What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-13 compared with 2024-11-13 · 67 added, 136 removed, 125 unchanged (62% of the section changed)

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Three Months Ended

Nine Months Ended

September 30,

Net (loss) income

Adjusted EBITDA (1)

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We define operating working capital as accounts receivable and inventory net of accounts payable and customer deposits.

Our backlog at September 30, 2024 and 2023 is net of revenue recognized over time.

Backlog as of September 30, 2024 has been adjusted to reflect updated assumptions related to raw material pricing (which is a customer passthrough) and other variables.

Our backlog at March 31, 2025 and 2024 is net of revenue recognized over time.

Backlog has been adjusted to reflect updated assumptions related to raw material pricing (which is a customer passthrough) and other variables.

We define the book-to-bill as the ratio of new orders we received, net of cancellations, to revenue during a period.

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Three Months Ended

Nine Months Ended

September 30,

Net (loss) income

Interest expense

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Capital expenditures

Proceeds from disposal of property and equipment

Free Cash Flow

Third Quarter Overview

We received $22,975 in new orders in the third quarter of 2024, up from $15,890 in the third quarter of 2023.

First Quarter Overview

We received $30,455 in new orders in the first quarter, up from $28,996 in the first quarter of 2024.

Within our Heavy Fabrications segment, orders increased 10% primarily due to the timing of orders associated with wind repowering projects.

Partially offsetting this was a 56% decrease in industrial fabrication orders, primarily due to reduced industrial and mining demand.

Orders within our Industrial Solutions segment increased 52% compared to the prior year quarter primarily due to an increase in orders associated with new gas turbine projects.

Gearing segment orders increased 46% from the prior year period primarily due to improved demand from most markets served.

We recognized revenue of $35,503 in the third quarter of 2024, down 38% compared to the third quarter of 2023.

Within the Heavy Fabrications segment wind tower revenue decreased 45% from the prior year period primarily due to a decrease in tower sections sold as a global wind turbine manufacturer shifted approximately half of its contracted tower section orders initially planned for 2024 into 2025.

Additionally, industrial fabrication revenues decreased primarily due to reduced shipments of our Pressure Reducing Systems (“PRS”) units from the prior year period.

Gearing segment revenue decreased 20% relative to the comparable prior year period primarily due to reduced shipments to oil and gas (“O&G”) customers, partially offset by increased shipments to industrial customers.

Industrial Solutions segment revenue decreased by 23% from the prior year period primarily due to reduced shipments to international customers.

We recorded net income of $74 or $0.00 per share in the third quarter of 2024, compared to net income of $4,394 or $0.21 per share in the third quarter of 2023.

This decrease in net income was primarily attributable to lower tower sales within our Heavy Fabrications segment and the corresponding decrease in the Advanced Manufacturing Production tax credits (“AMP credits”) earned.

Partially offsetting this was a 52% decrease in industrial fabrication product line orders, primarily due to reduced demand from mining customers and reduced demand for our Pressure Reducing Systems (“PRS”) units.

Orders within our Industrial Solutions segment increased 38% compared to the prior year quarter primarily due to an increase in orders associated with new gas turbine and aftermarket gas turbine projects.

Gearing segment orders decreased 24% from the prior year period primarily due to reduced demand from mining and aftermarket wind customers, partially offset by improved demand from oil and gas (“O&G”) customers.

We recognized revenue of $36,838 in the first quarter, which was a 2% decrease compared to the first quarter of 2024.

Within the Heavy Fabrications segment wind revenue increased 28% from the prior year period primarily due to an increase in wind repowering revenue.

This was partially offset by a decrease in industrial fabrication product line revenue as we experienced reduced shipments of our PRS units when compared to the prior year period.

Gearing segment revenue decreased 28% relative to the comparable prior year period primarily due to reduced shipments to O&G customers.

Industrial Solutions segment revenue decreased by 29% from the prior year period primarily due to reduced shipments to aftermarket gas turbine customers.

We recorded a net loss of $370 or ($0.02) per share in the first quarter of 2025, compared to net income of $1,510 or $0.07 per share in the first quarter of 2024.

