Good afternoon, and welcome to TPI Composites Fourth Quarter and Full Year 2021 Earnings Conference Call. Today’s call is being recorded. 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 2021 earnings call. We will be making forward-looking statements during this call that are subject to risks and uncertainties, which could cause actual results to differ materially.

A detailed discussion of applicable risks is included in our latest report and filings with the Securities and Exchange Commission, which can be found on our website, tpicomposites.com. Today’s presentation will include 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 Bill Siwek, TPI Composites President and CEO..

Thanks, Christian, and good afternoon, everyone. Thank you for joining our call. In addition to Christian, I am joined by Adan Gossar, our Interim CFO and Chief Accounting Officer. I will briefly review our fourth quarter and full year results, cover our global operations, including our supply chain and the wind industry market more broadly.

Adan and I will then review our financial results before we discuss the 2022 outlook and open the call for Q&A. Please turn to Slide 5. For the full year 2021, we delivered net sales of $1.7 billion, a 3.7% increase over 2020 and adjusted EBITDA of $2.3 million, while delivering approximately 13 gigawatts of wind blades.

Our results of operations for 2021 and the fourth quarter were adversely impacted by approximately $52 million and $40 million, respectively, primarily due to the deferral of revenue relating to extensions of customer contracts and estimates of cost to complete our contracts under ASC 606.

However, these factors did not have an impact on our 2021 billings, which exceeded expectations for 2021 and the fourth quarter. We manage our business on a billings basis as it reflects our actual cash flow and working capital requirements. Now for a summary of 2021 highlights.

During the year, we started wind blade production on two lines in our Chennai, India facility for Nordex and added four lines for them in Matamoros, Mexico. We also added four new lines in Vestas in Yangzhou, China, with production plan to start in the first half of 2022 and extended three lines with them in Turkey.

With these new lines and extensions, we now have a potential contract value of up to $3.5 billion through 2024, with a minimum contract value under our supply agreements of $2.2 billion. We grew our global service organization to almost 400 technicians and delivered revenue growth of more than two times compared to 2020.

During the fourth quarter to accelerate growth in Europe, we opened a training center in Spain. We expect further growth in our service business in 2022. We continue to experience strong traction in the transportation side of our business.

Our customers, and several of whom are new to TPI, are seeing the benefit of our capabilities and ability to collaborate to develop innovative composite solutions at an accelerated pace. In the fourth quarter, we won our first program commitment of meaningful size per passenger EV platform, a major milestone for TPI.

We have also entered into several new development agreements with multiple customers, which we expect will turn into longer-term production agreements in the future.

During 2021, we successfully launched our automated compression molding line and delivered nearly 30,000 parts to an electric vehicle manufacturer, and anticipate manufacturing an additional 25,000 parts in the first half of 2022.

We continue to expand our manufacturing capabilities and have been awarded programs to deliver approximately 450,000 parts this year, and a million-plus parts in 2023 for the same customer.

Our innovative composite solutions enable our customers to achieve faster time to market, require lower upfront investment and provide enhanced thermal protection and weight reductions. We closed a $400 million financing with Oaktree and have $200 million potential follow-on investment committed.

The financing enabled us to shore up our balance sheet and position ourselves for additional growth when market demand recovers. Turning to Slide 7, I’ll now give you a quick update of our global operations, supply chain as well as a market update.

During the fourth quarter, we turned around the performance in our Nordex, Matamoros operation, I’m happy to report that we are delivering blades on plan and meeting the expectations of our customer for safety, quality and delivery. However, we still have work to do on cost and pricing to realize the returns we expect from this facility.

With respect to the challenges we experienced during the transition to a new innovative multi piece blade, we made significant progress during the quarter, met our delivery requirements and are on track to drive productivity in 2022 to levels we and our customer expect. We currently plan to have transitions or startups in four locations during 2022.

Turkey, Mexico and India will go through a total of five line transitions, and we will start up for new lines in China. The Turkey transition of one line is already complete and is a great example of a well-planned transition with minimal interruption and no impact to our annual output.

