BROADWIND, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto in Item 1, “Financial Statements,” of this Quarterly Report and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2019 . The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances including, but not limited to, those identified in “Cautionary Note Regarding Forward-Looking Statements” at the end of Item 2. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties including those arising as a result of, or amplified by, the COVID-19 pandemic. As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” and the “Company” refer to Broadwind, Inc., a Delaware corporation headquartered in Cicero, Illinois, and its subsidiaries. (Dollars are presented in thousands except per share data or unless otherwise stated) KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE In addition to measures of financial performance presented in our consolidated financial statements in accordance with GAAP, we use certain other financial measures to analyze our performance. These non-GAAP financial measures primarily consist of adjusted EBITDA and free cash flow which help us evaluate growth trends, establish budgets, assess operational efficiencies, oversee our overall liquidity, and evaluate our overall financial performance. Key Financial Measures Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net revenues $ 54,614 $ 46,138 $ 158,174 $ 128,967 Net (loss) income $ (1,003 ) $ (898 ) $ 480 $ (2,958 ) Adjusted EBITDA (1) $ 1,297 $ 1,851 $ 7,766 $ 5,465 Capital expenditures $ 668 $ 593 $ 1,597 $ 1,776 Free cash flow (2) $ 7,256 $ 18,060 $ (1,737 ) $ 3,506 Operating working capital (3) $ 13,486 $ 5,184 $ 13,486 $ 5,184 Total debt $ 17,673 $ 10,394 $ 17,673 $ 10,394 Total orders $ 39,555 $ 76,517 $ 112,922 $ 205,135 Backlog at end of period $ 98,621 $ 174,654 $ 98,621 $ 174,654 Book-to-bill (4) 0.7 1.7 0.7 1.6 (1) We provide non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share based compensation and other stock payments, restructuring costs, impairment charges, and other non-cash gains and losses) as supplemental information regarding our business performance. Our management uses adjusted EBITDA when they internally evaluate the performance of our business, review financial trends and make operating and strategic decisions. We believe that this non-GAAP financial measure is useful to investors because it provides a better understanding of our past financial performance and future results, and it allows investors to evaluate our performance using the same methodology and information as used by our management. Our definition of adjusted EBITDA may be different from similar non-GAAP financial measures used by other companies and/or analysts. (2) We define free cash flow as adjusted EBITDA plus or minus changes in operating working capital less capital expenditures net of any proceeds from disposals of property and equipment. We believe free cash flow is a useful measure for investors because it portrays our ability to generate cash from our business for purposes such as repaying maturing debt and funding future investments. (3) We define operating working capital as accounts receivable and inventory net of accounts payable and customer deposits. (4) We define the book-to-bill as the ratio of new orders we received, net of cancellations, to revenue during a period. The following table reconciles our non-GAAP key financial measures to the most directly comparable GAAP measure: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net (loss) income $ (1,003 ) $ (898 ) $ 480 $ (2,958 ) Interest expense 507 609 1,654 1,919 Income tax provision 20 28 103 62 Depreciation and amortization 1,567 1,616 4,761 5,006 Share-based compensation and other stock payments 206 496 768 1,424 Restructuring costs — — — 12 Adjusted EBITDA 1,297 1,851 7,766 5,465 Changes in operating working capital 6,627 16,802 (7,906 ) (184 ) Capital expenditures (668 ) (593 ) (1,597 ) (1,776 ) Proceeds from disposal of property and equipment — — — 1 Free Cash Flow $ 7,256 $ 18,060 $ (1,737 ) $ 3,506 18 Table of Contents OUR BUSINESS Third Quarter Overview We booked $39,555 in new orders in the third quarter of 2020 , down from $76,517 in the third quarter of 2019 driven primarily by a $34,168 decrease in Heavy Fabrication orders as certain tower customers secured production capacity in the prior year in advance of historical lead times due to surging wind tower installation expectations in 2020. Industrial fabrication product line orders within the Heavy Fabrication segment decreased quarter-over-quarter primarily due to weaker mining and construction demand as customers deferred or reduced inventory purchases due to economic uncertainty stemming from the COVID-19 pandemic. Gearing segment orders decreased 45% from the third quarter of 2019 primarily due to reduced global demand for oil and gas (“O&G”) caused by the COVID-19 pandemic. Other markets within the Gearing segment, primarily mining, realized lower new order demand in the third quarter of 2020 compared to the third quarter of 2019 as customers delayed or reduced capital purchases due to economic uncertainty. Orders within our Industrial Solutions segment remained