This decrease in net income was primarily attributable to a less profitable mix of products sold across all three of our segments and operating inefficiencies within our Gearing segment when compared to the prior year period.

RESULTS OF OPERATIONS

Three months ended September 30, 2024, Compared to Three months ended September 30, 2023

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, 2024, compared to the three months ended September 30, 2023.

Three Months Ended September 30,

Three months ended March 31, 2025, Compared to Three months ended March 31, 2024

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 March 31, 2025, compared to the three months ended March 31, 2024.

Three Months Ended March 31,

Cost of sales

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Operating income

Other expense, net

Other (expense) income, net

Interest expense, net

Total other expense, net

Net income before provision for income taxes

Net (loss) income before provision for income taxes

Provision for income taxes

Revenues decreased by $21,660 as compared to the prior year period as we experienced a drop in revenue across all three operating segments.

Within our Heavy Fabrications segment, wind tower revenue decreased 45% from the prior year period primarily due to a 54% decrease in tower sections sold as a global wind turbine manufacturer shifted approximately half of its contracted tower section orders initially planned for 2024 into 2025.

In addition, industrial fabrications revenue decreased by 50% due largely to reduced sales of our PRS units.

Gearing segment revenue decreased 20% relative to the comparable prior year period, reflective of reduced shipments to O&G customers, partially offset by increased shipments to industrial customers.

Industrial Solutions segment revenue decreased 23% from the prior year period primarily due to reduced shipments to international customers.

Gross profit decreased by $4,970 when compared to the prior year period, primarily due to lower sales and the decrease in AMP credits earned.

Operating expenses decreased from the prior year period primarily due to lower incentive compensation and commissions in the current year quarter.

Net income was $74 during the three months ended September 30, 2024, compared to net income of $4,394 during the three months ended September 30, 2023.

Net (loss) income

Revenues decreased by $778 as compared to the prior year period primarily due to a drop in revenue in the Gearing and Industrial Solutions segments.

Gearing segment revenue decreased 28% relative to the comparable prior year period, reflective of reduced shipments to O&G customers.

Industrial Solutions segment revenue decreased 29% from the prior year period primarily due to reduced shipments to aftermarket gas turbine customers.

Within our Heavy Fabrications segment, wind revenue increased 28% from the prior year period primarily due to an increase in wind repowering revenue.

Industrial fabrication product line revenues decreased by 13% due largely to reduced sales of our PRS units.

Gross profit decreased by $2,311 when compared to the prior year period primarily due to a less profitable mix of products sold across all three of our segments and operating inefficiencies within our Gearing segment when compared to the prior year period.

Operating expenses decreased from the prior year period primarily due to lower employee compensation in the current year quarter.

We recorded a net loss of $370 during the three months ended March 31, 2025, compared to net income of $1,510 during the three months ended March 31, 2024.

This decrease in net income was primarily due to the factors described above.

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Three Months Ended

September 30,

Tower sections sold

Operating income

Operating margin

Within our Heavy Fabrications segment, orders increased 39% from the prior year period as wind orders increased primarily due to the timing of orders associated with wind repowering projects.

Partially offsetting this was a 56% decrease in industrial fabrication orders, primarily due to reduced demand from industrial and mining customers.

Segment revenues decreased by 46% compared to the prior year period primarily due to a 45% decrease in wind tower revenue.

The decrease in wind tower revenue was primarily a result of less tower sections sold, as a global wind turbine manufacturer shifted approximately half of its contracted tower section orders initially planned for 2024 into 2025.

Additionally, industrial fabrication revenues decreased by 50% during the current year period primarily due to reduced shipments of our PRS units in the current year quarter.

Heavy Fabrications segment operating income decreased by $3,561 as compared to the prior year period.

The decrease in operating performance was primarily a result of lower tower sales and the corresponding reduction in AMP credits recognized, as well as lower industrial fabrication revenues.

These factors were partially offset by reduced overhead costs.