Moving on to the supply chain, the after effects of the pandemic continue to evolve and affect our supply chain and the underlying cost assumptions in unpredictable ways, specifically with unprecedented volatility in commodity and logistic sector.

During 2021, there were both significant price increases and supply constraints with respect to epoxy resin and carbon fiber, key raw materials that we use to manufacture our products, as well as increases in inbound logistics costs.

We expect carbon fiber and related products supply to remain constrained as demand for carbon we use continues to outpace capacity additions.

Production of carbon products is also very energy-intensive, and continued rising energy costs could adversely impact the cost of carbon materials after already seeing price increases of up to 50% for certain carbon feedstocks during 2021.

Epoxy resin prices were approximately 150% higher in the fourth quarter of 2021 as compared to the fourth quarter of 2020, and high resin prices in Europe and North America continue to be supported by bullish demand from industries like automotive, infrastructure, construction, and new containership builds.

While competitive resin suppliers are available in Asia, the current unreliable logistics environment and associated costs often offset any potential savings on price. We expect that the price of carbon fiber and resin will remain at elevated levels in 2022.

More than 50% of the resin and resin systems and more than 90% of the carbon fiber we use is purchased under contracts either controlled or borne by our customers and therefore, these customers receive or bear 100% of any decrease or increase in price.

With respect to our other customer supply agreements, our customers typically receive or bear 70% of any raw material price decrease or increase.

Now withstanding the challenging cost environment, we still expect to be able to hold the average bill of material cost for customers for which we control the supply chain relatively flat compared to 2021 levels.

We remain focused on localizing and regionalizing our supply chain to reduce the impact of high logistics costs, provide security of supply and build long-term strategic partnerships with key suppliers to ensure the best pricing in the short, medium and long-term.

As you’ve heard from some of our customers in recent weeks, there continue to be headwinds in the U.S.

related to the stalled build back better plan, the expiration of the PTC at the end of 2021 in addition to supply chain costs and constraints, which decreased demand for our wind blades in 2021 compared to 2020, and is causing uncertainty and demand in the near-term.

While we continue to monitor legislative and regulatory policy proposals to extend and/or expand tax credits in the United States and in other parts of the world, we believe that notwithstanding current challenges, demand for wind energy will strengthen over the next few years, given the necessity to decarbonize and electrify to meet the aggressive goals set by states, regions and countries to combat climate change.

And we believe that we are uniquely positioned with our global footprint, located in key strategic geographies, to grow our market share with industry leading OEMs, as the demand for wind begins to accelerate again, and we see the growth that has been forecast during the decade and beyond.

Our relationships with our customers remain strong and we continue to jointly develop strategic plans to address the current environment, competitiveness, and future opportunities. For 2022, execution is our primary focus.

We have also identified multiple strategic initiatives to enable TPI to capitalize on the expected long-term growth in the wind market, including expanding our global service offerings and leveraging our expertise and blade design, while expanding our capabilities around logistics and recycling.

These initiatives are underway and will be advanced in 2022. I would also like to confirm that we remain focused on the health and safety of our associates while executing our operating initiatives and ESG goals, which include safety, diversity, inclusion, and driving to become carbon-neutral by 2030.

From a COVID-19 standpoint, we continue to operate all our facilities at normal levels, and we remain focused on operating our business safely and ensuring that we are prepared to deal with any resurgences of the virus. With that, let me turn the call over to Adan to review our financial results..

Thanks, Bill. Please turn to Slide 9. All comparisons met today will be on a year-over-year basis compared to the same period in 2020. For the fourth quarter ended December 31, 2021, net sales were $389.5 million, while net sales of wind blades were $362.3 million.

The decrease in wind blade sales was primarily driven by a decline in the number of wind blades produced due to the transition in Juarez, Mexico, the impact on our production due to shortages of raw material, supplied by our customers and foreign currency fluctuations offset by an increase in the average sales price per blade.

Our general and administrative expenses for the quarter decreased by $2.4 million to $5.4 million. Foreign currency loss was $117.4 million in Q4 2021, as compared to $1.9 million in Q4 2020. This change was primarily due to net Euro liability exposure against the Turkish Lira.

