What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-12 compared with 2025-05-13 · 116 added, 51 removed, 141 unchanged (54% of the section changed)

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Three Months Ended

Six Months Ended

Net (loss) income

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Operating working capital (3)

Total orders (4)

Backlog at end of period (4)

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

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

Our backlog at June 30, 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.

Additionally, orders and backlog at June 30, 2025 have been adjusted for orders totaling $2,320 received in prior periods that we do not plan to recognize as revenue as a result of the transaction described in the Manitowoc Purchase Agreement (defined below).

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

Six Months Ended

Net (loss) income

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Capital expenditures

Proceeds from disposal of property and equipment

Free Cash Flow

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 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.

The One Big Beautiful Bill Act (the “OBBBA”), which was signed into law on July 4, 2025, eliminates AMP credits for components produced and sold after December 31, 2027.

The OBBBA shortened the time period in which we could benefit from the AMP credits, which could have a material adverse effect on our business in the near term.

Under the OBBBA, wind projects that begin construction after July 4, 2026, must be placed in service by December 31, 2027, to qualify for the production tax credit (“PTC”) or the investment tax credit (“ITC”).

Any wind project that begins construction after July 4, 2026, and is not placed in service by December 31, 2027, will not qualify for the PTC or the ITC.

The PTC and ITC drive demand for new wind projects by providing financial incentives to developers.

We expect the changes to the PTC and the ITC could lead to a decrease in the number of new wind projects, which would cause a corresponding decrease in demand for our wind products.

Lower demand for our wind products, coupled with the expedited phase out of the AMP credits, would adversely impact the profitability of our Heavy Fabrications segment.

Second Quarter Overview

We received $20,956 in new orders in the second quarter, up from $18,372 in the second quarter of 2024.

Industrial Solutions orders increased by over 200% compared to the prior year quarter primarily due to an increase in demand associated with new gas turbine and aftermarket gas turbine projects.

Additionally, Gearing segment orders increased 45% versus the prior year period primarily due to improved demand from most markets served.

Partially offsetting this was a significant decrease in orders within our Heavy Fabrications segment as orders were muted as we wind down operations in our Manitowoc facility in conjunction with the pending sale of the Manitowoc facility (described below).

We recognized revenue of $39,235 in the second quarter, which was an 8% increase compared to the second quarter of 2024.Within the Heavy Fabrications segment, wind revenue increased 52% as we restarted tower production with a limited run at our Manitowoc facility and recognized increased wind repowering revenue.

This was partially offset by a decrease in industrial fabrication product line revenue as we experienced reduced shipments to mining customers.

Industrial Solutions segment revenue increased by 14% from the prior year period primarily due to increased shipments to new gas turbine customers.

Gearing segment revenue decreased 30% relative to the comparable prior year period primarily due to reduced shipments to oil and gas (“O&G”) customers.

We recorded a net loss of $989 or ($0.04) per share in the second quarter of 2025, compared to net income of $482 or $0.02 per share in the second quarter of 2024.

Despite an increase in revenue, net income decreased due primarily to manufacturing inefficiencies experienced within the Heavy Fabrications segment and increased fixed costs to support higher production levels.

On June 4, 2025, we entered into a definitive agreement (the “Manitowoc Purchase Agreement”) with Wisconsin Heavy Fabrication, LLC to sell certain assets used in our industrial fabrication operations in Manitowoc, Wisconsin including specified contracts, equipment, machinery and other personal property, and permits for an aggregate purchase price of up to $13,800 in cash, subject to certain purchase price adjustments.

The transaction is expected to close during the third quarter of 2025, subject to the satisfaction of customary closing conditions.

As such, within the Heavy Fabrications segment we have only reported orders and backlog which we believe will be recorded as revenue.

RESULTS OF OPERATIONS

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,

Three months ended June 30, 2025, Compared to Three months ended June 30, 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 June 30, 2025, compared to the three months ended June 30, 2024.

Three Months Ended June 30,

Cost of sales

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Total operating expenses

Operating income

Operating (loss) income

Other (expense) income, net

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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.

