Good afternoon, and welcome to TPI Composites First Quarter 2022 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]. At this time, I'd like to turn the conference over to Christian Edin, Investor Relations for TPI Composites. Thank you, sir. You may begin..

Thank you, operator. I would like to welcome everyone to TPI Composites First Quarter 2022 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 risk is included in our latest reports 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'm joined today by Adan Gossar, our Interim CFO and Chief Accounting Officer.

I will briefly review our first quarter results, cover our global operations, including our service and transportation businesses, then cover our supply chain and the wind energy market more broadly. Adan will then review our financial results in detail, and then we'll open the call for Q&A. Please turn to Slide 5.

We delivered net sales of $384.9 million during the quarter and adjusted EBITDA of $6.1 million.

Although adjusted EBITDA on a billings basis was a loss of $5.3 million, it was better than planned as a result of tight cost controls and cost reductions globally, excellent execution, including on multiple transitions, which enabled us to deliver additional blade volume during the quarter.

We signed a number of new development agreements in our Transportation segment, and we also published our 2021 ESG report during the quarter. Please turn to Slide 6 for highlights from the report.

We made significant progress towards our 2030 goal of carbon neutrality by reducing our overall CO2 intensity by 9% and expanded on-site renewable energy generation. We achieved our waste-reduction targets by meeting TPI's process waste reduction goal of 5% during the year.

We increased transparency throughout TPI's value chain by initiating Scope 3 emissions reporting. We reduced our already best-in-class recordable incident rate by 38% and lost time incident rate by 32%, driven by our behavior-based safety program.

We improved our overall diversity, equity and inclusion survey score by 6%, and I signed the CEO pledge for action as part of TPI's commitment to D&I. Going forward, we will refer to our initiative as IDEA, inclusion, diversity, equity and awareness Diversity without inclusion is not our goal.

The goal, first and foremost, is to create an inclusive culture. And finally, we obtained third-party assurance from DNV for Scope 1 and 2 emissions as well as select GRI and SASB topics. Turning to Slide 7.

We've reiterated our long-term ESG goals to promote a zero-harm culture focused on eliminating unsafe behaviors to achieve 33% female and 33% racial and ethnically diverse persons on our Board of Directors by 2023 to achieve 25% female representation on our global leadership team by 2025, achieve 25% racial and ethnically diverse persons on our U.S.

leadership team by 2025 and become carbon neutral by 2030 with 100% of our energy being procured from renewable sources. Turning to Slide 9. I'll now give you a quick update of our global operations supply chain as well as the wind market.

During the first quarter, we did not experience any significant production issues from COVID, including any material production stoppages.

Although there have been no production impacts to us so far from the senseless invasion of Ukraine by Russia, we will continue to monitor the impact of the war on our supply chain and take proactive measures to minimize potential risks.

In China, COVID cases have increased significantly, and as a result, Shanghai entered phased lockdowns in late March.

Domestic logistics have been impacted, but thanks to the efforts of our local and global supply chain teams, we met our Q1 production targets and continue to deliver blades on time from Yangzhou as well as export the raw materials that we still source in China on a timely basis.

We will continue to monitor the situation closely and execute our contingency plans to minimize the impact on our local production and raw material supply pipeline. We are continuing to diversify and derisk our supply chain by qualifying sources in the regions in which we manufacture products.

Other than our production in China, which primarily relies on Chinese suppliers, we have reduced our exposure in China for TPI-controlled spend to just 6%, down from over 20% in 2019. During the quarter, we made excellent progress on the speed of our start-ups and transitions that we have in 4 locations during 2022, China, Turkey, Mexico and India.

We have completed 5 lines, 2 each in China and India and 1 in Turkey, and they were all completed ahead of schedule, and as a result, will enable us to deliver additional volume to our customers during 2022. From a service perspective, we had another solid quarter of growth.

Our expansion in Europe is going as planned, including the opening of a new training center in Spain, the establishment of a new entity in the U.K. and the signing of several new significant agreements. We expect to grow the service business by approximately 40% to 50% in 2022. On the transportation front, we had another good quarter.

We are pleased with our operational execution on the passenger EV parts and our customer extended the initial pilot production program for another quarter. Now it goes through quarter 3.

We successfully launched a new program with the same customer and we plan to exceed the original estimate of 450,000 units we discussed during our fourth quarter call. We also kicked off development programs with multiple leading OEMs for Class 8 cap structures and last mile delivery vehicles.

Our pipeline continues to strengthen in the commercial vehicle segment and for unique components on passenger EVs. We now expect our transportation revenue on a billings basis to grow by over 70% in 2022. This is up from the 40% to 50% growth we discussed on our Q4 call. Moving on to supply chain.

The situation continues to be challenging with higher energy prices as well as the COVID lockdowns in China. During 2021, there were both significant price increases and supply constraints with respect to epoxy resin and carbon fiber as well as increases in inbound logistics costs.

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

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

Epoxy resin prices continue to see pressure with constrained feedstocks and high energy costs, and higher resin prices in Europe and North America continue to be supported by bullish demand from industries like automotive, infrastructure and construction.

While competitive resin suppliers are available in Asia, the current unreliable logistics environment and associated costs often offset any potential savings on price. As of today, we believe we have secured adequate raw materials for all planned production in 2022, including the raw material that is controlled by our customers.

Although we expect that the price of carbon fiber and resin will remain at elevated levels in 2022, approximately 60% of the resin and resin systems and approximately 90% of 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 increase or decrease in price.

Notwithstanding the challenging cost environment, we now expect to be able to hold the average bill of material cost for customers for which we control the supply chain to a less than 5% increase compared to 2021 levels.

As I noted earlier, 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 partners with key suppliers to ensure the best pricing and availability in the short, medium and long term.

Since our last earnings call, the war in Ukraine has brought to the forefront the need for energy security and independence, not only in Europe but across the globe. To accelerate the EU's Fit for 55 energy transition plan, the Repower EU program has been proposed.

It is intended to cut Europe's reliance on imported energy, speed up the permitting process throughout Europe and should help accelerate the growth in wind installations. We are pleased to see Europe increasing its commitments as this is an important market for TPI with over 30% of our blades going into the region.

In addition, Germany has announced plans to increase its 2030 clean energy target by 15% to 80%. This means that Germany would have to install more than 10 gigawatts of wind every year starting in 2025 or 5x what was installed during 2021.

In the U.S., discussions regarding extending the PTC as part of the more comprehensive energy transition strategy have gained some traction in recent weeks. With that said, uncertainty around the timing and magnitude of any legislation, along with increased costs, is still putting a damper on U.S. demand in the near term.

We believe that notwithstanding current challenges faced by the wind industry, demand for wind energy will strengthen over the long term, given the focus on energy security and independence globally and the necessity to decarbonize and electrify to meet the aggressive goal set to combat climate change.

We believe that we are uniquely positioned with our global footprint in key strategic geographies, along with collaborative relationships with our suppliers to grow our market share with industry-leading turbine OEMs as the demand for wind begins to accelerate again.

While execution remains our primary focus, we are moving forward with 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 in blade design while expanding our capabilities around logistics and recycling.

With that, let me turn the call over to Adan to review our financial results..

Thanks, Bill. Please turn to Slide 11. All comparisons made today will be on a year-over-year basis compared to the same period in 2021. For the first quarter ended March 31, 2022, net sales were $384.9 million, while net sales of wind blades were $354.6 million.

The decrease in wind sales was primarily driven by a decline in the number of wind blades produced due to the reduction in manufacturing lines year-over-year and foreign currency fluctuations, offset by an increase in the average sales price per blade.

Net loss attributable to common stockholders for the quarter was $29.9 million as compared to net loss of $1.8 million in the same period in 2021.

This increase in net loss was primarily due to preferred stock dividend and accretion, a decrease in the number of wind blades produced, cost challenges in our Nordex Matamoros facility, restructuring costs and approximately $7.1 million in nonrestructuring-related operating costs that were associated with certain manufacturing facilities where production has stopped.