The Euro exposure continues to be naturally hedged on a cash flow basis due to our Euro denominated revenue contracts. Net loss attributable to common stockholders for the quarter was $93.3 million as compared to net income of $5.2 million in the same period in 2020.

This decrease in net income was primarily due to the impact of the transition in Juarez, the ramp in Matamoros, shortages of customer supplied raw materials, non-cash foreign exchange losses, restructuring costs, and the deferral of revenue related to contract extension and contract cost estimates under ASC 606. Moving on to Slide 10.

For the full year 2021, net sales increased to $1.73 billion and net sales of wind blades totaled $1.61 billion. The increase in wind blade sales was driven by an increase in the average sales price of a blade, offset by a reduction in wind blade sets produced.

Net loss attributable to common stockholders for the year was $165.3 million, as compared to $19.0 million in 2020.

The increase in our net loss was primarily due to raw material and logistics inflation, the impact of transition in Juarez, the ramp in Matamoros, shortages of customer supplied raw materials, non-cash foreign exchange losses, restructuring costs, and the deferral of revenue related to contract extensions and contract cost estimates under ASC 606.

Bill?.

43 dedicated manufacturing lines, total wind blade set capacity of 3,710 for the lines we have under contract, utilization of between 80% and 85%, average sales price per blade of between $170,000 and $180,000, and CapEx of between $25 million and $30 million. I’ll now turn the call back to the operator for questions..

Thank you. [Operator Instructions] Our first question is from Justin Clare with ROTH Capital Partners. Please proceed..

Hi, everyone, thanks for taking our questions. So I guess just first off on the guidance that you provided, you provided utilization, dedicated lines and ASPs. So just based on those metrics, it looks like net sales could be flat to slightly down, which I think is what you had alluded to on the Q3 call.

So is that still a reasonable expectation for this year? Can you just talk through that and the level of uncertainty there with sales going forward?.

Yeah, Justin, nice to talk to you. I would say again, a lot of market volatility here and uncertainty, especially in the U.S. market. Given what we know today, I think that statement that we made in Q3 is still accurate..

Okay, sounds good. And then turning to margins, now you indicated that you could hold the bill of materials flat year-over-year in 2022, or at least that’s the goal here. And then if I look at your ASPs, it looks like they could increase 4% or so for the year, based on your guide.

So that would indicate that you could expand margins here, but just wanted to see, what visibility do you have to expanding margins? And if you could talk through the cadence as to how you expect margins to trend, that’d be helpful..

Yeah, I think margins will continue to be a bit compressed, Justin, in 2022. I think you’ve heard that from a number of our customers over the last several weeks, the margin pressure on the hardware side, no different for us. We’ll continue to see compressed margins.

We have made significant progress in many areas, but we still have some challenging areas to focus on. So I would say, expect still to see some compressed margins through 2022..

Okay. And then maybe just one more for me in. So given this environment, just want to know, or check in on how you’re thinking about the balance sheet here. Obviously, you raised the $400 million from Oaktree, but you have the option to do another $200 million here.

What are your thoughts on looking to add that $200 million of capital? what would lead you to make that decision to move forward with that?.

Yeah. So of the $400, If you remember, we only drew $350 Million of that. And we feel very confident and comfortable with that level at this point in time. The $200 million in addition to the $400 million was really marked for future growth opportunities.

So we wouldn’t – we don’t expect or anticipate having to tap that for anything, but growth opportunities as we move forward..

Okay, great. That does it for me, and I’ll pass it on..

Great, thanks..

Our next question is from James West with Evercore ISI. Please proceed..

Hey, good afternoon, Bill..

Hey, James, how are you?.

I’m doing well.

Yourself?.

Doing great. Thanks..

Yeah, good. Well, congratulations on the big transportation award, you guys are seeing good progress there. How should we think about, I mean, you gave the units that you expect to ship next year in 2023.

But what should we think about that in terms of kind of dollar amount or size of award, if you can provide me with some, maybe it could be above the big round number, but I’m trying to conceal that with the size of your wind blades there?.