Revenues increased by $2,783 as compared to the prior year period primarily due to a 27% increase in revenue within our Heavy Fabrications segment.

Wind revenue increased 52% from the prior year period as we restarted tower production with a limited run at our Manitowoc facility and recognized increased wind repowering revenue.

This was partially offset by a decrease in industrial fabrication product line revenues as we experienced reduced shipments to mining customers.

Industrial Solutions segment revenue increased 14% from the prior year period primarily due to higher shipments to new gas turbine customers.

Gearing segment revenue decreased 30% 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.

Despite the increase in revenue described above, gross profit decreased versus the prior year due primarily to manufacturing inefficiencies experienced within Heavy Fabrications and increased fixed costs to support higher volumes.

Operating expenses decreased from the prior year period primarily due to lower professional expenses and incentive compensation, partially offset by higher medical costs in the current year quarter.

We recorded a net loss of $989 during the three months ended June 30, 2025, compared to net income of $482 during the three months ended June 30, 2024.

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

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Operating margin

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.

Within our Heavy Fabrications segment, orders decreased 97% from the prior year period as orders were muted as we wind down certain operations due to the pending sale of the Manitowoc facility.

Segment revenues increased by 27% compared to the prior year period as we restarted tower production with a limited run at our Manitowoc facility and recognized increased wind repowering revenue.

This was partially offset by a 20% decrease in industrial fabrication product line revenue as we experienced reduced shipments to mining customers.

Heavy Fabrications segment operating income increased by $154 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.

The increase in operating income was primarily a result of higher segment revenue and the corresponding increase in Advanced Manufacturing Production tax credits (“AMP credits”) recognized.

This was partially offset by manufacturing inefficiencies associated with the production of a new, larger size wind tower model and restarting tower production on a limited run within our Manitowoc facility.

Gearing Segment

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Operating margin

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 segment orders increased 45% from the prior year period primarily due to higher demand from customers from most markets served.

Gearing revenue was down 30% relative to the prior year period reflective of reduced shipments to O&G customers.

The Gearing segment’s operating income decreased by $1,301 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.

This decrease was primarily attributable to lower sales in the current year period.

Industrial Solutions Segment

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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.

Segment revenues increased from the prior year period primarily due to higher shipments to new gas turbine customers.

Operating income decreased versus the prior-year period primarily as a result of a less profitable mix of product sold and increased fixed costs to support higher volumes.

Corporate and Other

Corporate and Other expenses increased during the three months ended June 30, 2025 compared to the prior year period primarily due to higher insurance and medical expenses, partially offset by lower employee compensation.

Six months ended June 30, 2025, Compared to Six months ended June 30, 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 six months ended June 30, 2025, compared to the six months ended June 30, 2024.

Six Months Ended June 30,

Cost of sales

Operating expenses

Selling, general and administrative expenses

Intangible amortization

Total operating expenses

Operating (loss) income

Other expense, net

Interest expense, net

Total other expense, net

Net (loss) income before provision for income taxes

Provision for income taxes

Net (loss) income

Revenues for the six months ending June 30, 2025, increased by $2,005 as compared to the prior year period primarily due to an increase in revenue within our Heavy Fabrications segment.

Wind revenue increased 39% from the prior year period primarily due to restarting tower production with a limited run at our Manitowoc facility and increased wind repowering revenue.

Partially offsetting this was a 17% decrease in industrial fabrication product line revenues due primarily to lower sales of our Pressure Reducing Systems (“PRS”) units and reduced shipments to mining customers.

Gearing segment revenue decreased 29% compared to the prior year period, reflective of reduced shipments to O&G customers.

Industrial Solutions segment revenue decreased 10% from the prior year period primarily due to reduced shipments to aftermarket gas turbine customers, partially offset by higher shipments to new gas turbine customers.

Despite the increase in revenue described above, gross profit decreased versus the prior year period due primarily to manufacturing inefficiencies experienced within Heavy Fabrications and increased fixed costs to support higher volumes.

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

We recorded a net loss of $1,359 during the six months ended June 30, 2025, compared to net income of $1,992 during the six months ended June 30, 2024.

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

Heavy Fabrications Segment

Six Months Ended

Operating income

Operating margin

Within our Heavy Fabrications segment, orders decreased 49% from the prior year period primarily due to a 75% decrease in industrial fabrication product line orders as we wind down certain operations in conjunction with the pending sale of the Manitowoc facility and lower demand for our PRS units.

Partially offsetting this decrease was a 92% increase in wind orders primarily due to the timing of orders associated with wind repowering projects.

Segment revenues increased by 21% compared to the prior year period primarily due to a 39% increase in wind revenue as we restarted tower production with a limited run at our Manitowoc facility and recognized increased wind repowering revenue.

This was partially offset by a 17% decrease in industrial fabrication product line revenues due to reduced shipments to mining customers and fewer shipments of our PRS units.

Heavy Fabrications segment operating income increased by $351 as compared to the prior year period.

The improved operating performance was primarily a result of higher segment revenue and the corresponding increase in AMP credits recognized, partially offset by manufacturing inefficiencies associated with the production of a new, larger size wind tower model and restarting tower production on a limited run within our Manitowoc facility.

Gearing Segment

Six Months Ended

Operating (loss) income

Operating margin

Gearing segment orders decreased 3% from the prior year period primarily due to the timing of orders from aftermarket wind customers.

Gearing revenue was down 29% relative to the prior year period reflective of reduced shipments to O&G customers.

The Gearing segment’s operating income decreased by $2,219 from the prior year period.

This decrease was primarily attributable to lower sales, partially offset by a favorable $482 property tax adjustment in the current year period.

Industrial Solutions Segment

Six Months Ended

Operating income

Operating margin

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, partially offset by increased shipments to new 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 decreased during the three months ended March 31, 2025 compared to the prior year period primarily due to lower employee compensation.

Corporate and Other expenses decreased compared to the prior year period primarily due to lower employee compensation, partially offset by higher medical costs in the current year period.

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 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.

As of June 30, 2025, cash totaled $1,037, a decrease of $6,684 from December 31, 2024.

Debt and finance lease obligations at June 30, 2025 totaled $31,423.

As of June 30, 2025, we had $24,671 outstanding under the 2022 Credit Facility and had the ability to borrow up to an additional $13,831 .

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 $1,527 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.

We also have outstanding notes payable for capital expenditures in the amount of $1,434 and $1,618 as of June 30, 2025 and December 31, 2024, respectively, with $383 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 June 30, 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, 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.

No shares of the Company’s common stock were issued under the Sales Agreement during the year ended December 31, 2024 or six months ended June 30, 2025.

As of June 30, 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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Sources and Uses of Cash

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

The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024:

Six Months Ended

Total cash (used in) provided by:

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Operating Cash Flows

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.

During the six months ended June 30, 2025, net cash used in operating activities totaled $20,498 compared to net cash used in operating activities of $3,427 during the prior year period.

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

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 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.

During the six months ended June 30, 2025, net cash used in investing activities tot aled $2,115, comp ared to net cash used in investing activities of $2,375 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 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.

During the six months ended June 30, 2025, net cash provided by financing activities tot aled $15,929, co mpared to net cash provided by financing activities of $5,641 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 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.

There have been no material changes in our critical accounting estimates during the six months ended June 30, 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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(i) the impact of global health concerns 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, including the advanced manufacturing tax credits, and state renewable portfolio standards as well as new or continuing tariffs on steel or other products imported into the United States;

(ii) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related phase out, extension, continuation or renewal of federal tax incentives and grants, including the advanced manufacturing tax credits, 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;

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(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.

(xxi) the impact of future sales of our common stock or securities convertible into our common stock on our stock price ;

(xxii) our ability to complete the sale of our industrial fabrication operations in Manitowoc, Wisconsin (the “Manitowoc Sale”) in a timely manner, if at all;

and (xxiii) the impact that the Manitowoc Sale may have on our current plans and operations.

We are under no duty to update any of these statements.

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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