Our adjusted EBITDA for Q1 was $6.1 million or 1.6% of sales compared to $13.1 million or 3.2% of sales in the same period in 2021. Moving to Slide 12. We ended the quarter with $131 million of unrestricted cash and cash equivalent and no net debt. The net change in cash for the quarter of approximately $111 million was in line with our forecast.

Net cash used in operating activities was approximately $81 million, primarily due to an increase of accounts receivable of $31 million, the majority of which was to one customer, a decrease in our accounts payable of $19 million and an increase in contract assets, which was the result of increased procurement of customer-specific materials to minimize the risk of potential production disruptions that may occur given the recent COVID-19 impacts in China and geopolitical uncertainties, including the ongoing war in Ukraine.

We expect a small cash ban in Q2 before we begin generating free cash flow in Q3 and Q4. Back to you, Bill..

Thanks, Don. Turning to Slide 13. As we look forward to the rest of the year, we expect Q2 sales and adjusted EBITDA on a billings basis to be much higher than Q1 of 2022 and expect adjusted EBITDA on a billings basis to be flat compared to Q2 of 2021.

We are also reiterating our full year billings targets for sales and adjusted EBITDA to be flat compared to 2021. Our formal guidance for 2022 has not changed.

And once again, we will not provide GAAP revenue or adjusted EBITDA guidance given current market volatility, potential impacts under ASC 606 related to future contract modifications or extensions and corresponding changes to our long-term volume, which cannot be forecast with certainty at this time. Please turn to Slide 15.

To close, we remain focused on managing our business through near-term challenges in the industry in our efforts to position TPI as the preferred global solution provider to our customers and their customers to enable profitable execution and growth in the future.

I want to thank all of our TPI associates once again for their commitment, dedication and loyalty to TPI and our mission to decarbonize and electrify. I'll now turn it back to the operator to open the call for questions..

[Operator Instructions]. Our first question comes from the line of Laura Sanchez with Morgan Stanley..

Bill, you just talked a little bit about the seasonality on EBITDA. Can you talk a little bit more on the revenue side? I'm wondering about kind of the trends that you're seeing, the lockdowns in China, transitions, start-ups for the rest of the year, et cetera.

How should we think about the cadence for the next three quarters?.

Yes. Laura, good to talk to you. I think the way we've got the cadence now, and we talked a little bit about in the fourth quarter is Q2 will clearly be a better revenue quarter than Q1. Q3, I think, is probably at or a little bit above Q2, then Q4 comes down a little bit as we normally see towards the end of the year..

Are you seeing -- you mentioned no impacts from the lockdowns in China in the first quarter. Any trends that you're seeing in the second quarter? Or is that fully, I would say, mitigated..

I would like to say it's fully mitigated. Obviously, there's still lockdowns happening. So that will still remain a challenge, I think, into the -- through the second quarter. I will tell you that even though the lockdowns in Shanghai didn't happen until late March, we were experiencing them through the quarter in various parts of China already.

And so we've kind of been dealing with that through the whole quarter. But again, I think we're in pretty good shape today. Our team has worked the situation pretty effectively. So I still don't anticipate any issues. We have taken some additional inventory on in the event that we do have some minor delays so that we don't stop production.

But right now, we're in pretty good shape..

Got it. Good to hear. And last one on my end on the ASPs. It seems like you're well ahead of the guide that you gave for the year.

Is there some timing issue that's making first Q particularly strong? Or should we use this level for the remainder of the year?.

Yes. It's a little bit of a timing issue because we had -- with some start-ups of transitions, we had early blades at a higher price as we ramp up the production.

Laura?.

Got it. Got it.

And that reminds me on the first question, was there anything on the revenue side that we should take into account for transitions and start-ups for the rest of the year?.

So we are largely through the transitions at this point. We have 2 lines still being transitioned in Mexico, and we have a couple in China yet. But no, I don't think anything of any material difference from what we saw in the first quarter..

