Broadwind (BWEN) Q2 FY26 earnings call: the analyst Q&A

When will the company reinstate guidance, given strong orders and improved visibility?

Management stated that reinstating guidance is not prudent at this time due to the ongoing wind-down of the Abilene operations, which is scheduled to be completed in Q3. This completion is a prerequisite for considering future guidance.

“At this time, given the ongoing wind down of our operations in Abilene, we just didn't think it was prudent for that to happen. So we definitely want that wind down of the operations to be complete, which is happening here in Q3 as scheduled. So that would be the first kind of domino to fall before we would be putting back guidance out there.”

asked by Stefan Thomson · answered by Thomas Ciccone

What drove the strong Gearing orders, and is it indicative of future demand?

The strong Gearing orders are a good indication of future demand, driven by broad-based activity across normal verticals, including an uptick in oil and gas due to older rigs returning to service.

“Yes, I would say this is a good indication of future demand. ... the demand was across all of our normal verticals. Oil and gas, I mentioned in my prepared remarks, rig counts are starting to go up a bit. They're up about 9%, but we think that's primarily due to customers putting older rigs that have been sidelined back in action. So we're seeing some are demand from that. But I think in general, Stefan, it would be indicative of future demand.”

asked by Stefan Thomson · answered by Eric Blashford

What specific areas or capabilities is the company looking for in potential bolt-on acquisitions?

The company is focused on opportunities that expand precision manufacturing capabilities in power generation, critical infrastructure, grid hardening, defense, and aerospace. They seek targets that are complementary in terms of customers, capabilities, or capacity, adding to their core Gearing and Industrial Solutions businesses.

“We're focused on opportunities that expand our precision manufacturing capabilities. We're looking at the power gen, critical infrastructure, grid hardening, maybe even defense and aerospace, but attractive targets would be complementary in terms of customers, capabilities or capacity. We're not going to recreate the wheel. We see our Gearing business and our Industrial Solutions business as core, and so we want to add to those businesses and serve those customers. That's what we're hunting now, Eric.”

asked by Eric Stine · answered by Eric Blashford

What is the potential for further expansion in Industrial Solutions beyond the recent 30% increase, especially given a major customer's order growth?

The recent warehouse expansion frees up manufacturing space in the original facility, allowing for substantial growth up to a $75 million rate. Beyond that, the company is looking at M&A, especially local to the Sanford/Raleigh area, to add manufacturing footprint and further expand capacity.

“As we look to M&A, especially if we can find it more local, we will look to add manufacturing footprint there so we can continue to grow local to the Sanford, Raleigh area. So our manufacturing can be local, and then we can use that 130,000-square-foot facility, which is now both manufacturing and picking and packing and shipping to be final picking and packing and shipping. So I think we can grow substantially in that facility, I mentioned before, to a $75-ish million rate. But beyond that, this M&A we're looking at in that specific part of our business could add manufacturing space, allowing further growth.”

asked by Eric Stine · answered by Eric Blashford

Is there a specific component of revenues in the backlog expected from the data center market, and are there any slowdowns due to regional bans?

While it's difficult to divide power generation demand specifically for AI, management believes AI is a primary demand driver, especially in the U.S. Approximately 30% to 40% of Gearing revenue is in power generation, with a higher percentage for Industrial Solutions, indicating significant exposure.

“Well, we service both oil and gas and power gen in both divisions. It's hard to divide power gen into what is just general demand growth and what is specific from AI. But I do know that both of our primary customers in that space, Talt AI is a primary demand driver, especially in the U.S. So while we think about 30% to 40% of our revenue in Gearing is in power gen and a higher percentage of Industrial Solutions in power gen, I don't have a specific breakdown as the drivers of that demand coming from AI, but I know it's significant, if that helps you.”

asked by Sameer Joshi · answered by Eric Blashford

What is the typical conversion cycle from backlog to revenue for Gearing and Industrial Solutions?

For Gearing, the typical conversion is about 6 months, though some power generation customers have requested production planning beyond 2026. For Industrial Solutions, it ranges from under 3 months for aftermarket orders to up to 18 months for new installations, with a general benchmark of 6 months to a year.

“Typically, we've said publicly that the conversion rate for a typical Gearing order is about 6 months. ... But say you're an oil and gas customer, you're a mining customer or you're a material handling customer, 6 months is normally a good benchmark for conversion of backlog into orders. With Industrial Solutions, that typically -- again, it's depending on the need. If it's a new install, it can be up to 18 months or even further out. If it's aftermarket, we can turn orders -- we can turn backlog with well under 3 months if we need to. But if you're looking for conversion rate, 6 months to a year is a good benchmark.”

asked by Sameer Joshi · answered by Eric Blashford