Operating margin was 10.8% during the three months ended September 30, 2024 compared to 15.1% during the three months ended September 30, 2023 primarily due to the factors described above.

Within our Heavy Fabrications segment, orders increased 10% from the prior year period primarily due to the timing of orders associated with wind repowering projects.

Partially offsetting this was a 52% decrease in industrial fabrication product line orders, primarily due to reduced demand from mining customers and demand for our PRS units.

Segment revenues increased by 15% compared to the prior year period primarily due to a 28% increase in wind revenue.

This was partially offset by a 13% decrease in industrial fabrication product line revenues during the current year period primarily due to reduced shipments of our PRS units in the current year quarter.

Heavy Fabrications segment operating income increased by $195 as compared to the prior year period.

The increase in operating performance was primarily a result of higher segment revenue, partially offset by a less profitable product mix sold.

Gearing Segment

Three Months Ended

September 30,

Operating (loss) income

Operating margin

Gearing segment orders increased 46% from the prior year period primarily due to improved demand from most markets served.

Gearing revenue was down 20% relative to the comparable prior year period reflective of reduced shipments to O&G customers, partially offset by higher shipments to industrial customers.

Gearing segment operating income decreased by $343 from the prior year period.

This decrease was primarily attributable to lower sales, partially offset by a more profitable product mix sold and cost savings.

Operating margin was (0.9%) during the three months ended September 30, 2024, a decrease from 2.3% during the three months ended September 30, 2023, driven primarily by the items identified above.

Gearing segment orders decreased 24% from the prior year period primarily due to reduced demand from mining and aftermarket wind customers, partially offset by improved demand from O&G customers.

Gearing revenue was down 28% relative to the prior year period reflective of reduced shipments to O&G customers.

The Gearing segment’s operating income decreased by $917 from the prior year period.

This decrease was primarily attributable to lower sales and operational inefficiencies incurred in the current year period.

These factors were partially offset by a favorable $482 property tax adjustment in the current year period.

Industrial Solutions Segment

Three Months Ended

September 30,

Operating income

Operating margin

Industrial Solutions segment orders increased from the prior year period primarily due to an increase in orders associated with new gas turbine projects.

Segment revenues decreased from the prior year period primarily due to decreased shipments to international customers.

Operating income decreased versus the prior-year period primarily as a result of lower sales.

Corporate and Other

Corporate and Other expenses decreased during the three months ended September 30, 2024 compared to the prior year period primarily due to lower employee compensation.

Nine months ended September 30, 2024, Compared to Nine months ended September 30, 2023

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, 2024, compared to the nine months ended September 30, 2023.

Nine Months Ended September 30,

Cost of sales

Operating expenses

Selling, general and administrative expenses

Intangible amortization

Total operating expenses

Operating income

Other expense, net

Interest expense, net

Total other expense, net

Net income before provision for income taxes

Provision for income taxes

Revenues decreased by $47,308 as compared to the prior year period primarily due to lower sales within the Heavy Fabrications and Gearing segments, partially offset by increased sales within the Industrial Solutions segment.

Wind revenue decreased 44% from the prior year period primarily due to a 52% decrease in tower sections sold as a global wind turbine manufacturer shifted approximately half of its contracted tower section orders initially planned for 2024 into 2025.

Gearing segment revenue decreased 19% relative to the comparable prior year period reflective of reduced shipments within most markets served, but most significantly within O&G.

This was partially offset by higher shipments to aftermarket wind customers.

Industrial Solutions segment revenue increased 6% from the prior year period primarily due to increased shipments of new and aftermarket gas turbine content, partially offset by reduced shipments to international customers.

Gross profit decreased by $8,076 when compared to the prior year period, primarily due to lower sales, partially offset by reduced overhead costs.

Operating expenses decreased from the prior year period primarily as a result of the absence of proxy-contest related expenses that were recognized in the prior year period.

Net income was $2,066 during the nine months ended September 30, 2024, compared to net income of $6,578 during the nine months ended September 30, 2023.

This decrease in net income was primarily due to the factors described above.

Heavy Fabrications Segment

Nine Months Ended

September 30,

Tower sections sold

Operating income

Operating margin

Within our Heavy Fabrications segment, orders decreased 22% primarily due to reduced demand for our PRS units.

These decreases were partially offset by an increase in orders associated with wind repowering projects.

Segment revenues decreased by 40% during the nine months ended September 30, 2024 primarily due to a 44% decrease in wind tower revenue.

The decrease in wind revenue was primarily a result of less tower sections sold as a global wind turbine manufacturer shifted approximately half of its contracted tower section orders initially planned for 2024 into 2025.

Heavy Fabrications segment operating income decreased by $6,616 as compared to the prior year period.

The decrease in operating performance was primarily a result of lower tower sales and the corresponding reduction in AMP credits recognized.

These factors were partially offset by reduced overhead costs.

Operating margin was 9.4% during the nine months ended September 30, 2024 compared to 12.0% during the nine months ended September 30, 2023 primarily due to the factors described above.

Gearing Segment

Nine Months Ended

September 30,

Operating income

Operating margin

Gearing segment orders decreased 8% from the prior year period primarily due to reduced demand from O&G customers, partially offset by increased demand from aftermarket wind customers.

Gearing segment revenue decreased 19% relative to the comparable prior year period reflective of reduced shipments within most markets served, but most significantly within O&G.

This was partially offset by higher shipments to aftermarket wind customers.

Gearing segment operating income decreased by $765 compared to the prior year period.

This decrease was primarily attributable to lower sales, partially offset by a more profitable product mix sold and cost savings.

Operating margin was 1.5% during the nine months ended September 30, 2024, a decrease from 3.5% during the nine months ended September 30, 2023, driven primarily by the items identified above.

Industrial Solutions Segment

Nine Months Ended

September 30,

Operating income

Operating margin

Industrial Solutions segment orders increased from the prior year period primarily due to improved orders associated with new gas turbine projects, partially offset by reduced orders associated with aftermarket projects.

Segment revenues increased from the prior year period primarily due to increased shipments of aftermarket gas turbine content, partially offset by reduced shipments to international customers.

Operating income increased versus the prior-year period primarily as a result of higher sales and a more profitable mix of product sold.

Industrial Solutions segment orders increased from the prior year period primarily due to an increase in orders associated with new and aftermarket gas turbine projects.

Segment revenues decreased from the prior year period primarily due to decreased shipments to aftermarket gas turbine customers.

Operating income decreased versus the prior-year period primarily as a result of lower sales and a less profitable mix of product sold.

Corporate and Other

Corporate and Other expenses during the nine months ended September 30, 2024 decreased from the prior year period primarily due to the absence of professional fees associated with the contested proxy election recognized in the prior year quarter and lower employee compensation costs.

Corporate and Other expenses decreased during the three months ended March 31, 2025 compared to the prior year period primarily due to lower employee compensation.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

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The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities.

As of September 30, 2024, cash totaled $1,384, an increase of $285 from December 31, 2023.

Debt and finance lease obligations at September 30, 2024 totaled $23,353.

As of September 30, 2024, we had the ability to borrow up to an additional $17,614 un der the 2022 Credit Facility.

As of March 31, 2025, cash totaled $1,204, a decrease of $6,517 from December 31, 2024.

Debt and finance lease obligations at March 31, 2025 totaled $17,871.

As of March 31, 2025, we had $3,357 outstanding on the senior secured revolving credit facility and had the ability to borrow up to an additional $21,392 un der the 2022 Credit Facility.

In addition to the 2022 Credit Facility, we also utilize supply chain financing arrangements as a component of our funding for working capital, which accelerates receivable collections and helps to better manage cash flow.

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Fees incurred in connection with the agreements are recorded as interest expense.

We also have outstanding notes payable for capital expenditures in the amount of $1,706 and $1,361 as of September 30, 2024 and December 31, 2023, respectively, with $365 and $163 included in the “Line of Credit and current maturities of long-term debt” line item of our condensed consolidated financial statements as of September 30, 2024 and December 31, 2023, respectively.