Our next question comes from the line of Joseph Osha with Guggenheim Partners..

This is actually Hilary on for Joe. I first wanted to touch on the transportation side of the business. A lot of exciting moving parts there. And I know you highlighted the 70% growth for this year.

But I was kind of wondering if you could provide updated thoughts on how we should be thinking about that over the next couple of years and when we might see that generating a more meaningful amount of revenue..

Yes. Hilary, this is good to speak with you again. Yes, we've made some really nice traction over the last several quarters, including the first quarter. I think the quality of our partners in the development agreements should result in some meaningful movement over the next couple of years for sure.

Clearly, the program we have working with the EV passenger vehicle is going to drive significantly more volume next year than we have in the plan for this year as well. But I think the conversion of a number of those development projects that we've entered into actual production contracts.

We should start to see that towards the end of this year or early next year. So we should start to see that impact in 2023 and beyond..

Great. And last one for me. Just on the cost initiative, if you could kind of give us an update on how that's progressing against targets for this year or ongoing..

I'm sorry, Hilary. I couldn't understand what you asked.

On cost out, did you say?.

Yes. Just the various cost-out initiatives that you've been working on, if you could just give us update on progress there..

Yes, going really well. We talked about taking a significant amount out last year, the year before. We have some pretty ambitious goals for this year. We were ahead of our cost out plan for the first quarter. So they're going very well. Just very diligent on every dollar we spend as well as taking cost out of the process as well.

So it's -- we're ahead of schedule, and we plan to stay ahead of schedule..

Our next question comes from the line of Justin Clare with ROTH Capital Partners..

So first off, just considering the cost inflation that we've seen since March, wondering if you've seen any impact on order volume or customer demand. It sounds like you're maintaining your revenue expectations. So maybe there hasn't been a meaningful impact here, but just wanted to see any impact to customer demand at this point..

At this point, no, we've been very successful in our transitions. We've got the ability to provide some additional volume this year. There's some interest in that in certain geographies. So I would say we haven't seen a decrease.

We could see a little bit of a pickup just because of our -- the speed of our transitions and demands in certain other regions. But at this point, Justin, we haven't seen any decline in demand from a cost standpoint..

Got it. Okay. And then in Q1, you produced more sets than you had planned, and I know a part of that is the transitions.

But is there anything else in Q1? Were some plants performing ahead of expectations or anything else that enabled you to kind of exceed expectations there?.

Yes. Actually, from an operational standpoint, all of our plants are operating really nicely this year. No major operational hiccups or issues. We did produce more than expected out of Mexico. That was planned from our standpoint based on what our customers' needs, where they accelerated a little bit.

So other than that, just very good execution with a little bit of build ahead in Mexico..

Okay. Great. And just one more, if I may. You said you secured all the raw materials for your planned production in 2022.

Can you share when you were able to do that? Was this potentially ahead of the most recent increase in costs? And what is typical? Like is this proactive action that you had taken, given the expectations here for inflation?.

Yes. It really varies by commodity. Lead times vary. But in this environment, we were proactive as we have been through the whole of COVID, you'd probably remember us talking about building inventory levels in the COVID time frame as well.

So the key here was making sure that where we are reliant on our customer to contract for the material that we worked proactively -- more proactively, I would say, this year than in the past with our customer supplier as well to make sure that we had the proper allocation and volumes at the right time.

So I think it was proactivity on the part of our supply chain as well as better collaboration with our customers that control their supply chains. So it's a combination of things..

Our next question comes from the line of Eric Stine with Craig-Hallum..

It's Aaron Spychalla on for Eric. Maybe first on the service business. Good to see the EU expansion and kind of the growth targets that you laid out.

Can you just kind of give a little more color on kind of the growth profile, the margin profile there and how you think about that business over the next couple of years?.

Yes. So we'll grow it. We grew it 50% last year. We'll grow at another 40% to 50% this year. That's assuming it's all organic. Margins are better this year, better utilization of our personnel, better allocation of talent around the globe as well as some better pricing on some of the deals that we've cut with our customers.

So it's a combination of just very robust market in the service business, a need for very high-quality blade technicians, which we have a bunch of them around the globe. Obviously, we build them. We should be able to repair them and service them and just focusing on higher dollar and higher volume and higher margin work.

It's a combination of all those..

All right. And then just maybe on offshore, kind of seeing folks talking about a reprioritization there.

Can you just kind of talk about how that might impact you and just how you are thinking about the opportunity offshore here in the near term?.

Yes. So we're continuing to work a number of different opportunities in the offshore space. It's a complicated space. There's a lot of risk involved. You saw -- you might have seen Vestas talked a little bit about it during their earnings release earlier this week. So we're proceeding very cautiously and carefully and making sure we dot Is and cross Ts.

But we do see it as a nice opportunity going forward. And we're continuing to pursue it with vigor..

And our next question comes from the line of Julien Dumoulin-Smith with Bank of America..

It's Alex Webber on for Julien. I wanted to ask specifically a little bit more on the raw material side of things. I know you guys mentioned carbon fiber as well as epoxy resin earlier in the call.

But I'm wondering if you can expand a little bit more on some of the other inputs here, whether balsa wood, PET, I mean, particularly as we go into this rather inflationary backdrop on oil and whatnot.

What are you seeing there? And kind of what's your outlook, I guess, throughout '22 into 2023?.

Yes, you bet. So our -- obviously, carbon and epoxy resins we've talked about. Our other big inputs are glass -- fiberglass and core, which would include balsa and PET, as you mentioned. Glass market trend is up a bit. Our actual trend is pretty flat from 2021. Again, that's just relationships, volumes, et cetera.

So we've been able to keep that relatively flat. But the market trend has been up a bit in '22 from '21. From a core perspective, balsa is actually flat or trending down. There's a lot more demand for PET. Capacity hasn't come online as quickly as most would like. So we do see in the market a bit of a price increase from a PET standpoint.

But from a TPI standpoint, we've again been able to secure volumes at prices that are flat to last year or down. And then other than that, you've got coatings, which are the kind of the paint that we use on the blade. Again, market price is up a bit, but we're flat year-over-year or down on that as well.

So we're tending to trend a little bit better than market, at least the spot prices in the market, but we do see a challenging -- remainder of 2022 from a commodity standpoint..

Got it. I appreciate that. And then just a quick follow-up. I'm wondering if you guys can characterize sort of the cadence you expect on utilization throughout the year versus where you are in Q1 to your full year '22 guide, which obviously you're maintaining..

You bet. So for Q1, we are right around that 65% level. Expect to be in the mid-80s in Q2. Mid- to low 90s in Q3 and Q4 both. So utilization picks up pretty nicely as we get through transitions..

And our next question comes from the line of Alec Scheibelhoffer with Stifel...

So just looking at the strong increase you had in an average selling price per blade.

I was wondering if you could give some color on what's driving that and maybe some outlook moving forward and how we should be thinking about that?.

Yes. I think as we mentioned a little bit earlier, part of that is, as we go through a transition, early blades produced once we start production are generally priced at a higher ASP until we get to a certain number and then it kind of levels off to a normal price. So that's part of it. Part of it is just blade mix, the mix of blades produced in Q1.

We do expect that to kind of level out and come back down to kind of where our guide range was as we get further into the year. Some of the transition blades that we are doing, especially in China, are smaller blades. So ASP on those is a little bit lower.

So as those come on, full steam, we'll start to see that ASP come kind of back down into the range that we originally guided to..

Our next question comes from the line of Kashy Harrison with Piper Sandler..

This is Luke filling in for Kashy. I'd like to talk about the cash flow statement a little bit. Obviously, you guys called out that there was a little bit of a headwind with accounts receivable and timing of payments.

But I'm just wondering if you can give some color on the cadence of working capital over the course of the year and your level of comfort with where cash is at right now..

Yes. So yes, I think as we mentioned, we expected a pretty big burn in Q1 for a number of reasons as we were getting through some of the cost challenges in Mexico, some buildup of AP at the end of the year, some CapEx carryover and what have you.

So it's -- we're right on target with where we thought we would be at the end of the quarter for the balance of the year. As we mentioned, we'll have a bit of a burn in Q2 before we turn to free cash flow positive in Q3 and Q4, ending the year in pretty -- what we think is very good shape.

We've got $107 million of availability under borrowings that are not outstanding today. So we feel very good from a liquidity standpoint through the balance of 2022 for sure..

All right. And the rest of our questions were answered..

And our next question comes from the line of Tom Curran with Seaport Research Partners..

Just two. You've repeatedly emphasized that your primary focus for 2022 is execution. And it sounds as if the company is off to a promising start with that priority when it comes to transitions.

Could you elaborate on the transitions that occurred in China and India in 1Q? Were these transitions between customers or intra-customer transitions between molds? And what are some of the tactics that prove successful or lessons learned that you should be able to apply to future transitions, wherever they might be?.

No, great question. So in India, same customer, just going to a larger blade and in India -- that was in India, sorry. In China, same customer, 2 new blades. So multiple blade transitions in China plus a blade transition to a larger blade, both in India and in Mexico for the same customer.

Just as an example, now this is -- this one is a little bit unique because it's a blade we built in another factory in China. But from start of production until we got to our desired cycle time of 24 hours was 5 weeks. That is blazing speed to anybody in the blade industry.

So -- and the reason why -- part of it was we had prior experience on the blade.

But the main reason is, is we've known about these transitions for a long-enough period of time that we were able to better collaborate and plan with our customer and hold our customer accountable for the portion of the transition that they need to participate in, whether it's approvals of molds being installed or cut up blades, various things.

So it was really -- the lessons learned are just enough time to do truly detailed planning and do that planning with the participation of our customer and our suppliers for equipment and what have you. And then execute that plan and hold all parties accountable. And I think that's the biggest lesson learned for us.

The other thing I will mention is we did -- we have a dedicated team now that is responsible for the transitions. So we have a dedicated team of unbelievable talented people that travel the globe and assist our local sites with the transitions and having them involved early often on the ground when we need them, that's been a big help as well..

And Bill, how long have you had that team?.

We've had -- we haven't -- well, really just since last year is when we formed it, and we're able to carve out resources from our teams around the globe and just put this as one cohesive team. And we don't pull from that team for other projects, they are fully dedicated to transitions and start-ups.

And so just having a dedicated team that, that is their focus. And we've had teams that have done transitions in the past, but not to the extent we do now, where they're 100% dedicated to a transition and to the startups. They're a cohesive unit. I kind of -- I like to call them the go team.

They pick up -- their bags are packed and they go when we have a transition and they camp out in the plant until we have it right. So -- but that's just been about over the last year is when we really started utilizing a fully dedicated team..

Interesting. And then in Mexico, you highlighted that production came in -- it sounds like a bit better than expected for 1Q.

Could you clarify how Juarez and Matamoros performed, respectively? And then for Matamoros, where you're at with getting the Nordex facility up to where you want it to be?.

Yes. So Juarez performed very well. That's where we had the kind of the build ahead. So for both blades that we're building for our customer there operationally went very well. As you might recall, we had some challenges last year with the multi-piece blade when we started that out, but we've ironed those kinks out.

We've worked very collaboratively with our customer, and we are on track to deliver the volumes they need this year. In Matamoros, our plant for Vestas there operated -- continues to operate very well. And with respect to Nordex Matamoros, operationally, we're in very good shape today.

We have -- we produce the volumes that we needed to produce in Q1 after hitting our production in Q4 as well. We are in the middle of a transition there. So -- and that is going as planned. So I would say, from a pure operational standpoint, we've turned the corner there.

The plant itself is now getting to a place that -- to become a world-class blade plant, which is what we like to operate. So we're very close to that. We still have some cost challenges there that we're working on. Some of that is qualifying new material, locally sourced versus from China to avoid the logistics cost.

So we're working through those for the balance of the year. But operationally, from a production standpoint, we're in very good shape..

And our next question comes from the line of Pavel Molchanov with Raymond James..

I dialed in a little late, so sorry if you covered this already. Since the start of the war, I'm curious if, specifically from the European onshore market, you've encountered or your blade customers specifically have encountered any increase in incoming appetite from developers.

In other words, natural gas, $20 in MCF, tremendous focus on disentangling from Russian supply. Obviously, you're well positioned with your facility in Turkey.

Is there anything like that, that you can point to?.

I think there's certainly a lot of talk, Pavel, about increasing installs over the foreseeable future. Have we seen an increase in demand for the balance of '22 specifically related to that? I would say no. Now it's possible that blades that we are producing are now being diverted to Europe that might have had been earmarked somewhere else.

Don't know that today. I will tell you that about 37% of our blades in Q1 went to Europe compared to 30% last year. So whether that was already planned or that's -- there's some correlation, it's probably too early to tell. But we do expect, obviously, for the longer term for there to be really strong demand in the European market.

But whether we're seeing it today just yet, I think it's still a bit early for that..

Okay. And on the nonblade sales, $30 million this quarter, pretty solid growth versus a year ago. And I think your second-highest quarterly number ever in that category.

Is that still all from Proterra?.

No. No, we've got Proterra. Clearly, it's still in the mix and then our EV customer that we're building parts for. That's clearly a big part of that as well..

Any sense of when you might be able to disclose some additional detail on who that is?.

My guess is we won't be able to disclose it. We'd love to be able to, but at this point, that's not there -- their policy is to not disclose their suppliers..

Understood. Well, good to see the growth anyway..

Appreciate it. Yes, we're pretty excited about it..

Our next question is a follow-up from Julien Dumoulin-Smith with Bank of America..

Appreciate it. I just wanted to follow up here and talk a little bit, Bill. I wanted to follow up and talk a little bigger picture here and step back and certainly considering some of the comments from NextEra out there about sort of the fungibility between solar and wind.

What are you seeing out there in terms of early days on the back of AD/CVD, any effective pivots out there? Again, I get that there's a lot of other dynamics here, but would love to hear how this might be fomenting potential demand, when that might materialize? And how much the BBB, yay or nay, might be holding customers back at the same time?.

Yes. I think the uncertainty around long-term policy is probably overwriting any impact of the anti-circumvention stuff and maybe some -- I know NextEra talked about a pivot or a shift from solar to more wind this year. We haven't seen a meaningful uptick as a result of the challenges in the solar market yet.

But again, it's still a little bit early to see that demand shift. There's -- it's not easy to just turn on and turn off these deals. So I will tell you that it is certainly possible that we start to see some of that manifest itself in the back end of the year. But at this point, I would say we haven't seen anything material..

Got it. And then just when you think about the time line there for seeing some of that uptick, I mean, is it -- as you say, like by the end of the year, we get tax extenders or what have you, I mean, at least pencils down. Hopefully, you see something of an uptick in U.S.

origination just with that "certainty" at that point either way?.

Julien, yes, I think if something happens sooner rather than later and we get certainty then, clearly, that helps the market. When we see that manifest and a tick up in demand, I think it's still a little bit hard to tell. There are some that are saying, if we get something here before the midterms, which most don't think that's likely at this point.

We still probably don't see any real impact until best case back half of 2023 from a major swing. So again, I think it's a little hard to pin it down. I wish I could.

But with the uncertainty there as well as just the continued challenges from a supply chain and a cost standpoint, I think that's impacting some of the decision-making in the wait and see as well. So my best guess would be best case, it's a back half of '23, but more likely into '24..

Thank you, everyone, for your questions. At this time, we have reached the end of the question-and-answer session, and I would now like to turn the call back over to management for any closing remarks..

Thank you. And I'd just like to thank all of you again for your interest in TPI and your attention today, and look forward to our next discussion. Thank you..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day..