Yeah, it’s – I would tell you there the price per part is relatively low, just based on the nature of the part..

Right..

Yeah, however, the margins on them are very good. And I can’t disclose exactly what that price per part is at this point in time. But we’re pleased with it and it will be margin positive for us, both in 2022 and in 2023..

Okay. Okay, fair enough. Well, I think, we should sort of get back into it. The other question I had on offshore wind in the US. I mean, you made some positive comments about it. We got the build back better then stalled here. But we’re going forward with the New York auction right now.

So kind of how do you guys see this playing out? If we start awarding the acreage, do you start to then get awarded the blades? And you start to – I’m sure you’re already sourcing and you’re talking to states and working on manufacturing capacity near the acreage.

I mean, how does this all kind of play out in your mind?.

Yeah, so again, we have to work through our customers for that and you can be sure that the conversations are ongoing with customers for opportunities on the – both on the East Coast as well as in other regions of the world. So, we’ve been – we’ve talked about this for quite some time and those discussions are robust and continue..

Okay, that’s it for me. Thanks, Bill..

Great. Thanks, James. Good talking to you..

Our next question is from Joseph Osha with Guggenheim. Please proceed..

Hello, this is actually Hillary [ph] on for Joe. First question. You already kind of touched on the supply chain and efforts there to localize it.

And I just kind of wondering if you could provide any context for how much progress has been made so far versus further room for improvement there?.

Yeah. Hey, Hillary, good to talk to you. We’ve actually made quite a bit of progress. We’ve started first in Mexico and we’ve done a pretty nice job of localizing both in Juarez and in Matamoros, some of the key suppliers, and we’re working on some additional opportunities there.

India, we’re a relative recent entrant to – entrance into the Indian market. And a lot of the wind suppliers, if you will, were up in the northeast, whereas – sorry, the Northwest and we’re down in the Southeast. But making progress on that as well, that’s a focus for us.

And I think, suffice it to say, our team there as well as our global team has done a nice job of introducing some of our suppliers to that area. And I look – I expect that we’ll make significant progress in 2022 on that..

Okay, great. And then I believe you said it was Matamoros, in your prepared remarks, where it seems like they’re kind of up and running more smoothly, but still a little bit of room for cost improvements, if you could just kind of provide timeline for where we see that come in a bit and kind of what has to happen to get you there? Thank you..

Yeah, you bet. So that was the one that we were challenged with. Last year, we talked a bit about it. And as I said in our prepared remarks, we’ve made a significant amount of progress, but not without throwing some additional resources at it. So, as of today, as I mentioned, we are delivering product on time, high-quality product to our customer.

And now it’s time to, as we drive cycle time down and throughput down, it’s to work on the cost side of that as well. So, through the balance of this quarter and into second quarter, we are very focused on driving that cost side of it. So, I would expect by the end of Q2, we’ll be in a much better position down there..

Great, thank you. That’s all for me..

Thanks, Hillary..

Our next question is from Laura Sanchez with Morgan Stanley. Please proceed..

Hi, Bill, thank you for your time.

Can you hear me, okay?.

I hear you loud and clear, Laura. Good to talk to you..

Perfect. Thank you, likewise. So on the volume side, where are volumes today relative to the minimum volume commitments? I’m wondering if OEM – those MVCs, the idea there is to provide some instability.

So I’m wondering if OEM can continue to push volumes further out? Or if doing so would incur costs on their end?.

Yeah. So Laura, it varies a little bit by region and by customer, but we are above what the MVOs would require in the contract for sure. I – yeah, so I guess I’m not sure what else to say other than, yeah, we’re above the MVOs. And it been in some cases, we’re over 100% capacity and in other places, we’re lower, but overall over the MVO amounts.

And to your to your question, if they did go below the MVO, yes, there would be a cost to the customer..

Okay. Okay. And in terms of the – on the EBITDA side, the incremental 606 charge relative to the guidance provided last year, you were talking about that being related to a delay in revenues, given the extensions in some of the contracts. The revenues for the year were in line the guidance range.