We also have outstanding notes payable for capital expenditures in the amount of $1,527 and $1,618 as of March 31, 2025 and December 31, 2024, respectively, with $377 and $371 included in the “Line of Credit and current maturities of long-term debt” line item of our condensed consolidated financial statements as of March 31, 2025 and December 31, 2024, respectively.

The notes payable have monthly payments that range from $1 to $20 and an interest rate of approximately 7%.

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We will pay a commission to the Agents of 2.75% of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement.

No shares of the Company’s common stock were issued under the Sales Agreement during the year ended December 31, 2023 or nine months ended September 30, 2024.

As of September 30, 2024, shares of our common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement.

No shares of the Company’s common stock were issued under the Sales Agreement during the year ended December 31, 2024 or three months ended March 31, 2025.

As of March 31, 2025, shares of our common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement.

Any additional shares offered and sold under the Sales Agreement are to be issued pursuant to the Form S-3 and a 424(b) prospectus supplement.

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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 credit facilities or equity or equity-linked financings will be available in an amount sufficient to enable us to meet these financial obligations.

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 for the next twelve months, there can be no assurances that our operations will generate sufficient cash, or that 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, 2024 and 2023:

Nine Months Ended

September 30,

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2025 and 2024:

Three Months Ended

Total cash (used in) provided by:

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Financing activities

Net increase (decrease) in cash

Net decrease in cash

Operating Cash Flows

During the nine months ended September 30, 2024, net cash used in operating activities totaled $986 compared to net cash used in operating activities of $22,593 during the prior year period.

The decrease in net cash used in operating activities during the current year period was primarily attributable to proceeds from the sale of the 2023 AMP credits received during the current year period, in addition to a decrease in accounts receivable during the current year period compared to a significant increase in accounts receivable during the prior year period due to a change in payment terms with a major customer.

This was partially offset by a more significant decrease in customer deposits during the current year period.

During the three months ended March 31, 2025, net cash used in operating activities totaled $8,037 compared to net cash provided by operating activities of $5,857 during the prior year period.

The increase in net cash used in operating activities during the current year period was primarily attributable to an increase in inventory, decreased proceeds from the sale of AMP credits, and a more significant decrease in customer deposits.

Partially offsetting this was an increase in accounts payable during the current year period as compared to a decrease in the prior year period.

Investing Cash Flows

During the nine months ended September 30, 2024, net cash used in investing activities tot aled $3,120, comp ared to net cash used in investing activities of $5,300 during the prior year period.

During the three months ended March 31, 2025, net cash used in investing activities tot aled $916, comp ared to net cash used in investing activities of $1,744 during the prior year period.

The decrease in net cash used in investing activities as compared to the prior-year period was primarily due to a net decrease in purchases of property and equipment.

Financing Cash Flows

During the nine months ended September 30, 2024, net cash provided by financing activities tot aled $4,391, co mpared to net cash provided by financing activities of $16,901 during the prior year period.

The decrease was primarily due to decreased net borrowings under the 2022 Credit Facility in the current year period.

During the three months ended March 31, 2025, net cash provided by financing activities tot aled $2,436, co mpared to net cash used in financing activities of $4,139 during the prior year period.

The increase was primarily due to increased net borrowings under the 2022 Credit Facility in the current year period, partially offset by proceeds from long-term debt received in the prior year period.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes in our critical accounting estimates during the nine months ended September 30, 2024 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no material changes in our critical accounting estimates during the three months ended March 31, 2025 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2024.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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(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) the limited trading market for our securities and the volatility of market price for our securities;

(xix) our outstanding indebtedness and its impact on our business activities (including our ability to incur additional debt in the future);

and (xx) the impact of future sales of our common stock or securities convertible into our common stock on our stock price.

(xviii) the effects of proxy contests and actions of activist stockholders;

(xix) the limited trading market for our securities and the volatility of market price for our securities;

(xx) our outstanding indebtedness and its impact on our business activities (including our ability to incur additional debt in the future);

and (xxi) 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, 2024.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis