and potential customers are demanding increasing quantities of blades serve many fast-growing emerging markets and a very strong U.S. market.

Along with our customers we will continue to invest in existing line transitions and new line start ups. Our matured operations continue to perform at or above our expectations which gives us confidence in our ability to generate the profit levels we expect. With that let me turn the call over to Bryan..

Thanks Bill. Please refer to slides 10 through 12. Net sales for the three months ended December 31, 2019 increased by $132 million or 45.5% to $422.1 million compared to $290.1 million in the same period in 2018.

Net sales of wind blades increased by 54.3% to $397.8 million for the three months ended December 31, 2019 as compared to $257.8 million in the same period in 2018.

The increase was primarily driven by a 41% increase in a number of wind blades produced year-over-year largely as a result of increased production at our new plants in Mexico, China along with the increased production in Turkey.

The impact of the currency movement on the consolidated net sales for the quarter with a net decrease of 0.8% as compared to 2018. Gross profit for the quarter total $30.8 million, an increase of $18.2 million for the same period of 2018 and our gross profit margin increased to 7.3%.

Our general and administrative expenses for the quarter were $12.1 million or 2.9% of net sales as compared to $11.6 million in the same period of 2018 or 4% of net sales. Before share based compensation G&A as a percentage of net sales was 2.6% and 3.7% in Q4 of 2019 and 2018 respectively.

Our provision for income taxes for the quarter was $8.4 million as compared to a provision of $3.3 million for the same period in 2018. The change was primarily due to [indiscernible] associated with the jurisdictional earnings mix in the quarter as compared to the same period in 2018.

Net loss for the quarter was $0.9 million as compared to net loss of $8.8 million in the same period in 2018. This decrease was primarily due to the operating results discussed above. Diluted loss per share was $0.02 for the quarter compared to a loss per share of $0.26 in the same period in 2018.

Adjusted EBITDA increased to $31.8 million compared to $9.8 million during the same period in 2018. Our adjusted EBITDA margin for the quarter was 7.5% up from 3.4% in the fourth quarter of 2018. The increase in margin percentage [up] 410 basis points was primarily driven by the decrease of startup and transition activities.

For the full year of 2019 net sales for the year increased by $406.9 million or 39.5% to $1.44 billion compared to 1.03 billion in 2018. Net sales of wind blades increased by 42.4% to [$1.3 billion] in 2019 from $0.9 billion in 2018.

The increase was primarily driven by 31% more wind blades produced in 2019 as compared to 2018 in an increased and average selling prices due to the mix of wind blade models produced during 2019 compared to 2018.

Gross profit for the year totaled $77.8 million, up from $72.8 million in the same period of 2018 and our gross profit margin decreased to 5.4% from 7.1%.

The decrease in the gross margin percentage was primarily driven by the extended challenges at our Newton Iowa transportation facility, significant underutilization of labor in Matamoros, Mexico due to the strike partially offset by a decrease in start-up and transition cost.

General and administrative expenses for 2019 totaled $39.9 million or 2.8% of net sales compared to $43.5 million or 4.2% net sales for 2018. A decrease as a percentage of net sales was primarily driven by lowered incentive compensation and a reduction in the performance assumptions related to certain of our shared based compensation plans.

Our provision for income taxes was $23.1 million for the year ended December 31, 2019 as compared to a benefit of $3 million the same period to 2018.

The increase in taxes was primarily due to changes in valuation allowances and to a lesser extent the impact of [indiscernible] based on the earnings mixed by jurisdiction in the year ended December 31, 2019 as compared to the same period in 2018.

Net loss for the year was $15.7 million as compared to net income of $5.3 million in the same period in 2018. The above decrease was primarily due to the reasons set forth above. The net loss per share was $0.45 for 2019 compared to diluted income per share of $0.15 for 2018.

Adjusted EBITDA increased to $81.9 million or a margin of 5.7% in 2019 from $68.2 million in a margin of 6.6% in 2018. The decrease of 90 basis points was primarily driven by our $13 million increase in investment and transportation business in 2019 as compared to 2018 and the underutilization Matamoros in Mexico component noted above.

Moving to slide 12. We ended the year with $70.3 million of cash and cash equivalents. Total debt outstanding of $142.1 million and net debt of $71.8 million compared to net debt of $51.3 million as September 30, 2019.

For the quarter we had a net use of cash from operating activities of $5.7 million while spending $15.3 million on CapEx resulting in negative free cash flow for the quarter, up $21 million. For the year we had negative free cash flow of $17.3 million after spending $74.4 million on CapEx.

Our balance sheet remains strong and we continue to demonstrate the ability to fund our growth primarily with cash generated from our operations and the availability we have under our line of credit facility. The announcement that we have exercised recorded feature on our revolver gives us the optionality for working capital and future CapEx.

Please turn to Slide 14, as Bill noted earlier we continue to monitor the impact of COVID-19 on our operations. Based on what we know today COVID-19 will negatively impact Q1 revenue by approximately $45 million and adjusted EBITDA by approximately $15 million.

For the year we expect to recover approximately 95% of the revenue and adjusted EBITDA could be impacted by up to $10 million. Due to the impact of the COVID-19 we believe Q1 adjusted EBITDA will be slightly negative. For the full year of 2020 we are maintaining our previously provided guidance.

We expect 2020 net sales of between $1.55 billion and $1.65 billion. Adjusted EBITDA of between $100 million and $125 million. Utilization of between 80% to 85%. Wind blades set capacity of 4,380. Average sales price per blade between 140,000 and 145,000. Non-blade sales of between 75 million and 100 million.

Capital expenditures to be between 80 million and 90 million. Approximately 50% of the CapEx purchases will be incurring Q1. Startup cost of between $17 million and $20 million. Due to the impact of the COVID-19 and the cash out flow associated with CapEx we expect negative free cash flow of 30 million in Q1.

For the year we still expect to be free cash flow positive. With that I will turn it back over to Steve to wrap up and then we will take your questions.

Steve?.

Thanks Bryan. Our overall mission remains unchanged establishing 18 gigawatts of global wind blade capacity over the next few years to drive $2 billion of annual wind revenue along with $500 million in annual transportation revenue and achieved double digits adjust EBITDA levels.

With an estimated 75 gigawatts global combined onshore and offshore wind market we expect to have approximately 20% global market share.

We plan to continue to drive for more speed during transitions, leverage our global scale for operating and buying efficiencies continue to drive down cost all while maintaining a strong and conservative balance sheet. I want to thank all of our dedicated TPI associates for their commitment to our mission to decarbonize and electrify.

We remain very confident in our multi-year game plan and will stay that course. Thank you again for your time today and with that operator please open the line for questions..

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Eric Stine with Craig-Hallum. Please go ahead..

Hi everyone.

Hey just wondering if you can talk a little bit about the confidence you have in making up the revenue and EBITDA that you've called out for COVID-19? I'm just curious it sounds like in part it's because your operations are slowly getting back up and running but curious how it kind of breaks down between that and your confidence in other locations being able to make up for those lost volumes..

Yes Eric. This is Bill and I'll turn it over to Bryan. So the answer to your question is our plants are all open again, we are in process of ramping them up.

We are little ahead of schedule which is good, obviously taking most care of our associates to make sure that they're protected and we're following the proper recommended health procedures and what have you but with all that said supply chain is opening back up as well, most of them if not all are back in production.

Like us they're ramping up through as we're bringing employees back from their hometowns and getting them to the quarantine.

So we're ramping back up and we're not only confident in the balance of the year and I'll let Bryan comment on the revenue EBITDA but we do have the opportunity as I mentioned with our other plants to overdrive a bit of capacity there to make up any shortfall we may ultimately have. Bryan if you may want to comment on that..

Yes.

As we work closely with the teams and we feel good as they work with the customers to utilize over other plants and the current platform that we have on the revenue side so we feel confident we'll make that up and then on the net income and adjusted EBITDA side we see basically we're able to use utilize and find up side and other sites or other areas as we talked about before with our cost initiatives in other directions.

So that's why we're able to keep our guidance the same..

Okay. And maybe just a good segue I know thinking back to early 2019 in Mexico and the disruption there and hoping to make that up and there were certain raw materials that got in the way of that.

Maybe just talk a little bit about some of the initiatives and success you're having in the build of materials, localizing, supply and those sorts of things..

Yes. So we are continuing to work not only on the localization but just on making sure number one, we are better coordinated with our customers and what their needs and demands are for the full year and then going out and securing that capacity.

So there's a number of different initiatives on the supply chain that we've taken our supply chain team has done a great job of securing the volume of capacity we need for 2020 as well as working with our customers on that collaboration. So there are still some challenges.

Core remains to be a bit of a challenge from a supply standpoint but we feel confident that we've got our, what we need for 2020. I don't really see any other major issues.

Again just to be clear on the COVID-19 stuff I mean we are very confident in where we are at today given what we know in China and our plants around the globe as the virus potentially spreads the impact that may have on shipping or orders being closed and other locations we can't predict what that may or may not do but again we're pretty confident in the supply chain and what we've done in place for 2020 and beyond..

Yes. Okay.

Maybe this last thing for me just to clarify did you say Q1 to expect negative adjusted EBITDA?.

Yes that's correct. Slightly negative. Yes..

Okay. Thanks a lot..

Thanks Eric..

Our next question comes from Paul Coster with JPMorgan. Please go ahead..

Yes. Thanks for taking my question Steve and Bill and team. So you talked about supply in your own workforce.

Can you talk a little bit about your OEMs and how -- what the nature of the dialogue is with them and to what extent you think they've got a handle around COVID-19 because obviously that would be a factor outside of your control it might weigh on 2Q and beyond..

Yes Paul, it’s Steve. Thanks. Paul we can't really comment on specifics around our customers. I think in general and what is -- there's a lot of demand in calendar 2020 in the North American market and in other markets.

So there's going to be a lot of scrambling industry-wide to serve as much of that demand as we all can beyond that, in terms of very specifics we're not really in a position to speak for them. But as Bill said, we're comfortable with what we control in our pieces of this and that's what we can effect..

Okay. And then, in terms of the catch-up that presumably having so much cumulative in second quarter.

Can you just talk us through what that actually means? Are you going to be sort of working 24/7 for a period or how are you going to get more from your available capacity?.

Yes. We work 24/7 all the time..

All right..

So, it's not quite as simple as that. But with that said, it's different schedules on, on scheduled holidays those change. So, we work the production plan to try to meet the needs of our customers. So, and some of that quite frankly is in conjunction with our customers, we might push out some of this changes that we were anticipating later in the year.

Push them into 2021. So, we can maximize the volume for them in 2020. So, it's a combination of different thing that fortunately won't have been just in Q2 just because of the nature of our manufacturing process. It'll happen throughout the year. But we do see the opportunity to make up most if not all of the volume that we're talking about.

And in some of our sites, we'll go beyond what our original expectations work. So, that's why we're competent in making up the volume..

And Paul, just to add real quick if I could. You've seen us continue to drive cycle times down even though blades are getting larger, we're continuing to do that. So, whenever we do that, we create additional capacity kind of quarter-by-quarter as we go through the year.

So, as Bill used the word "overdrive" and that's part of the way for you all to think about it that we're creating more capacity and we're probably going to be using more of that capacity through reductions in cycle time to help with the makeup throughout the year..

Good. And my last question really is on the sort of expedited costs here. You mentioned that everyone's going to want to play catch-up really fast and means more trucks right, more storage area for a period. Can you just comment upon those variables and whether or not you see any gauging points is there..

Yes. I think from our supplier standpoint, there will be some expediting costs. Again we as it lies, we have share cost agreements with our customers, so doesn't have want to pass on others maybe not as much.

But as far as from our customer's standpoint I think that’s more of a discussion for them as it relates to transportation of the blades et cetera from our plants to their location..

All right, thank you..

Okay. Thanks, Paul..

Thanks, Paul..

The next question comes from Pavel Molchanov with Raymond James. Please go ahead..

Yes. Thanks for taking my question. Just one more on the Q1 guidance. A year ago we had the Senvion and the Matamoros disruption, now it's the virus.

Do you expect revenue to be up or down compared to Q1 of '19?.

Yes, this is Bryan. Yes, we still expect revenue to be up from Q1 of '19 based on the other plans the Matamoros and Yangzhou are performing better this year. So, that's..

Understood, okay.

And is the -- can you tell me what the mix of blade versus non-blade was in Q4 and whether any of the 2020 guidance is still going to be the same in terms of the mix from what you talked about at the Analyst Day?.

Yes. As far as the split, we don’t disclose that on a quarterly basis. You will have the revenue split on our financial when we released our K. it will be available on Monday. As far as this changing guidance on revenue and basically blade and non-blade revenue, that has not changed as we provided guidance..

Okay. Thank you, very much..

Thanks, Pavel..

[Operator Instructions] Our next question comes from Jeff Osborne with Cowen and Company. Please go ahead..

Yes, good afternoon guys. A couple of questions on my end. I think you mentioned that the pipeline was strong but I didn’t hear the figure of the number of lines in the pipeline.

Is it something you could share with us?.

Yes, Jeff. As we talked about last year, we're transitioning from number of lines the gigawatts of what the pipeline is. So, the pipeline remains strong.

It hasn’t changed significantly as far as numbers from what we talked about in the past but we're moving away from the line discussion and talking more about gigawatts of capacity, gigawatts under contract and utilization. But it does remain strong, we're still actively working the number. Pretty interesting opportunity..

And Jeff, it's Steve. Just to add to it. If you think about big picture here, I know we've repeated these numbers a few times but we are basically finishing out Chennai. We have 18 gigawatts of floor space under roof. We have four more lines in China, four more lines in India, yet it's so in order to turn that into 18 gigawatts under contract, call it.

So, 15 under contract, 18 under rooftop if you will, 08 more lines there to fill. And then as we've said, we do expect over the next couple of years to slow the topline growth on a percentage basis to really it's time to harvest by and turn that into free cash flow.

But there is more than adequate pipeline to build point to show out the 08 lines and then just be really smart about how and where and when those additions get made.

So, you could see with tariffs in China from last year, now October '19, you could imagine there is a bit of a delay around exactly how quickly some of the lines emergence in China might be made. And as we said before, there are both onshore and offshore lines in the pipeline. So, moving to the gigawatt utilization is a big picture move.

It does change just as Bill said it does change the overall demand profile for us to accomplish what we told you..

That's helpful. And maybe just a follow-up on the offshore discussion.

I was always under the impression that you would maybe elected but the offshore at Matamoros, but it sounds like is that facility fully occupied or is there any potential turnoffs over there relative to China where you have the four lines?.

Yes, the current Matamoros facility is fully occupied. You could imagine and I think we've shared before that for us to think about the best site for offshore blade production are likely to be locations where we already exist or nearby where we've got immediate water access, where we can ship blades all over the world.

So, low-cost hubs could be Mexico, could be India, and certainly could be Yangzhou, China. We have existing space on the water at Yangzhou. We would have to build space in the other locations in order to be world-class and cost competitive.

And as we said in our prepared remarks, the real issue on offshore, there is a lot of interest in offshore, there is a lot of growth opportunity. There is a lot in the press but getting that market to a point where it's big enough to really pull out a dedicated model like ours, that's what we're still working on.

We got to get the critical mass volumes up a little bit and then to your point operate off one of our world-class hubs, one or more of our world-class hubs to serve that market..

Got it, that's about it. I just said two other quick clients are questioning. So, one the coronavirus you mentioned the 45 and the 15 of EBITDA. If I heard you right, either you can get 95% of the revenue back but potentially only five of the EBITDA, you said you could so lose 10.

Just trying to understand the detrimental margins or the lack of this European gain approach with that process or maybe I misheard the statistics you were trying to guess..

No, you've heard and then we gave the guidance, the impact on Q1 would be 15 million adjusted EBITDA and then for the year up to 10 million. Again, we're working closely with our customers. Some of that has to do with additional cost that we've incurred in Q1 to keep the labor force going.

And then some other cost for PP&E and other things you move throughout the year just because of the safety of our associates at these facilities..

Got it, that's helpful Bryan. And then the last one I had is just is there I know it's early but any you highlight both at the Analyst Day and in today's deck that you want to use speed to your advantages. Any early indication either through the Senvion R&D team or other initiatives that increase cycle time.

Is that actually playing out and you're able to drive down that cost?.

Yes. So, we've got some transitions going on right now in the first quarter. And you'll ask Adrian and we are a mess laid out at the Investor Day with the different phases of a transition. Where we're already tracked in and well ahead of what our base lines have been.

So, I think we're well on the way to the goal of 50% reduction this year if not better. So, the answer is the early indications are that the plan we put in place and the new kind of approach to the transitions is going to be bear fruit..

It's good to hear, bro. thank you..

Yes. Thanks, Jeff..

Thanks, Jeff..

[Operator Instructions] Our next question comes from Ethan Ellison with Morgan Stanley. Please go ahead..

Hey guys, two quick ones from me. If I'm not mistaken I think there are nine manufacturing lines with GE with contracts that are expiring in 2020.

Could you just talk or walk through the process of extending these contracts or backfilling them somehow?.

Yes Ethan, thanks. It's Steve. We do need to extend those contracts and that's obviously an important objective for this year. I think Iowa and Mexico those lines are serving primarily in the U.S. market. Mexico serves perhaps 10% of the volume builds. Mexico, vast majority comes to the U.S. The U.S.

market is strong, the competitiveness of particularly of Mexico serving the U.S. market is extremely strong. So, we're quite confident in being able to get that done which you're right it's an important objective for us in this timeframe..

Okay, perfect. And then, maybe just a follow-up on the transition activity and the ramp times that we're trending better than you had expected or planned for. In the past, you've talked about this taking about six months.

So, just to clarify for if we're seeing 50% improvement, are we expecting to see transitions take about three months by the end of the year?.

Yes. So, by the end of the year, maybe. Again, this is a process and as I said earlier results are looking very good. But yes, it depends on the nature of the transition, Ethan. So, it can be three months, it can be six months but I would expect both of those that more land in the high-end to come back down a bit from that.

So, the answer is yes we expect to see good results by the end of the year and throughout the year..

Okay. Thanks, all..

Thank you. Thanks, Ethan..

Thank you. I would now like to turn the floor over to management for closing comments..

Yes. So, thanks all for joining our call today and for your continued interest in TPIC. We look forward to continuing to update you as we make progress. Thanks, so much..

This concludes today's conference, you may disconnect your lines at this time. And thank you, for your participation..