So were there any revenue offsets, or maybe could you discuss just the moving pieces there and the extended terms of the contracts like how further out does that take you?.

Yeah. So we extended a number of lines by a year, or a year, right? Yeah. So I think all of them were extended by a year. And yes, there was a corresponding revenue impact as well. So we had to defer a certain amount of revenue, and that’s what impacted EBITDA.

And were there some revenue offsets on the revenue side that even with that change allowed you to remain within the guided range?.

There were puts and takes from a volume standpoint, but I don’t think nothing that I can recall significant – significantly different. We had a fairly wide range on the revenue side, so..

Yeah. Okay. Understood. Thank you..

Yep. Thanks, Laura..

Our next question is from Eric Stine with Craig-Hallum Capital Group. Please proceed..

Hi, it’s Aaron Spychalla on for Eric. Thanks for taking the questions..

Hey, Aaron..

Hi. Maybe first on China. Can you just give us an update there on kind of merging the facilities and replacing those lines and OF [ph] or with Vestas that are kind of starting up, but maybe talk about the timeline there.

And then just thoughts on potentially entering that market going forward?.

Yeah. So it’s never easy when you have to consolidate factories and there’s a human side of it. Our team in China did a phenomenal job of managing that. And we’ve effectively now merged our both of our blade operations into one into Yangzhou. So we have seven lines operating there now. So we have three lines that were already there.

And then we’re starting four new lines this year. We’ll have those up in operating by the end of Q2. So seven lines total. But the integration went very smooth.

We will continue, Aaron, to look at opportunities to continue to expand our production in Yangzhou with our existing customers, breaking into the China market for China, with the Chinese OEM has always been a very difficult task from a cost standpoint. We’ve had a number of discussions or a number of opportunities.

But we’re going to make sure if we do that we can do that profitably. And at this point, we haven’t found that right opportunity yet. So we’ll continue to work with our existing customer base on filling the balance of the capacity that we have in Yangzhou..

Understood.

And then any more color you can share on you kind of mentioned recycling just what that might entail any kind of CapEx or any contribution, just anything else there would be helpful?.

Yeah, it’s a little bit early. There’s a lot of discussion in the industry about it. We’re working on two or three different end solutions. And actually, the CapEx is not as expensive as you might think. Now, if you get to once you increase the volume of blades that are coming down tower that need to be recycled, obviously, you’ve got to scale.

But CapEx is not crazy at this point. You could – for about $1 million, you can handle a lot of blades from a pure CapEx standpoint. Now, the challenge is transport and everything else, because that becomes expensive, but it’s not CapEx intensive.

But we are working on a couple of interesting solutions for that, that we hope to be able to talk about more as we get to the back half of 2022..

All right. We’ll stay tuned there. I’ll hop back in the queue. Thanks..

Great. Thanks, Aaron..

Our next question is from Mark Strouse with JPMorgan. Please proceed..

Yeah. Good afternoon. Thanks for taking our questions. Bill, you gave some color on the blade business, kind of directionally speaking how we should be thinking about that in 2022.

Just curious if you can give us any directional color on the non-blade business revenue this year?.

Yeah, I think, again, transportation, we’re going to grow that over where we were this year. I think you’ll see pretty good growth, quite frankly. It’s still be a very small part of our overall business. But we’re building up. We’re winning some production contracts and we’ll add to that.

So it’ll be more than we did this year, by a factor of probably 1.5 times, I would say. On the service business, we’re going to continue to aggressively grow that. We grew up by two times top line this year, probably go up by another 50% on top of that for this year, conservatively, but that’s kind of a directionally where we’re headed..

Okay, that’s helpful. And then just lastly, I think in the past, you’ve targeted a kind of a low double-digit EBITDA margin.

Has there been anything over the last year or so in the industry that has led to a structural change that you think that that number is no longer appropriate?.

I would tell you, Mark, given the uncertainty as we sit here today, with everything that’s going on, whether it be build back better stalled. What’s happening from a geopolitical standpoint in Europe, I think, if you listen to our customers, there needs to be a fundamental change in how – and how wind is priced.

So I do think there are some structural changes that need to happen. I think we’re starting to see that with some of the – so that price per megawatt of turbines over the last couple of quarters starting to go back up. And that’s not just because of input costs, but – so the answer is, yes. Long answer to your question is yes.

I think there do need to be some structural changes and we’re working on that with our customers as we speak..

Okay. Thank you, Bill..

You bet. Thanks, Mark..

Our next question is from Pavel Molchanov with Raymond James. Please proceed..

Thanks for taking the question. A minute ago, you referenced the geopolitical context and specifically in Europe.

Remind please, how much of your revenue comes out of the European markets and I guess specifically from the Turkish facility?.

Yeah. So good to talk to you, Pavel. We – Turkey, probably it’s less than 10% stays in Turkey of what we built. Most of it does leave leave Turkey and go around the world, a lot of that to EMEA. In Europe, it’s about 30% of our blades end up in Europe that are built. So it’s in that neighborhood..

Okay. When we think about the European wind market, obviously offshore gets maybe disproportionate attention most of the new builds are in fact still on land.

Do you envision as seemed logical for $25 in NCF natural gas, most expensive natural gas in the history of the world to drive adoption of more wind in the electricity mix, both on land and offshore?.

Yeah, I would hope so, Pavel. I mean, the WindEurope just put out a report today that between now and 2030 of the new installs, they’re anticipating 76% of them are going to be onshore. So you’re right, offshore gets a lot of the press, but there’s still a significant amount of onshore activity in Europe.

I do – the challenge in Europe remains permitting and citing. And so if the governments can work with the industry and figure out how to speed up that process, then the pace of installs in Europe should and could increase significantly. Right now, they estimate like 17 gigawatts a year between now and 2030.

It needs to be twice that much to hit their 40% renewable target by 2030. So long answer to your question, but the answer is absolutely yes..

And then lastly, maybe just clarify the light duty vehicle contract that you referenced, that will be basically a smaller version of the buck bodies that you’re supplying to Proterra, correct?.

No, I didn’t mention a light body vehicle. It was – it’s structural components for an EV passenger platform. So it’s not a body and weight or a body – it’s a structural component that is under body for the most part..

Okay. Okay. That’s clear. Thank you very much..

Yeah. Thanks, Pavel..

Our next question is from Jeff Osborne with Cowen and Company. Please proceed..

Good afternoon, Bill. A couple of questions on my side. I was wondering on the EVPs, if there’s any notable CapEx that would be needed to produce a million units in 2023.

And then a secondary question about it is, could you disclose if it’s a startup or maybe those goals are ambitious versus an established OEM?.

First of all, no incremental CapEx, Jeff; and secondly, it’s an established platform..

Got it.

And will that be produced in Rhode Island or somewhere else?.

It – a portion of its produced in Rhode Island and a portion of it is produced with in another location that we partner with a supplier..

I got it. And then I had a question on the transitions that you guided for the year.

Are any of those associated with the segmented blade or multi piece blade that you had challenges within Mexico? I’m just curious if they are what level of learnings you experienced there and how quickly you could port that knowledge to other locations?.

Yeah, no, fair question. But no, the answer is they’re not related to the multi piece blade. They’re single piece blade as we would call them. The good news is, is that two of the transitions one in Mexico and one in Turkey, it’s that – we’re transitioning to the same blade. And so that’s helpful.

And we’re ahead of schedule on both of those as we speak right now. So very optimistic that we’ll complete those in very efficient fashion as we did the first one in Turkey at the beginning of the year..

Got it. Thank you all I had..

Great. Thanks, Jeff..

Our next question is from Tom Curran with Seaport. Please proceed..

Hello?.

Hey, Tom, how are you?.

Good, good. A follow-up on the topic of transitions. I know you’ve had several initiatives underway to try to improve the efficiency of transitions when you do them from what I understand, both in moving from one customer to another and then intermodal transitions with the same customer.

Could you update us on where you think those initiations – those initiatives are at and how much more improvement we might see?.

Well, I’ll give you an example. So in Turkey, it was for an existing customer, and we did transition a line. We’ve already upped our production estimate for 2022 to north of what our contractual amount is, that will just give you an example of how efficient that transition was.

So transitioning a line and not losing any volume for the year is about as if – and in fact, getting more volume is about as efficient as you can do it. I would say we’ve made – I’m going to pull the COVID card for a second.

So in 2020 and 2021, our transitions were a little bit challenged because of COVID, whether it was the ability of people to get to a certain country, getting some of the experts on the equipment in country, et cetera, created some challenges. But what was really under our control, we executed pretty well.

So, again, I’m pressing the guys every day to continue to get better. Our schedules are much more aggressive. I think our collaboration with our customers has gotten better. We are holding them more accountable for what their part of the transition is with consequences if those deliverables aren’t met.

So the answer is, I feel very confident in the transitions this year. We’ve made significant progress, and I expect to continue to make progress as we go through the balance of the year..

That all sounds encouraging.

And then, in terms of the remaining cost savings, you might be able to wring out of facility consolidation, perhaps line idling, just wondering what more we might see you do with Iowa over the course this year? And then whether or not there’s additional shutdown or mothballing steps you could take with the four lines in Juarez that had been relinquished by FCRA?.

Yeah, so Iowa, I think as we talked about before, we’ve extended that lease through 2022. The reason we did that was to number one, if build back better came in, would there be provisions in there to possibly provide for the reopening of that plant, where it made economic sense.

With build back better stalled that at least from a regulatory or a legislative standpoint, it’s less likely at this point. But we’ve minimized costs there to really the lease as well as just kind of the normal maintenance that we need to do there. So there’s not much more we can do from a cost savings, from a mothball there this year.

But if nothing happens there, then we’ll obviously eliminate that cost for 2023. And whereas there’s interest in that facility, we’re utilizing it for some other work right now as well. So it’s not going unutilized completely. But again, I think when we get a little bit more certainty about the U.S.

market whether we have a build back better, whether we have tax extenders at the end of the year, or a new clean energy bipartisan plan early next year, I think we’ll have a better feel for exactly what the long-term play is there.

But I remain optimistic that once we have certainty from a policy standpoint in the U.S., that that space will get scooped up pretty quickly..

Thanks for taking my questions..

You bet. Thank you..

[Operator Instructions] Our next question is from Stephen Gengaro with Stifel. Please proceed..

Thanks. Good afternoon, gentlemen..

Good afternoon..

I apologize. I got disconnected earlier. So hopefully, this was not asked, but can you talk a little bit more about what you’re hearing from your wind blade customers? I mean, obviously, you kind of talked about this in the press release a bit about the near-term uncertainty.

But are you – can you give a sense for kind of what’s going to kind of restart things and kind of what they’re looking forward to kind of be maybe more aggressive on the waterfront and on ramp again?.

Yeah, and again, just from what they are saying publicly, it’s not about chasing market share, it’s about chasing profitable business. So I think, and we may have seen some of that in Q4 with some of the order volumes, I think with them having the discipline to price. So that they can be profitable, certainly will help us as well.

So what I’m hearing from our customers is just more discipline on the pricing side, not chasing share, just to chase share, being diligent and how they’re contracting. And again, just not chasing business to chase business, but really chasing profitable business..

Okay, great. Thank you. And then the second one, I have just some sort of a bigger picture perspective.

And I know your crystal balls is cloudy, as we speak, as all of us are, but when you think about the sort of the EBITDA in 2022 and you’re kind of when you get – when you turn positive into the how that just got, like, how are you sort of thinking about that over the next several quarters?.

No, I think from a sequencing standpoint, Steve, and I would say, Q1 will be a down quarter for us, just because all of our transitions and our startup – a couple of our startups will happen in the quarter. And so will – that’ll be a down quarter, and then you’ll see a build in Q2. Q3 will likely be our best quarter, which is fairly typical.