relatively flat as increased orders for aftermarket content were more than offset by decreases in orders for new gas turbine content. We recognized revenue of $54,614 in the third quarter of 2020 , up 18% compared to the third quarter of 2019 , primarily due to growth in the Heavy Fabrications segment as tower sections sold increased 28% compared to the prior year quarter driven primarily by increased customer demand to support the expected increase of wind tower installations. Within the Heavy Fabrications segment, industrial fabrication product line revenues decreased from the prior year quarter primarily due to decreases in demand from the construction end market. Gearing revenue was down $864 from the third quarter of 2019 , driven primarily by lower order intake in recent quarters, primarily in O&G and mining end markets, partially offset by increased demand in other industrial markets. Industrial Solutions revenue was down $236, representing a 5% decrease compared to the prior year quarter, primarily due to supply chain constraints and customer project delays. We reported a net loss of $1,003 or $0.06 per share in the third quarter of 2020 , compared to a net loss of $898 or $0.06 per share in the third quarter of 2019 primarily due to decreased profitability in our Gearing segment due to decreased sales, a lower margin sales mix and manufacturing inefficiencies associated with lower activity levels, partially offset by higher capacity utilization in towers. COVID-19 Pandemic In March 2020, the World Health Organization recognized a novel strain of coronavirus (COVID-19) as a pandemic. In response to this pandemic, the United States and various foreign, state and local governments have, among other actions, imposed travel and business restrictions and required or advised communities in which we do business to adopt stay-at-home orders and social distancing guidelines, causing some businesses to adjust, reduce or suspend operating activities. The pandemic and the various governments’ response have caused significant and widespread uncertainty, volatility and disruptions in the U.S. and global economies, including in the regions in which we operate. Overall, through September 30, 2020 , we have experienced an adverse impact to our business, operations and financial results as a result of this pandemic due in part to the significant decline in order activity levels for Gearing and Heavy Fabrications, and due to customers’ postponement of scheduled purchases and project timing delays. Additionally, in the third quarter, we incurred manufacturing inefficiencies associated with supply chain disruptions and realized employee staffing constraints due to the spread of the COVID-19 pandemic. Our facilities have continued operations as essential businesses in light of the customers and markets served. In response to the pandemic, we continue to right-size our workforce and delay certain capital expenditures. In future periods, we may experience weaker customer demand, requests for extended payment terms, customer bankruptcies, additional supply chain disruption, employee staffing constraints and difficulties, government restrictions or other factors that could negatively impact the Company and its business, operations and financial results. As we cannot predict the duration or scope of the pandemic or its impact on economic and financial markets, any negative impact to our results cannot be reasonably estimated, but it could be material. We continue to monitor closely the Company’s financial health and liquidity and the impact of the pandemic on the Company. We have been able to serve the needs of our customers while taking steps to protect the health and safety of our employees, customers, partners, and communities. Among these steps, we have followed the guidance provided by the U.S. Centers for Disease Control and Prevention to protect the continued safety and welfare of our employees. 19 Table of Contents RESULTS OF OPERATIONS Three months ended September 30, 2020 , Compared to Three months ended September 30, 2019 The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the three months ended September 30, 2020 , compared to the three months ended September 30, 2019 . Three Months Ended September 30, 2020 vs. 2019 % of Total % of Total 2020 Revenue 2019 Revenue $ Change % Change Revenues $ 54,614 100.0 % $ 46,138 100.0 % $ 8,476 18.4 % Cost of sales 50,876 93.2 % 42,144 91.3 % 8,732 20.7 % Gross profit 3,738 6.8 % 3,994 8.7 % (256 ) (6.4 )% Operating expenses Selling, general and administrative expenses 4,030 7.4 % 4,049 8.8 % (19 ) (0.5 )% Intangible amortization 183 0.3 % 203 0.4 % (20 ) (9.9 )% Total operating expenses 4,213 7.7 % 4,252 9.2 % (39 ) (0.9 )% Operating loss (475 ) (0.9 )% (258 ) (0.6 )% (217 ) (84.1 )% Other expense, net Interest expense, net (507 ) (0.9 )% (610 ) (1.3 )% 103 16.9 % Other, net (1 ) (0.0 )% (2 ) (0.0 )% 1 50.0 % Total other expense, net (508 ) (0.9 )% (612 ) (1.3 )% 104 17.0 % Net loss before provision for income taxes (983 ) (1.8 )% (870 ) (1.9 )% (113 ) (13.0 )% Provision for income taxes 20 0.0 % 28 0.1 % (8 ) (28.6 )% Net loss $ (1,003 ) (1.8 )% $ (898 ) (1.9 )% $ (105 ) (11.7 )% Consolidated Revenues increased by $8,476, primarily due to higher capacity utilization levels in the Heavy Fabrications segment as tower sections sold increased 28% compared to the third quarter of 2019 and a higher average sales price on the product mix sold. Industrial fabrication product line revenues within the Heavy Fabrication segment decreased from the prior year quarter primarily due to decreased demand from construction customers. Gearing segment revenue decreased by $864 from the prior year quarter due primarily to lower order intake in recent quarters primarily within the O&G and mining markets. Customer purchasing levels continue to be impacted by the level of oil prices and delaying capital purchases in response to the COVID-19 pandemic. Industrial Solutions revenue was down $236 compared to the third quarter of 2019, primarily due to a delay of customer projects and supply chain disruptions associated with the COVID-19 pandemic. Gross profit decreased by $256 due primarily to the impact of decreased sales, a lower margin sales mix and increased manufacturing inefficiencies within our Gearing segment. This decrease was partially offset by higher capacity utilization and an increase in average selling prices within our Heavy Fabrication segment. Gross margins were negatively impacted by a more complex tower product mix sold and new product introductions during the current year quarter. Additionally, supply chain constraints and other impacts associated with the COVID-19 pandemic led to higher manufacturing variances. As a result, gross margin decreased to 6.8% during the three months ended September 30, 2020 , from 8.7% during the three months ended September 30, 2019 . Due to higher revenue levels, operating expenses as a percentage of sales improved to 7.7% in the current-year quarter from 9.2% in the prior year quarter. Net loss increased to $1,003 during the three months ended September 30, 2020 compared a net loss of $898 during the three months ended September 30, 2019 due to the factors described above and lower interest expense associated with reduced usage of our revolving credit line. Heavy Fabrications Segment Three Months Ended September 30, 2020 2019 Orders $ 31,391 $ 65,559 Tower sections sold 312 243 Revenues 43,440 33,834 Operating income 2,020 693 Operating margin 4.7 % 2.0 % The decrease in Heavy Fabrications segment orders was primarily attributable to certain tower customers securing production capacity in the prior year in advance of historical lead times due to surging wind tower installation expectations in 2020. Industrial fabrication product line orders within the Heavy Fabrication segment decreased primarily due to weaker mining and construction demand as customers reduced inventory purchases in response to economic uncertainty stemming from the COVID-19 pandemic. Segment revenues increased by $9,606 due to a 28% increase in tower sections sold and higher average selling prices on the product mix sold compared to the prior year quarter. Industrial fabrication revenues decreased by 19% from the prior year quarter to $4,143, primarily as a result of decreased construction revenues and several large product deliveries scheduled to occur early in the fourth quarter. 20 Table of Contents Heavy Fabrications segment operating results improved by $1,327 compared to the prior year. The quarter-over-quarter improvement reflected the higher capacity utilization associated with increased tower production and higher average selling prices on the product mix sold. Operating income was negatively impacted by a more complex product mix sold and new product introductions during the current-year quarter. Additionally, supply chain constraints and other impacts associated with the COVID-19 pandemic led to higher manufacturing variances. Operating margin was 4.7% during the three months ended September 30, 2020 , an increase from 2.0% during the three months ended September 30, 2019 . Gearing Segment Three Months Ended September 30, 2020 2019 Orders $ 3,225 $ 5,877 Revenues 7,125 7,989 Operating (loss) income (1,023 ) 496 Operating margin (14.4 )% 6.2 % Gearing segment orders decreased 45% primarily due to reduced demand for O&G driven by reduced global demand for oil and gas caused by the COVID-19 pandemic. Other markets within the Gearing segment, particularly mining, realized lower new order demand as customers delayed or reduced capital purchases as the COVID-19 pandemic led to economic uncertainty. Gearing revenue was down 11% driven primarily by lower order intake in recent quarters, primarily in O&G and mining end markets partially offset by increased order intake in industrial markets. Gearing segment operating results decreased $1,519 from the prior year period. The decrease was primarily attributable to decreased plant utilization, a lower margin sales mix and manufacturing inefficiencies associated with the lower activity levels. Operating margin was (14.4%) during the three months ended September 30, 2020 , down from 6.2% during the three months ended September 30, 2019 , driven primarily by the items identified above. Industrial Solutions Segment Three Months Ended September 30, 2020 2019 Orders $ 4,939 $ 5,081 Revenues 4,081 4,317 Operating income 87 141 Operating margin 2.1 % 3.3 % Industrial Solutions segment orders decreased by 3% from the prior year period primarily due to lower orders for new gas turbine content. Segment revenue declined by 5%, primarily due to customer project delays and supply chain delays associated with the COVID-19 pandemic. The decrease in operating income versus the prior-year quarter was primarily a result of the revenue decrease, partially offset by cost reductions. Corporate and Other Corporate and Other expenses during the three months ended September 30, 2020 were in line with the expenses from the prior year period. Nine months ended September 30, 2020 , Compared to Nine months ended September 30, 2019 The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the nine months ended September 30, 2020 , compared to the nine months ended September 30, 2019 . Nine Months Ended September 30, 2020 vs. 2019 % of Total % of Total 2020 Revenue 2019 Revenue $ Change % Change Revenues $ 158,174 100.0 % $ 128,967 100.0 % $ 29,207 22.6 % Cost of sales 142,847 90.3 % 117,532 91.1 % 25,315 21.5 % Restructuring — — % 12 0.0 % (12 ) (100.0 )% Gross profit 15,327 9.7 % 11,423 8.9 % 3,904 34.2 % Operating expenses Selling, general and administrative expenses 12,537 7.9 % 11,772 9.1 % 765 6.5 % Intangible amortization 550 0.3 % 609 0.5 % (59 ) (9.7 )% Total operating expenses 13,087 8.3 % 12,381 9.6 % 706 5.7 % Operating income (loss) 2,240 1.4 % (958 ) (0.7 )% 3,198 333.8 % Other expense, net Interest expense, net (1,654 ) (1.0 )% (1,919 ) (1.5 )% 265 13.8 % Other, net (3 ) (0.0 )% (19 ) (0.0 )% 16 84.2 % Total other expense, net (1,657 ) (1.0 )% (1,938 ) (1.5 )% 281 14.5 % Net income (loss) before provision for income taxes 583 0.4 % (2,896 ) (2.2 )% 3,479 120.1 % Provision for income taxes 103 0.1 % 62 0.0 % 41 66.1 % Net income (loss) $ 480 0.3 % $ (2,958 ) (2.3 )% $ 3,438 116.2 % 21 Table of Contents Consolidated Revenues increased by $29,207 from the prior year period, primarily due to higher production levels in the Heavy Fabrications segment as towers sections sold increased 49% compared to the first nine months of 2019 and an increase in industrial fabrications revenue primarily as a result of our ongoing diversification efforts. Gearing segment revenue decreased $7,009 due primarily to lower order intake in recent quarters primarily within the O&G and mining markets driven by reduced global demand for oil and gas and general market uncertainty caused by the COVID-19 pandemic. Industrial Solutions revenue increased by $1,927 from the first nine months of 2019, primarily due to stronger near-term demand for new gas turbine content. Gross profit increased by $3,904 primarily due to higher capacity utilization within our Heavy Fabrication segment. Partially offsetting this were the negative impacts of a more complex tower product mix sold and new product introductions during the current year quarter. Additionally, supply chain constraints and other impacts associated with the COVID-19 pandemic led to higher manufacturing variances. Utilizing the PPP Loans proceeds to retain personnel, decreased sales, a lower margin sales mix and increased manufacturing inefficiencies associated with lower sales in our Gearing segment all further impacted our gross margins negatively. As a result, gross margin increased to 9.7% during the nine months ended September 30, 2020 , from 8.9% during the nine months ended September 30, 2019 . Due to higher revenue levels, operating expenses as a percentage of sales decreased to 8.3% compared to 9.6% during the first nine months of the prior year. Profitability improved as we reported net income o f $480 during the nine months ended September 30, 2020 compared to a net loss of $2,958 during the nine months ended September 30, 2019 due to the factors described above. Heavy Fabrications Segment Nine Months Ended September 30, 2020 2019 Orders $ 78,306 $ 174,398 Tower sections sold 944 632 Revenues 125,424 91,098 Operating income 8,760 789 Operating margin 7.0 % 0.9 % 22 Table of Contents The decrease in Heavy Fabrications segment orders was primarily driven by certain tower customers securing production capacity in advance of historical lead times in the prior year due to surging wind tower installation expectations in 2020. Industrial fabrication orders decreased by $5,018, a 29% reduction from the prior year period, primarily due to decreases in mining and construction demand. Segment revenues increased by $34,326 primarily due t o a 49 % increase in tower sections sold compared to the prior year period and a higher average selling price on the product mix sold. Heavy Fabrications segment operating results improved by $7,971 compared to the prior year period. The year-over-year improvement primarily reflected the higher segment capacity utilization and a higher average selling price on the product mix sold. Operating results were negatively impacted by a more complex product mix sold and new product introductions during the current-year quarter. Additionally, supply chain constraints and other impacts associated with the COVID-19 pandemic led to higher manufacturing variances. Operating margin was 7.0% during the nine months ended September 30, 2020 , an increase from 0.9% during the nine months ended September 30, 2019 . Gearing Segment Nine Months Ended September 30, 2020 2019 Orders $ 19,376 $ 18,584 Revenues 20,273 27,282 Operating (loss) income (1,935 ) 2,797 Operating margin (9.5 )% 10.3 % Gearing segment orders increased 4% compared to the prior year period primarily due to an increase in aftermarket wind gearing, steel and other industrial customer orders, partially offset by a decrease in O&G and mining demand. Revenue decreased 26% from the prior year period due primarily to lower order intake in the past two quarters due to low oil prices and general market uncertainty stemming from the COVID-19 pandemic. Gearing segment operating results decreased $4,732 from the prior year period. The decrease was primarily attributable to a decrease in sales across a majority of our core markets, a lower margin sales mix and manufacturing inefficiencies associated with lower activity levels. Operating margin was (9.5%) during the nine months ended September 30, 2020 , down from 10.3% during the nine months ended September 30, 2019 . Industrial Solutions Segment Nine Months Ended September 30, 2020 2019 Orders $ 15,240 $ 12,153 Revenues 12,516 10,589 Operating income (loss) 496 (116 ) Operating margin 4.0 % (1.1 )% Industrial Solutions segment orders and revenues increased from the prior year period primarily due to stronger near-term demand for new gas turbine content. The operating income improvement of $612 was a result of the revenue growth and general operating efficiencies. The operating margin improved to 4.0% during the nine months ended September 30, 2020 from (1.1%) during the nine months ended September 30, 2019 . Corporate and Other Corporate and Other expenses increased by $653 during the nine months ended September 30, 2020 primarily due to increased professional service expenses in the current year. 23 Table of Contents LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES As of September 30, 2020 , cash and cash equivalents totaled $2,541 an increase of $125 from December 31, 2019 . Cash balances remain limited as operating receipts and disbursements flow through our Credit Facility (as defined in Note 7, “Debt and Credit Agreements,” in the notes to our condensed consolidated financial statements), which is in a drawn position. Debt and finance lease obligations at September 30, 2020 totaled $20,703. As of September 30, 2020 , we had the ability to borrow up to an additional $19,214 un der the Credit Facility. On July 31, 2018, we entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with Roth Capital Partners, LLC (the “Agent”). Pursuant to the terms of the ATM Agreement, we may sell from time to time through the Agent shares of the Company's common stock, par value $0.001 per share with an aggregate sales price of up to $10,000. The Company will pay a commission to the Agent of 3% of the gross proceeds of the sale of the shares sold under the ATM Agreement and reimburse the Agent for the expenses of their counsel. We did not issue any shares of our common stock under the ATM Agreement in 2019. During the quarter ended September 30, 2020, we reinstated the ATM agreement and issued 91,481 shares of the Company's common stock thereunder. The net proceeds (before upfront costs) to such shares were approximately $321 after deducting commissions paid of approximately $10. The ATM Agreement was terminated in accordance with its terms on October 12, 2020. We anticipate that we will be able to satisfy the cash requirements associated with, among other things, working capital needs, capital expenditures and lease commitments through at least the next twelve months primarily through cash generated from operations, available cash balances, the Credit Facility, additional equipment financing, and access to the public or private debt equity markets, including the option to raise capital from the sale of our securities under the Form S-3. On Octob er 29, 20 20, we executed the First Amendment to the Amended and Restated Loan Agreement, implementing a payoff of a syndicated lender and a pricing grid based on our trailing twelve month EBITDA under which applicable margins range from 2.25% to 2.75% for LIBOR rate loans and 0.00% and 0.75% for base rate loans, and extending the term of the Credit Facility to July 31, 2023. In April 2020, the Company received funds under the U.S. Paycheck Protection Program. Refer to the discussion below under the heading “Sources and Uses of Cash - Other” for more information. If assumptions regarding our production, sales and subsequent collections from certain of our large customers, as well as customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, particularly in light of the COVID-19 pandemic and its effects on domestic and global economies, we may encounter cash flow and liquidity issues. ​ If our operational performance deteriorates, we may be unable to comply with existing financial covenants, and could lose access to the Credit Facility. This could limit our operational flexibility, require a delay in making planned investments and/or require us to seek additional equity or debt financing. Any attempt to