Broadwind Energy (NASDAQ: BWEN) CEO Interview


Broadwind Energy, Inc
CEO: Stephanie Kushner



WSA: Good day from Wall Street, this is Juan Costello, Senior Analyst with the Wall Street Analyzer.  Joining us today is Stephanie Kushner, CEO for Broadwind Energy, the company trades on NASDAQ.  Ticker symbol is BWEN.  Thanks for joining us today there Stephanie.

Stephanie Kushner: Thanks Juan.

WSA: So, starting off please give us a history and overview of the company for some of our listeners that are new to your story?

Stephanie Kushner: Okay sure.  Broadwind was formed about 10 years ago, originally through a reverse merger into a public shell company and then following that a series of acquisitions were made in the wind energy space.  Originally the focus was exclusively on wind energy, but the business model has changed over the years as we have been adapting to some of the variability in wind energy policy and some of the cyclicality that is introduced in wind.  Wind is still a relatively new business in the US and we are still predominantly wind, but we have moved outside of that as well.  Today we’re a growing US based $200 million precision manufacturer of structures, equipment and components for clean tech and other specialized applications.  So that includes wind, but it goes beyond wind.

WSA: Sure and please bring us up to speed on some of your recent news including the acquisition of Red Wolf Co?

Stephanie Kushner: Last week we announced the acquisition of Red Wolf Company and Red Wolf is a fabricator and a kitter of the components that you use to support the manufacturing and service of the large utility grade natural gas-fired turbines.  So, again this is an example of going from wind turbines to natural gas turbines.  For us the acquisition adds about $30 million for our revenue base to select material and it should boost our EBITDA by about $5 million a year. One of the other nice things about Red Wolf is its manufacturing base is in the Southeastern US.  They’re actually in Sanford, North Carolina, which is outside of Raleigh. We’re enthusiastic about the location and the manufacturing talent.  It is a good strong manufacturing center and we hope to expand Red Wolf customer base and product offerings into other areas.  Red Wolf gives us some good diversification, because again they are in natural gas rather than wind and then they’re largely servicing the aftermarket, rather than just the new turbine units. So, that also gives us some exciting diversification.

WSA: Sure and before that you had received about $28 million in new tower orders, can you cover some of that news?

Stephanie Kushner: Yeah, so in general wind–because we make large wind towers–is still a very important part of our revenue base and the wind business has been strong.  It’s been fundamentally strong and I think it will continue to be sold at least into the 2020s because there was a multi-year PTC, that’s the Production Tax Credit extension, which happened in late 2015, and basically it will support the industry through a multi-year phase down until the early 2020s.  We have announced quite a series of new orders during the course of 2016.  Our new orders and our backlog  vary materially from the prior year as a result of that and we think the wind energy business is going to continue to be strong.

It has a broad appeal.  The industry has become more economic every year.  The cost of wind energy has come down 60 plus percent over the last several years and then a lot of industrial customers now are buying wind energy direct. It used to be predominately utilities, but now there are a lot of announcements that we see week to week of not only high tech investors, but companies like Walmart and IKEA.  You know, a lot of very mainstream companies want to diversify their electricity source and they’re turning to wind energy. We think it’s a strong market.

WSA: Great.  So, what are some of the key trends that you’re targeting right now in the sector and what makes Broadwind uniquely positioned to capitalize?

Stephanie Kushner: Well, in addition to wind, which again I think is going to be strong and here to stay, we also manufacture gears–large precision gears–and we’ve suffered in that segment because of the downturn in oil, gas and mining.  I mean that has been very weak for the last couple of years, but we’re starting to see that come back now.  So, we think that will be a nice change in 2017 and the management team for that business has done a great job cutting costs and making that organization as lean as possible.  So, I think they’ll be in a good position to thrive in a recovery and then as I said natural gas, when utilities look for sources to add new electricity capacity over the last five years that’s been pretty evenly split between wind energy and natural gas.  So, I think it’s an important step forward with Red Wolf for us to have that extra leg in our stool.