And then Q4, we’ll see it dip a little bit, and that’s primarily because of holidays and what have you. But that’s how I would kind of sequence the EBITDA over the quarter – or over the year, sorry..

Okay, great. Thanks for the color..

You bet. Thank you..

Our next question is from Kashy Harrison with Piper Sandler. Please proceed with your question..

Good afternoon, and thank you for taking the question..

You bet..

Just one quick one for me, and I apologies if this was answered in some form or fashion a little bit earlier. But just simplistically, how should we think directionally about the startup in transition cost line in 2022 for the full year? Are you thinking flattish, slightly down, slightly up, just some directional indicator would be great? Thank you..

Yeah, I would – given the number of transitions in startups and recognizing that for the startups are in China, and our team in China does a really, really good job of either transitions or startups.

And the fact that I think 2021 was probably impacted a bit more by the challenges we had in Juarez as well as Matamoros, I would say directionally, it will be down year-over-year..

Got it. That’s all I needed. Thank you..

You bet. Thanks, Kashy..

And our next question is from Adhok Bellurkar with Bank of America. Please proceed..

Thank you so much. Good evening. Thank you for taking my question. I guess the first question I had was at a higher level, we’ve heard discussions of some of the Chinese wind turbine OEMs looking to expand outside of China into Europe, mainland, for example. So as we think about potentially expanding beyond your current customer base.

Does that look like an interesting opportunity of partnership with TPI to pursue and get back into the equation?.

Thanks for the question. As I mentioned earlier, it is – we’ve had discussions for years with the Chinese OEMs, the terms that they require, or request, and the pricing is extremely aggressive from our perspective. So I mean, China is the largest wind market in the world, and they are making some headway outside of China.

So I will never say never, is certainly an opportunity. But it’s a bit of a long putt for us right now from that perspective, as I look at it today, just from a pure cost standpoint, yeah..

Understood. That’s helpful. And then for raw materials, your commentary around epoxy resin and carbon fiber was extremely helpful.

I was wondering if you could help us complete the puzzle in terms of understanding how best of wood fiberglass or their trading, whether they are tailwind or status quo versus 2021, how should we think about it?.

Yeah. So I would tell you that, for some of the reasons that we’re seeing increasing costs from carbon. We’re seeing some challenges with PET. PET is a capacity issue, to some extent, as well as acrylonitrile is a feedstock for both PET and carbon and we’re seeing some capacity constraints there as well. So that’s a bit of a challenge.

But we see that capacity to challenge a little bit, but from a pricing standpoint, we’re in pretty good shape based on our contracts for next year, or for this year. Glassfibre, I think we expect probably a 2% to 3% increase year-over-year from 2021 to 2022.

And that there remain a few supply constraints there, but nothing that we can’t manage through..

Understood. Thank you. And then I guess the last one would be I know you have touched upon the new [EDI order] [ph] from multiple angles.

I guess the only question I had was just the current backlog number that you have shared $2.5 billion, does that capture the full 50,000 parts this year and then 1 million parts for 2020? And then what’s the room to expand within these contracts from where they are right now? And in terms of just linking it to the $500 million the long-term target that you have for the second half?.

Yeah, so those contracts today are not included in the backlog number or the contract value number. And the ability to expand, I mean, the first production, or the first part we made for the customer, we did very successfully, which is – which led to this opportunity. I think there’s the opportunity to expand the relationship geographically.

So that is certainly an option. But if we continue to demonstrate our ability to be nimble, innovative, work fast, and reduce upfront tooling costs for these customers, I think our opportunity to expand that is right in front of us..

Got it. That’s really helpful. Thank you so much..

Thank you..

We have reached the end of our question-and-answer session. I would like to hand the conference back over Bill for closing comments..

Thank you, and thanks, everybody, for your questions. Just to reiterate, we remain focused on managing our business through the near-term challenges in the industry and our efforts to position TPI as the preferred global solution provider to our customers to enable profitable execution and growth in the future.

And then finally, I want to thank our TPI associates, once again, for their commitment and dedication to TPI and our mission to decarbonize and electrify. Thank you, again, for your time today..

Thank you. This does conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation..