Good afternoon, and welcome to TPI Composites' First Quarter 2020 Earnings Conference Call. Today's call is being recorded, and we have allocated one 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' First Quarter 2020 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 latest reports and 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, TPI Composites' CEO..

Thanks, Christian, and good afternoon, everyone. Thank you 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 briefly review our first quarter results and then discuss the impact and response TPI is taking to the COVID-19 pandemic.

Bryan will then review our financial results in detail, and then we'll open up the call for Q&A.

To start, the health and safety of our associates and their families as well as the communities in which they live is our top priority, and we believe the practices we've put in place in all of our global plants and offices beginning in early March, after successfully navigating COVID-19 in our plants in China during February, meet, and in many cases, exceed local government, CDC and WHO recommendations.

Furthermore, we're providing PPE to our associates and their families, so they can be as safe as possible when they leave our plants and help to prevent community spread.

So as we continue to navigate through these challenging times, you can be sure that the health and safety of our associates will be our priority while at the same time, securing our financial stability to emerge stronger from the current environment. Please turn to slide five.

In the first quarter, we delivered net sales of $357 million, a 19% increase over Q1 of 2019 and adjusted EBITDA of $1.3 million or 0.4% of net sales, down 60 basis points. The impact of COVID-19 on revenue and adjusted EBITDA during the quarter was $38 million and $11 million, respectively.

During the first quarter of 2020, we announced that Bill Siwek will become our President and CEO, effective May 20, and I'll transition to the Chairman of the Board. Two of our long-term current directors will not be seeking reelection as we look to continue to refresh, strengthen and diversify our Board of Directors going forward.

We published our first annual ESG sustainability report. The report highlights how TPI has incorporated sustainability and ESG into our day-to-day operations. Our substantial improvement in safety over the last four years and our significant potential contribution to global emissions reduction.

We hosted our Investor Day in New York City in early February, where we detailed our strategy of 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.

We announced today that we've been awarded a contract to build production tooling, supporting a new passenger electric vehicle platform. The tooling will allow us the capability to produce advanced composite parts on our new automated pilot production line in Warren, Rhode Island beginning later this year.

We started blade production in our new India facility, on time and under budget with a very experienced senior management team and a labor force with significant previous in-country blade manufacturing experience. Now, I'll turn the call over to Bill to provide a more detailed business and market update, including our COVID-19 response.

Bill?.

Thanks, Steve. Please turn to slide six. I'll start by describing in more detail our response to the COVID-19 pandemic and will follow that with an overview of the current operational status of our manufacturing facilities, discuss the status of our supply chain and finish up with a brief update on the wind energy market.

To protect the health and safety of our associates, their families and communities during the COVID-19 pandemic in China in February and globally in March, we put in place a series of policies and safety protocols following CDC and WHO guidelines and the guidelines of health organizations and the communities in which we operate.

These included mobilizing the global cross-functional COVID management team, eliminating nonessential travel globally, restricting visitors to our sites to business essential personnel only, implementing temperature scanning for all individuals entering our manufacturing facilities and prior to boarding any company provided transportation.

Associates are also required to where appropriate PPE on all company provided transportation and additional buses and shuttles were added to allow for more physical distancing, moving as many associates as possible to work-from-home arrangements, providing ongoing education and reinforcement of safe behavior such as proper PPE and hygiene, cleaning and sanitizing and social distancing for all of our associates to continue to work on-site as well as when they're at their homes, providing PPE to our associates and their families for use at home as well as to frontline health care workers in our communities, and coordinating with local, state and federal governments on restarting in locations where we are temporarily shut down as well as for the testing of our associates.

We are also focused on continuing to run our business safely while working to mitigate the negative impacts to our operations of COVID-19 by partnering with our customers and suppliers to make up as much of the lost volume as possible in each of our locations, including pushing out transitions because our customers' demand remains strong.

We have also not lost focus on the operational imperatives we outlined at the beginning of the year to continue to drive cost out and improve our operations globally. Finally, we remain focused on our liquidity to secure business continuity and ensure the long-term viability of TPI as we navigate these dynamic and unpredictable times.

Our stress testing results indicate adequate liquidity, if needed, to withstand prolonged shutdowns in our plants. And today, our liquidity stands at $188 million, and we will continue to manage it by pushing out nonessential CapEx, controlling and reducing other costs and focusing on our cash conversion cycle.

Turning to slide eight, and I'll take us around the world and give you an update of our operations. As you know, our China facilities were shut down for an extended Chinese New Year break due to the outbreak of COVID-19.

We are now back to normal operations and ahead of our recovery plan and expect to deliver more volume than our original 2020 budget, in part the result of pushing out a planned transition.

We are in the start-up phase in our Chennai, India manufacturing facility, and we operated for most of the month of April with a reduced workforce due to the government of India's imposed curfew. We were able to resume limited production on April 21, 2020, with additional personnel after working with the government to obtain special approvals.

On May 6, we increased production to approximately 50% of plan, and we expect to begin the ramp to full production on May 17 if the government's current plans do not change.

Since this facility is in start-up during 2020 and was ahead of schedule at the time the curfew was instituted, the financial impact on TPI for the year is expected to be minimal. We operated our Izmir, Turkey manufacturing facilities at approximately 50% capacity during the first half of April.

TPI's decision to temporarily reduce production was due primarily to government-mandated stay-at-home orders in response to COVID-19, which resulted in demands from our union in Turkey to temporarily reduce production. Since mid-April, we have been running our production at normal levels.

Our second quarter blade production in Turkey will be slightly impacted by the 2-week production slowdown as well as a shortage of core related to one blade model. We operated our Matamoros, Mexico facility at reduced capacity or approximately 30% to 35% during April 2020 and have increased that to approximately 50% beginning in May.

We may be required to continue to operate at a reduced capacity through May 30, 2020, when the federal government has indicated e sanitary emergency in Mexico is expected to be lifted. Because we've been operating at these levels, our second quarter blade production will be negatively impacted.

Our four factories in Juarez are currently shut down as well due to the sanitary emergency and the lack of clarity provided by the government.

And as a result, a lack of clarity for our associates as to whether we are an essential business under the decree or under what conditions the government will allow us to safely restart prior to the expiration of the decree.

We are working with our customers, their customers and the government of Mexico to resolve this uncertainty as soon as possible. However, if this uncertainty is not resolved, our plants in Juarez may be shut down through May 30, and our Q2 volumes will be negatively impacted.

With that said, some progress is being made in Mexico with state and federal government officials to safely restart operations for critical supply chain companies who are serving essential U.S. and Mexican industries.

On April 23, 2020, we decided to voluntarily pause production at our Newton, Iowa manufacturing facility, due to an increase in COVID-19 levels in the surrounding counties, including a significant increase in the number of confirmed cases in the prior week among our associates at this facility.

We performed an additional deep cleaning of our facility and implemented a mandatory testing program for all new Iowa associates in collaboration with the state of Iowa. We restarted production on a limited basis yesterday after working closely with the governor's office and Iowa Health officials to reopen the plant as soon as it was safe to do so.

Q2 volume will be negatively impacted due to the duration of our production pause. Finally, our operations in Rhode Island have not been materially impacted during the pandemic. Now an update on supply chain. As one would expect, our raw material suppliers have been impacted by COVID-19 as well.

Our global supply team continues to do a phenomenal job ensuring that our factories continue to operate during the pandemic by securing critical raw materials through alternative suppliers and/or locations as needed and executing our strategy of regional localization and long-term supply agreements to ensure a consistent, uninterrupted supply of key raw materials.

We also took steps in the early stages of the pandemic to secure additional safety stocks of most key raw materials to reduce the risk or impact of any short-term supply disruptions. We expect that the impact of these proactive steps will be reflected in a buildup of working capital.

Notwithstanding our efforts, we will still see tightness in supply in core materials, Bolsa, in particular, due to COVID-related challenges in Ecuador as well as overall market demand in 2020. To date, this has not had a material impact on our production, but there is still risk around the balance of the year.

With respect to the balance of our supply chain, we will continue to navigate short-term disruptions and have developed contingency plans for key materials as we work through the impacts of the pandemic and continued strong demand from our customers. Turning to the wind market.

As of today, we have not seen a material change in demand from our customers for 2020 or 2021 due to COVID-19. However, the potential impact on the market will be derived from many factors, including manufacturing disruptions, potential, project execution delays, supply chain shortages, logistics challenges and postponed auctions, among others.

BNEF's global onshore 2020 market forecast was downgraded by nine gigawatts to approximately 60 gigawatts in March due to COVID-19, which would still be a record year for onshore installations globally.

However, BNEF forecast that all of this reduction will roll over into 2021, and they have increased their 2021 forecast by 11 gigawatts to 73 gigawatts. BNEF upgraded the 2022 and 2023 onshore forecast as well by 5% and 7%, respectively.

So while COVID-19 is creating some uncertainty for the overall market in 2020, the coming years still look to be relatively strong at this point. In the U.S., BNEF downgraded the U.S. wind market for 2020 from 13.5 gigawatts to 11.1 gigawatts due to the impacts of COVID-19, but has upgraded its estimates for 2021 by five gigawatts to 13.4 gigawatts.

In response to potential project commissioning delays in the U.S., the wind industry is working to clarify PTC's safe harbor qualification and force majeure rules with the potential to extend project completion dates by one year, which could alleviate some of the installation and commissioning challenges exacerbated by COVID-19.

Finally, several of our customers have indicated their desire to push out transitions to enable us to maximize production once we are back at full capacity and reduce the amount of volume lost during these transitions.

As a result, we currently estimate the number of transitions in 2020 will be approximately 30% to 40% of what were previously planned, so we expect transition costs will be significantly less as well.

Our pipeline remains strong with the potential to add both onshore as well as offshore lines in multiple geographies with our focus on filling the existing capacity we have in India and China and carefully managing our liquidity.

We also remain focused on extending those contracts that expire at the end of 2020, and we fully expect to extend those contracts covering most of these lines shortly. Turning to slide nine.

We now have a total potential contract value of up to approximately $5 billion through 2023, and the minimum guaranteed volume under our supply agreements is $2.5 billion.

The potential and minimum contract values do not include the two lines in China that we were operating under a short-term contract this year, nor does it include the impact from some of the anticipated new larger blade models that we will produce after 2020 and 2021 transitions or the extensions we expect to close on shortly.

While the health and safety of our associates remains our primary objective, we remain focused on our operating imperatives and continue to apply our scale to expand material capacity, ensure continuity of supply.

This is especially important now drive operating costs down and focus on the integration of our key ESG initiatives to drive profitable growth and long-term shareholder value. With that, let me turn the call over to Bryan Schumaker..

Thanks, Bill. Please refer to slides 11 through 13. All comparisons made today will be on a year-over-year basis compared to the same period a year ago ended March 31, 2019. For the first quarter of 2020, ending March 31, 2020, net sales increased by $56.9 million or 19% to $356.6 million. Net sales of wind blades increased by 21.4% to $336.3 million.

The increase was primarily driven by a 10.8% increase in the number of wind blades produced year-over-year largely as a result of increased production at our new plant in Matamoros, Mexico and China, along with the increased production at our plants in Juarez, Mexico.

Q1 2020 revenue was negatively impacted by approximately $38 million associated with the temporary production suspension in China due to COVID-19. Our general and administrative expenses for the quarter increased by $1.5 million to $9.5 million. G&A as a percentage of net sales was 2.7% for both periods.

Before share-based compensation, G&A as a percentage of net sales was 1.9% and 2.4% in Q1 of 2020 and 2019, respectively. Our provision for income taxes for the quarter was a benefit of $15 million as compared to a benefit of $4.6 million for the same period in 2019. The change was primarily driven by the jurisdictional earnings mix.

The net loss for the quarter was $0.5 million as compared to a net loss of $12.1 million in the same period in 2019. The decrease was primarily due to the operating results discussed above.

Net loss was negatively impacted by approximately $9 million, net of $2 million of income taxes associated with the production volume loss due to the temporary suspension of production in China and other costs related to COVID-19. Net loss per share was $0.01 for the quarter compared to a net loss per share of $0.35 for the same period in 2019.

Adjusted EBITDA decreased to $1.3 million as compared to $2.9 million in the same period in 2019. Adjusted EBITDA was negatively impacted by approximately $11 million associated with the production volume loss due to the temporary suspension of production in China and other costs related to COVID-19. Moving on to slide 12.

We ended the quarter with $109.5 million of cash and cash equivalents, total principal amount of debt outstanding of $207 million, a net debt of $97.5 million compared to the net debt of $71.8 million at the end of the year.

For the quarter, we had net cash provided by operating activities of $2.6 million while spending $27 million on CapEx, resulting in negative free cash flow for the quarter of $24.4 million. As a reminder, we withdrew our 2020 guidance on April 23, 2020, due to the rapidly evolving nature, magnitude and duration of COVID-19 pandemic.

The variety of measures implemented by governments around the world to address its effects and the impact on our manufacturing operations. I will now provide an update on our current liquidity position on slide 13. In April, we drew down an additional $30 million of our revolver and $9 million of unsecured debt.

As of May 1, we had cash and cash equivalents of approximately $154 million, and our total availability under various debt facilities was approximately $34 million. This gave us total liquidity of approximately $188 million. Our focus remains on liquidity to ensure the long-term viability of TPI.

We are forecasting that our Q2 working capital will be significantly impacted by lost volume at our Turkey, Iowa and Mexico facilities due to the temporary suspension of production while continuing to pay our associates, an increase in inventory levels as we proactively increase safety stocks of key materials to mitigate any short-term supply disruption caused by COVID-19 and warranty remediation campaigns with one of our customers.

We continue to push our CapEx and focus on essential capital expenditures that are critical to our operations and required to meet customer commitments. We have run multiple stress test scenarios to model the potential impact of additional or extended production suspensions of our plants around the globe.

Based on our current forecast, we have adequate availability to liquidity to withstand protracted shutdowns of our plants. With that, I will turn the call back over to Steve to wrap up, and then we will take your questions.

Steve?.

Thanks, Bryan. Turning to slide 15. The health and safety of our associates and their families as well as the communities in which they live is our number one priority. As you've heard today, we're taking many proactive steps on the COVID-19 front.

We're continuing to execute on our operating imperatives while mitigating the negative impacts COVID-19 on operations during this time. And we're focused on managing our liquidity to provide financial security and to emerge stronger as we drive through the current environment.

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 of annual transportation revenue and achieved double-digit adjusted EBITDA levels.

With an estimated 75 gigawatts of 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 to continue to drive down cost, all while maintaining a strong and conservative balance sheet. I want to thank all our dedicated TPI associates for their commitment to our mission to decarbonize and electrify.

We are confident we will emerge stronger from the current environment, and remain very confident in our multiyear game plan, and we'll stay that course. I want to especially thank Bill for demonstrating exceptional leadership as President this last year and congratulate him as he steps into the CEO role.

Bill has been a trusted partner at TPI for seven years and is more than ready to lead this company to the next level of success. I look forward to providing any assistance I can in my next role as Board Chairman. Thank you again for your time today. And with that, operator, please open the line for questions..

[Operator Instructions] The first question comes from Phil Shen with ROTH Capital Partners. Please go ahead. Phil, your line is live. Phil, maybe you're on mute. Then I move on to the next questioner. The next question is from Eric Stine with Craig-Hallum. Please go ahead..

Hi, everyone. So I'd love to just get your thoughts on transitions and in makes sense. I get it on in the near term, your OEM partners wanting to push those out. But I'm curious, I mean, is this something where you potentially could see a structural change to that and time lines? I mean, if I think about it, pushing them out for 2020.

And if you're going to make up all the volumes or the industry potentially makes up for all of the loss volumes in 2020 in 2021, that would seem to imply that it should be more structural, and it could be a push out of those transitions longer than just a couple of quarters here in response to COVID?.

Yes. Eric, thanks for the question. Yes, I think some of the transitions we've been talking about are pushing further than just into 2021. So you're correct there.

And I think you might have recently seen some public comments from some of our customers about maybe slowing down new product introductions a little bit, consolidating some of the some of their platforms in an effort to minimize transitions.

If you look at LCOE has come down came down 9% last year, and that's primarily for moving to the larger platforms up to the 4-megawatt platforms with the longer blades we're already building. So we've always said we hope and we look forward to the time when transitions slow.

We're not suggesting that they are yet, that this is not quite a trend yet, but we are seeing a little bit more time in between transitions, somewhat brought on by COVID, but I think also just by the sheer cost of them for both us and our customers and recognizing the economics of running played models longer and having fewer platform changes than we have in the past..

Maybe along those lines, I mean just looking for some maybe unanticipated consequences or changes in the wind industry.

Is this I mean is this something you think changes or strengthens the trend towards outsourcing? That maybe it's a higher percentage as OEMs think about just diversifying the locations where they are having blades manufactured?.

I'm not sure if I would go that far. I think we continue to see the trend of outsourcing, though. I mean, that has not changed. So and again, I think as you look into where the significant growth in the market is occurring. And quite frankly, over time, the offshore market if you think about offshore markets, you can almost think of the U.S.

as an emerging market for offshore as we would think of some of the other onshore markets like Middle East or Turkey and Latin America. So I think as production or I'm sorry, as growth continues to accelerate in the emerging markets. I think it still is a great case for outsourcing from an overall capital efficiency standpoint for our customers..

Yes, got it. And then last one for me. Just on the new transportation opportunity there on the tooling. So just so I'm sure I understand this. So this is building the tooling rather than you necessarily elevating it or calling it a new program.

Is that the right way to think about it? And if that is, is that something that could advance at some point to becoming a new program for you?.

Yes. So the first step is always building the tooling, right? And then as you get through that process, the next step would be a production type of deal. And so we are again, this just demonstrates the traction we're making in this effort of diversification. And we would expect that this would move into a production agreement by the end of this year..

Okay, thanks a lot..

Thanks, Andrew..

The next question comes from Michael Webber with Webber Research. Please go ahead..

Hi, good afternoon guys. I wanted to dig in on the line transitions again. I think you mentioned in your prepared remarks that those were driven by your customer base, and most of those customers have also withdrawn guidance.

So I guess, is the is the scenario here that they likely operate on the minimum side of those contracts before we see transitions accelerate again? Or can you just give us a bit more color about how those conversations went? And I guess, maybe specifically, whether there's any reopening of terms associated with that process that would give you may be an opportunity to augment or change things might have or dynamics we might have changed..

Yes, sure. No change in terms, if you will. It's part of it is a decision where as we have factories that get temporarily shut down or we suspend production for a time period and our customers are having the same challenges.

So they're looking at, okay, demand has not changed from their standpoint, right? They are asking for as much as we can produce this year. So it's just the opposite of operating at the minimums. So by pushing out a transition, you're able to you don't lose the volume during a transition of a mature blade and then a ramp-up of a brand-new blade.

So, if you think about the volume we're losing in our plants that are that have been temporarily shut down or are still in shutdown being made up during throughout the balance of the year by not transitioning.

We don't expect we expect our utilization from on a year-over-year basis to be about the same as we guided to earlier before we suspended guidance, but I will tell you, it's not a volume issue here. It's more of a timing issue from a blade action standpoint. And demand has not changed..

Yes, okay. And it's effectively a mutual deferral. There's no reopening of any material terms..

No. It's a mutual deferral, and that's driven by our customer..

All right. Just to follow-up on the EV. I guess kind of a similar question, but is the right way to think about this kind of almost like a feed program? And then you mentioned potentially turning into a larger production program.

Is that would you have a ROFR on that? Or would that be something that would be available or kind of tender might be the wrong term, but would there be competitive dynamics associated with that transition to a more robust opportunity?.

Yes. So we're building the tooling for our pilot production line in Warren, Rhode Island. So the tooling is being built for the equipment that we are putting in place in Warren, Rhode Island. So that tooling would logically be used to build production parts over time..

Fair enough. Okay, just one more for me on Mexico. And I think in late April, it looked like one of the three Warren facilities was temporarily shut down. And now it looks like all I think it looks like all three are and then the others running at 50% capacity.

I know it seems like visibility is pretty tough there, but if you could just give a bit of color on what changed in between, I think it was April 23 and today.

And then, your best guess at a time line for when you think you'll have some clarity from the Mexican side around how those businesses will be treated in terms of whether they're critical or not?.

Yes. So, primarily driven by the order that was issued by the labor department in Warren to shut down the one plant, which, by the way, we've we're challenging that. We don't think that was properly done. Nonetheless, as that kind of spread through the rest and the order stated that we were not an essential industry.

And so as the rest of our associates learned of that as well as growing fear in the Mexican and the Juarez area about the COVID virus and the extent of it and the fact that they hadn't gone through their peak yet. It became more and more difficult to keep the plants fully staffed.

And so a number of our employees decided that they would rather not work until we were deemed as essential. And so that's been the challenge. As I mentioned in the prepared remarks, we've got a definition in a decree that is very ambiguous.

And so we've been working with the Mexican government, both state and federal to help clarify that and/or to provide us with parameters under which we can restart those operations. So it was more of an employee driven as a result of our first facility being shut down that kind of cascaded into the other facilities.

And as far as clarity, there is some discussion with the Mexican government that they would begin to open factories up again by May 17. There was a meeting between the President and his cabinet last night. They're continuing that meeting again on Monday, as I understand it.

So we are still working to get the plants open prior to that, but that's probably the near-term date that we've seen from the government is sometime in the middle of May at this point..

Okay.

But yes, but measured in weeks at worse at this point?.

Yes, correct..

Okay, right. All right, thanks for the time guys..

I'll turn it over thanks, Michael..

The next question is from Michael Legg with Benchmark. Please go ahead..

Thanks, guys.

Could you talk a little bit about the lower pricing of oil and the longer-term impact that you might see or how you view that?.

Yes, interesting. So again, less than 3% of the world's energy is produced by oil. So it's not a huge generator of energy. So I think it doesn't change the demand for renewable.

I also think that the low price of oil could move more dollars for investment into the renewable side because as investors look at what kind of returns can they earn in oil or gas as opposed to renewables, I think that gap is shifting or reverse. So I actually think it can be helpful for the renewables.

If you look at many of the signatories to the Paris accord or the Paris agreement, they're calling for the recovery to be based on renewable for a whole bunch of reasons. So, I don't know if that answers your question. And it really doesn't impact any of our material feedstocks or raw materials into our product in any significant manner.

There's no real correlation..

So that's good. That's fine. And then, just a little more on Mexico.

Could you talk a little bit -- are you engaging all bright consulting? How are you dealing and communicating with the government there? What is it sporadic or what type of?.

Yes. It's not sporadic by any chance. It's daily. We have our local government relations team in Juarez that is working the Tamaulipas government, the Chihuahua government, which are the states that our two factories are located in as well as different folks at the federal government. We've had direct conversations with the secretary of the economy.

With some folks in AMLO's Cabinet direct conversations with them as well, plus we are utilizing ESG to help in some of that with contacts with the ambassadors for Mexico and the U.S. as well as our customers. And we're working in collaboration with our customers because we are critical to their supply chain, and there's a very vested interest there.

So we're hitting it from multiple angles, and that's on a daily, if not hourly basis..

Okay. And then, I know when we talked you mentioned something about the union wanting to put in some other restrictions.

Is that an additional issue? Or is that just something that's part of the whole government relations?.

No, the union is only in Matamoros.

And again, for the same reason of this designation of essential, the union wanted the plant to be shut down effectively, and we negotiated with the union that if they want it to work because the health practices and safety practices we put in place were at or above CDC, WHO or Mexican federal government standards, would they be could they work and the union said, yes.

And so although many plants were shut down, we've been operating, as I mentioned, 30% to 35% during April, 50% now with more coming back kind of on a weekly basis. So they want to work, they're willing to work. Our workplaces are safe. So that's the union aspect of Mexico..

And then just one last question, if I may.

April, can you talk a little bit about how that's trended versus the first quarter? Or are you going to stay away from that?.

April?.

Yes..

Yes. I think in our prepared remarks, we kind of went around the globe and lets you know what factories were open or not or partially open. So I think you can kind of get a picture from that..

Okay. And Mike, just to add to the Mexico comment. This is Steve for a minute, too. They are a lot of this is in the press. You can keep tabs on what's going on more broadly. But as Bill described, there are essential designations for some companies or some technologies in the U.S. and in Mexico that are a little more straightforward.

In Mexico, renewable energy has not been broadly deemed to be essential, but it has in the U.S. and there are critical supply chain tensions pressure, if you will, building and what we would describe as being a constructive way. And again, just read about what's going on, on the automotive side of things.

If Detroit is going to reopen at a certain time in May, then Mexico automotive supply chain needs to open to feed it. And so there are good kind of constructive tensions building, if you will, on this balance of personal health and security and economic security.

Mexico is a little bit of a tough spot at the moment given when they expect COVID cases to peak. And so the government is challenged in the very short term, really. And I think you said weeks. I think that's right.

Kind of challenged within a week or two here, but then we hope and think that things ought to ought to start to become a bit more flexible, a bit more open for those that are meeting the new safety protocols and the Health Ministry issued a new set of safety protocols for the government of Mexico as well over the weekend. We're meeting those.

And so you're starting to see some traction there that should be helpful..

Okay, great, thank you guys..

Yes. Thanks, Mike..

The next question comes from Austin Moeller with Canaccord. Please go ahead..

Good afternoon, guys. This is Austin on for Ken.

How are you today?.

Hey, Austin. Good, Austin..

I just wanted to introduce myself since we're kind of new the stories here. So as far as the urban air mobility contract, that was the first of its kind for you guys.

And so you haven't done anything on passenger vehicles or urban air mobility previously, correct?.

I'm sorry, repeat the question on....

Passenger EV..

Are you talking about the passenger or the commercial vehicle?.

The passenger air vehicle..

Yes. So yes, this is the first thing that we've announced publicly related to a passenger EV. That's correct..

Yes. This is a passenger ground-based electric vehicle. And we thought we heard you say air vehicle, maybe we misunderstood. But and Workhorse, for example, as a company is working on some other things that you might be referring to.

But this is the first passenger automotive production tooling contract that we've received, if you will, as Bill described. We do have, in our development portfolio, additional passenger EV programs, one with General Motors, which was a development program. It's been made public some time ago.

But this is the first passenger EV production tooling contract. That's true..

Okay.

And so once you get the tooling set up for that at the Rhode Island factory, do you expect that to be an open production line that you can utilize for other projects in the EV space?.

No. Not initially. Initially, the tooling is being built specifically for this customer, for that production line. Is that could that tooling be interchangeable for other manufacturing certainly, but initially, it's being set up specifically for that program..

Okay. Got it. And then you guys sort of have a supply side shock and a demand-side shock going on here with the COVID endemic. So if the Mexico facilities are brought back online and the China facilities and everything else are fully brought back up to capacity at some level in the next couple of months here.

At that point, will you consider reissuing guidance?.

Yes. So just to be clear, the China facilities are up and operating at full capacity. So that's fine.

I think when we get through this uncertain period and when it becomes clear what the ultimate impact is for the year, given the number of uncertainties that the industry is dealing with, then we would certainly consider putting out new guidance, if you will..

Okay. Yes. Thank you, guys..

Thank you..

Thank you. The next question comes from Phil Shen with ROTH Capital Partners. Please go ahead..

Hi guys, This is Donovan Schafer on for Phil today. Sorry about earlier, we're navigating five earnings calls all at the same time right now. And so I missed the beginning, apologies if you already addressed this. But one question. This has been very important to investors.

Is the GE lines that are expiring at the end of 2020? I know you sort of talked about this in the past.

I just wondering if you can give us kind of any update on that?.

Yes. I think I'll repeat what we said in the in our prepared remarks is that we are very confident that we will extend the contracts that make up the bulk of those lines that are set to expire at the end of 2020, in very short order..

Okay. Is there any thinking of changing the facility, where it would be? I know challenges in Newton and there's Matamoros is closer for shipping purposes.

Is that on the table of discussions?.

No, it's not..

Okay.

Second question; how do you expect the industry structure to evolve as we move from beginning to end in this market downturn?.

I think for we built a very strong balance sheet for a reason, and it's to deal with times like this. But as we said earlier, we haven't seen a change in demand from our customers in the near term, and we have not had any indication of demand changes for next year.

I think there are too many uncertainties to predict exactly what the ultimate fallout is. But at this point, I don't see any major structural change. I don't know, Steve, if you see it differently..

No, I agree. We're continuing to see in the industry some forces of and again, this is a broader comment, not just a COVID comment, but broader forces of consolidation. Broader forces of wind being adopted for economic purposes, in combination with the renewable energy aspect and climate change driven aspect of what we do and what our customers do.

So there's a lot of healthy kind of fundamental pull on the industry and the markets. But there are some shorter-term effects of policies that come and go a little bit. So for example, U.S.

market this year, if some projects slip into next year, they'll either probably qualify under force majeure excuses or perhaps extensions to how the Safe Harbor gets treated.

So we don't see that as a structural change as much as it may be a delay, as Bill described in the prepared remarks about some gigawatts being installed next year as opposed to this year. So we'll continue to see those kinds of project-based puts and takes, if you will. But those two are mine structural changes, bigger picture, if you will.

And similar issues around the world. With economics being a big driver of customer selection being a big driver, but individual government policies or temporary tariffs, those types of things impact individual project timing or decisions. They don't tend to impact the bigger fundamental market as we see it..

Okay. Last question, and then I'll hand it off. I'm just curious for the Newton, the facility in new Iowa. I thought it was very interesting and just maybe even commenting from a general perspective as more and more companies are doing manufacturing and putting safety measures in place.

The, I think, 20% infection rate, at least on the face of it seemed kind of high, and that's a challenge.

But I was wondering if is that something that you think was people contracting from within the facility? Or was this from people outside the facility in their daily lives? It'd be very interesting, I think, broadly, to get color if, say, hypothetically, you institute policies, but the virus was contagious in spite of that or something. I'm curious..

Yes. Yes, I think that's a challenge for any company. I mean, if you look at the practices that we put in place that we put in place in early March. We had a head start because we were in China, and we understood what those practices should be post the issue in our China factories. And so we put those practices in place very early.

We've done as much contact tracing as we can do. There is no hard-core evidence that there was any transmission within the plant. We do believe our rates are pretty consistent with the rates in the surrounding communities and counties within Iowa. So again, it's hard to control what our associates are doing when they go home.

As much education as we can provide as much PPE as we can provide them to use with their families outside of the factory that we've done. But that's a tough question. But given what we've got in place, we believe that, that was more community spread related than anything that was transmitted within the four walls of our plant..

Thank you, guys..

Yes. Thank you..

[Operator Instructions] The next question comes from Pavel Molchanov with Raymond James. Please go ahead..

Thanks for taking the question. We talked a lot about the Mexican lockdown and the impact on your manufacturing. Do any of your customers in their various jurisdictions have the physical turbine installation disrupted as a result of the lockdowns, for example, Italy, France and some of the U.S.

states?.

I think there have been construction delays in multiple countries as a result of COVID-19, travel restrictions. There have been challenges getting certain of the equipment to different locations depending on border crossings and what have you. So clearly, there have been some challenges with respect to logistics and construction as a result of it.

Is that was that what you were asking, Pavel?.

Right.

And I guess, is it the regulatory restriction that's more impactful in slowing down wind new builds or is it labor availability and just frankly, fear on the part of the workforce?.

I think it's a combination. Clearly, any border crossings or lockdowns on movement of people, country to country or within countries, that can certainly impact the actual construction in the wind farm. And there's the human factor as well with the fear part. I mean, I think we saw that in Mexico clearly with our workforce.

But yes, I think it's a combination of both, Pavel..

Understood. Lastly, a lot of the renewable energy trade groups in the U.S.

are pushing for an extension of the ITC, or I should say, a further extension as part of one of these COVID stimulus bills, kind of what's your take on what you guys would like to see out of Washington vis-à-vis the industry?.

Yes. Pavel, it's Steve. I think the most critical ask is for safe harbor extension, one year each on the 2016 and 2017 safe harbor consideration. So that would affect this year and next year and basically give projects that were due to be completed by the end of this year, the opportunity to be done into next year.

And then likewise, in 2021 for '22, if you will. That's the number one ask. And if you think about it, that's no additional money from treasury. It's the benefit of the bargain. It's the way the PTC was structured last time. So that's the highest priority.

There are some groups that are concerned about availability of tax equity and are interested in seeing some direct pay component, that's being discussed. We'll see how that proceeds. And then to your a little more directly to your question, in the context of a stimulus discussion.

So if we get to a pure stimulus-related discussion, then if we're asked, what could stimulate additional spending, additional tax credits could stimulate additional spending. It doesn't mean it's needed for the industry to survive or to do well, but it could be a part of a stimulus related request.

And just, Pavel, as you know, I mean the biggest thing the industry needs is a level-playing field. If you think about it, if other technologies are given preference, then that wasn't necessarily the deal, the basis on which the phase down of the PTC was negotiated.

So to me, this is more now about, for the future, more about parity and more about level playing field. And then, again, to the extent that stimulus is the ASK, there may be a tailored stimulus-related package..

The next question comes from Paul Coster with JP Morgan. Please go ahead..

Yes. This is Mark Strouse on for Paul. Most of them have been addressed already. But Steve, I wanted to go back to the non-blade business. You again highlighted your long-term growth targets for that business, and it's obviously good to see the new tooling contract.

I'm just kind of curious if you can touch on your discussions with other folks that may not be as far along in your pipeline. How those discussions are evolving due to COVID? If people are hitting the pause button, it's actually the opposite, and this is making them kind of more interested in outsourcing..

Yes. Mark, I'm not -- I don't think we're seeing a significant change in the transportation-related work from COVID. There are, as you can imagine, short-term impacts of more work by video calls and e-mail than in-person visits.

But honestly, that hasn't stopped us off from continuing to do an awful lot of good work remotely with our customers, within our teams globally. So nobody is waiting to get back in person to push things forward on the development programs or on cooperative engineering as it relates to that.

It will be interesting just to see how some of the to the extent there were stimulus infrastructure-related packages over time. Does that help support a larger EV market or charging infrastructure? We'll see how all that develops. But from our perspective, we're staying the course and really no significant changes.

Good traction, as Bill said, on the current tooling contract. We'll continue to demonstrate traction as we have been, but no real change..

Okay. And then, Bill, just one quick follow-up.

Of the 52 lines that are currently installed, can you just remind us how many of those are in Matamoros and Juarez?.

So in Matamoros, we have six and Juarez, we have 13. Okay..

Thank you very much..

Thanks, Mark..

This concludes the question-and-answer session. I would like to turn the conference back over to management team for any closing remarks..

Yes. Thanks, all, very much. We appreciate you joining and appreciate your continued interest in TPI Composites. Thanks again..

Thank you..

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day..