WSA: Sure and what are the key goals and milestones that you’re hoping to accomplish here over the course of the next six to twelve months?

Stephanie Kushner: Well, last fall our board approved a strategic plan for us basically to double our revenue size and double our EBITDA margins over about a three-year period and we’re planning to achieve that growth through about a 50-50 mix of organic or internal growth and acquisitions.  On the internal growth side we should see benefits in 2017 from the expansion that we’ve invested in, in our Abilene Tower Plant. That expansion is underway today and we should start seeing some increased production coming out of that in the second half of 2017 and as I said, I think we’ll see some recovery in our oil and gas and mining markets and I think we introduced a new CNG compressor line about a year or so back and we’re starting to see some growth there as well. We should see some nice revenue growth this year. We haven’t given guidance yet on our EBITDA except to say that we believe that the Red Wolf acquisition, that segment, should add another $4 to $5 million to our existing run rate.  So, we think overall this should be a nice improvement in 2017.

WSA:  Certainly and perhaps you can talk about your background and experience and go over some of the key management team?

Stephanie Kushner: Sure, sure. I had about a 30 year plus finance career in some pretty traditional industries, I started in oil and gas. I was in mining and then some other types of equipment manufacturing.  I joined Broadwind seven years ago as a CFO when the company was in a pretty precarious situation due to the recession and the loss of equity financing for wind farms.  So, my role is to help restore the company to good health and improve the liquidity and  just help to get some of what I would say good solid business practices in place.  I became CEO about a year ago first on an interim basis and then I became permanent in May of last year and we’ve had some strong objectives for 2016 in terms of improving our operational performance and our bookings and some pretty significant cost reductions, and we’ve delivered those and we’re feeling very good about 2017.  My management team is terrific.  I have a very experienced management team with some deep manufacturing expertise.

Eric Blashford, who runs our tower business has been with us for nearly two years and he has demonstrated some good solid turnaround experience and he has built a very good team beneath him and then also operationally Dan Schueller who runs our gearing business also has a career of managing successful manufacturing businesses and his team have worked really well navigating through some very tough gearing markets that are starting 2017 off very strong.

WSA:  Right and so in terms of investors and the financial community, Stephanie, what are some of your key drivers there that you wish perhaps they better understood about the company?

Stephanie Kushner: I doubt there any CEO’s to think that their company is really well understood by investors, but I think perhaps we’re pretty small and we’ve been changing rather quickly.  So, I think the investment community hasn’t really caught up with us very well yet.  We’re followed by two analysts James Ward at Macquarie and Jeff Osborne at Cowen.  So, they have some pretty good information out on us right now I think it’s valuation and recognizing our turnaround.  Our market cap is only about $65 million, we don’t have any debt and we are trading at pretty low multiple of EBITDA quite far below a lot of industrial and clean tech peers and then I think the other thing that’s important is we have $200 million of net operating loss carry forwards.  So, our earnings, we’ll be able to shelter earnings as we become profitable from tax for the foreseeable future.  So, in many ways, our EBITDA is a little bit more valuable than the average company because it’s going to be tax-free.

Juan Costello: Right, so once again joining us today is Stephanie Kushner, the CEO for Broadwind Energy Incorporated.  The company trades on NASDAQ, ticker symbol BWEN.  Currently trading at $4.28 a share, market cap is about $65 million and before we conclude here Stephanie to recap some of your key points why do you believe investors should consider the company as a good investment opportunity today?

Stephanie Kushner: I think we’re relatively small.  We’ve been under the radar screen and we’ve been making a lot of changes.  I’ve got a superb management team and we’re getting some good traction and I think this Red Wolf announcement is a good example of some of the things that that we can do.

WSA:  Well, we certainly look forward to continue to track the company’s growth and report on your upcoming progress, and we’d like to thank you for taking the time to join us today and update our investor audience on BWEN.  It was great having you on.

Stephanie Kushner:  Okay and thank you so much Juan.

WSA:  Alright, take care.


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