raise equity through the public markets could have a negative effect on our stock price, making an equity raise more difficult or more dilutive. Any additional equity financing or equity linked financing, if available, will be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other operating and financial restrictions on us. While we believe that we will continue to have sufficient cash available to operate our businesses and to meet our financial obligations and debt covenants, there can be no assurances that our operations will generate sufficient cash or that existing or new credit facilities or equity or equity linked financings will be available in an amount sufficient to enable us to meet these financial obligations. Sources and Uses of Cash The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2020 and 2019 : Nine Months Ended September 30, 2020 2019 Total cash (used in) provided by: Operating activities $ (2,475 ) $ 4,334 Investing activities (1,597 ) (1,775 ) Financing activities 4,197 (3,721 ) Net increase (decrease) in cash $ 125 $ (1,162 ) 24 Table of Contents Operating Cash Flows During the nine months ended September 30, 2020 , net cash used in operating activities totale d $2,475, com pared to net cash provided by operating activities of $4,334 for the nine months ended September 30, 2019 . This increase in net cash used was primarily due to a reduction in customer deposits, which was driven by a surge in deposits in orders placed in the prior year, partially offset by a decrease in inventory levels in the current year. Investing Cash Flows During the nine months ended September 30, 2020 , net cash used in investing activities tot aled $1,597, comp ared to net cash used in investing activities of $1,775 during the nine months ended September 30, 2019 . The decrease in net cash used in investing activities as compared to the prior-year period was due to a decrease in net purchases of property and equipment, as we deferred purchases to subsequent periods. Financing Cash Flows During the nine months ended September 30, 2020 , net cash provided by financing activities tot aled $4,197, co mpared to net cash used in financing activities of $3,721 for the nine months ended September 30, 2019 . The increase versus the prior-year period was primarily due to PPP Loans proceeds received in the current year, partially offset by increased net repayments on our Credit Facility in the current year. Other In 2016, we entered into a $570 loan agreement with the Development Corporation of Abilene which is included in the “Long-term debt, less current maturities” line item of our condensed consolidated financial statements as of September 30, 2020 and December 31, 2019 . The loan is forgivable upon the Company meeting and maintaining specific employment thresholds. During each of the years 2019 and 2018, $114 of the loan was forgiven. As of September 30, 2020 , the loan balance was $342. In addition, we have outstanding notes payable for capital expenditures in the amount of $531 and $1,563 as of September 30, 2020 and December 31, 2019 , respectively, with $527 and $1,400 included in the “Line of Credit and other notes payable” line item of our condensed consolidated financial statements as of September 30, 2020 and December 31, 2019 , respectively. The notes payable have monthly payments that range from $1 to $36 and an interest rate of approximately 5%. The equipment purchased is utilized as collateral for the notes payable. The outstanding notes payable have maturity dates that range from February 2021 to August 2022. 25 Table of Contents On April 15, 2020, we received funds under notes and related documents (“PPP Loans”) with CIBC Bank, USA under the Paycheck Protection Program (the “PPP”) which was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted on March 27, 2020 in response to the COVID-19 pandemic and is administered by the U.S. Small Business Administration (the “SBA”). We received total proceeds of $9,530 from the PPP loans and made repayments of $379 on May 13, 2020. Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020 enacted on June 5, 2020 (the “Flexibility Act”), the PPP Loans, and accrued interest and fees may be forgiven following a period of twenty-four weeks after PPP Loan proceeds are received (the “covered period”) if they are used for qualifying expenses as described in the CARES Act including payroll costs and benefits (which must equal or exceed 60% of the amount requested to be forgiven), rent, mortgage interest, and utilities, which are subject to certain reductions based on the number of full time equivalent employees and the level of compensation for employees during such covered period. The amount of loan forgiveness will be reduced if the borrower terminates employees or significantly reduces salaries during such period, subject to certain exceptions. Subject to the terms and conditions applicable to loans administered by the SBA under the PPP, as amended by the Flexibility Act, the unforgiven portion of a PPP Loan is payable over a two year period at an interest rate of 1.00%, with a deferral of payments of principal, interest and fees until the date on which the SBA remits the loan forgiveness amount to the lender (or notifies the lender that no loan forgiveness is allowed), provided that the borrower applies for forgiveness within 10 months after the last day of the covered period (and if not, payment of principal and interest shall commence 10 months after the last day of the covered period). We used at least 60% of the amount of the PPP Loans proceeds to pay for payroll costs and the balance on other eligible qualifying expenses that we believe to be consistent with the terms of the PPP and plan to submit its forgiveness applications to CIBC Bank, USA during the fourth quarter of 2020. While we currently believe that our use of the loan proceeds will meet the conditions for forgiveness of the PPP Loans, we cannot provide assurance that we have not taken and will not take actions that could cause us to be ineligible for forgiveness of the PPP Loans, in whole or in part. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS The preceding discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2019 . Portions of this Quarterly Report on Form 10-Q, including the discussion and analysis in this Part I, Item 2, contain “forward looking statements”, as defined in Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Forward looking statements include any statement that does not directly relate to a current or historical fact. Our forward-looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following, many of which are, and will be, amplified by the COVID-19 pandemic: (i) the impact of global health concerns, including the impact of the current COVID-19 pandemic on the economies and financial markets and the demand for our products; (ii) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related extension, continuation or renewal of federal tax incentives and grants and state renewable portfolio standards as well as new or continuing tariffs on steel or other products imported into the United States; (iii) our customer relationships and our substantial dependency on a few significant customers and our efforts to diversify our customer base and sector focus and leverage relationships across business units; (iv) the economic and operational stability of our significant customers and suppliers, including their respective supply chains, and the ability to source alternative suppliers as necessary, in light of the COVID-19 pandemic; (v) our ability to continue to grow our business organically and through acquisitions, and the impairment thereto by the impact of the COVID-19 pandemic; (vi) the production, sales, collections, customer deposits and revenues generated by new customer orders and our ability to realize the resulting cash flows; (vii) information technology failures, network disruptions, cybersecurity attacks or breaches in data security, including with respect to any remote work arrangements implemented in response to the COVID-19 pandemic; (viii) the sufficiency of our liquidity and alternate sources of funding, if necessary; (ix) our ability to realize revenue from customer orders and backlog; (x) our ability to operate our business efficiently, comply with our debt obligations, manage capital expenditures and costs effectively, and generate cash flow; (xi) the economy, including its stability in light of the COVID-19 pandemic, and the potential impact it may have on our business, including our customers; (xii) the state of the wind energy market and other energy and industrial markets generally and the impact of competition and economic volatility in those markets; (xiii) the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities; (xiv) competition from new or existing industry participants including, in particular, increased competition from foreign tower manufacturers; (xv) the effects of the change of administrations in the U.S. federal government; (xvi) our ability to successfully integrate and operate acquired companies and to identify, negotiate and execute future acquisitions; (xvii) the potential loss of tax benefits if we experience an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended; (xviii) our ability to utilize various relief options enabled by the CARES Act, including our ability to receive forgiveness of the PPP Loans; (xix) the limited trading market for our securities and the volatility of market price for our securities; and (xx) the impact of future sales of our common stock or securities convertible into our common stock on our stock price. These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements including, but not limited to, those set forth under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 , as supplemented by our Current Report on Form 8-K filed April 17, 2020 and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020. We are under no duty to update any of these statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or other factors that could cause our current beliefs, expectations, plans and/or assumptions to change. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results. 26 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K under the Securities Act and as such are not required to provide information under this Item pursuant to Item 305(e) of Regulation S-K.