TPI Composites, Inc. (TPIC) on Q1 2021 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to TPI Composites First Quarter 2021 Earnings Conference Call. Today's call is being recorded, and we have allocated 1 hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Christian Edin, Investor Relations for TPI Composites. Thank you. You may begin.
Christian Edin: Thank you, Operator. I'd like to welcome everyone to TPI Composites' first quarter 2021 earnings call. We will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements. If any of our key assumptions are incorrect because of other factors discussed in today's earnings news release and the comments made during this conference call or in our annual report on Form 10-K filed with the Securities and Exchange Commission or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, tpicomposites.com. We do not undertake any duty to update any forward-looking statements.
William Siwek: Thanks, Christian, and good afternoon, everyone. Thank you for joining our call. In addition to Christian, I'm joined today by Bryan Schumaker, our CFO. I'll briefly review our first quarter results and activities, discuss the current operational status of our manufacturing facilities, including our supply chain, give an update on our global service and transportation businesses, and then a quick update on the wind energy market. Bryan will then review our financial results in detail, and then we'll open the call for Q&A. Please turn to Slide 5. We had a strong first quarter in which we delivered net sales of $404.7 million, a 13.5% increase over Q1 of 2020 and adjusted EBITDA of $13.1 million or 3.2% of net sales, an $11.8 million increase over Q1 of 2020. We started wind blade production in India for Nordex. We published our second ESG report, where we laid out specific goals related to safety, gender and racial ethnicity for our Board of Directors and leadership teams as well as a pledge to become carbon neutral by 2030, with 100% of our energy being procured from renewable sources. We remain focused on operating our businesses safely while continuing to mitigate the impacts of COVID-19 and ensuring that we are prepared to deal with continued resurgences of the virus in any of our global locations. We have and will continue to adapt our operating procedures in order to enable our associates to work safely and continue to meet our customers' demand. Turning to Slide 7. I'll now give you a quick update of our global operations as well as a market update. During the first quarter, we continued to operate all of our facilities at normal levels. In China, production continued as normal. We are still working on backfilling the 5 lines that were taken out of production at the end of last year. Stay tuned. In India, production for Vestas continued uninterrupted, and we started production on 2 lines for Nordex. The country of India is currently experiencing a significant increase in COVID cases, but this is not currently having a material impact on our operations. We will continue to monitor the situation very closely, including the impact on our supply chain and work to protect our associates and their families as we have through the entire pandemic.
Bryan Schumaker: Thanks, Bill. Please turn to Slide 11. All comparisons made today will be on a year-over-year basis compared to the same period in 2020. For the first quarter ended March 31, 2021, net sales increased by $48 million or 13.5% to $404.7 million. Net sales of wind blades increased by 12.7% to $379.2 million. This was primarily driven by an 11% increase in the number of wind blades produced year-over-year and an increase in the average selling price due to the mix of wind blades produced. Start-up and transition costs for the quarter increased by $2.3 million to $14.4 million as we continue to ramp our India facility and transition lines to bigger blades in Mexico and Turkey. Our general and administrative expenses for the quarter decreased by $0.6 million to $8.9 million, and G&A as a percentage of net sales decreased 50 basis points to 2.2% of net sales. This decrease was primarily related to a decrease in travel and training costs due to COVID-19 and our continued focus on reducing costs. Before share-based compensation, G&A as a percentage of net sales was 1.7% and 1.9% in Q1 of 2021 and 2020, respectively. Foreign currency loss was $3.7 million in Q1 2021 as compared to foreign currency income of $1 million in Q1 2020. This increase was primarily due to euro liability exposure against the Turkish lira. As a reminder, on a cash flow basis, this exposure is naturally hedged due to our euro-denominated revenue contracts. Approximately 22% of our revenue in Q1 2021 was denominated in euros. Our income tax benefit for the quarter was $7.1 million as compared to $15 million for the prior year period. This decrease was primarily due to our forecasted jurisdictional mix of income. We are forecasting our cash tax liability to be approximately $20 million to $23 million for 2021.
William Siwek: Thanks, Bryan. Turning to Slide 15. The health and safety of our associates and their families as well as the communities in which they live remain our #1 priority. We continue to take the necessary steps on the COVID-19 front to ensure the safety of our associates and safe working conditions in our facilities. We continue to aggressively work our wind pipeline, and we are pleased with the progress we have made in growing the team and opportunities in the global service space. We continue to build on our momentum in the transportation space with a number of exciting new collaborative development agreements. We remain focused on managing our liquidity to provide financial security and flexibility as we drive through the current environment and execute our strategy to capitalize on the acceleration of the energy transition. We are excited about the multiple opportunities we are evaluating to build out and add to our current technologies and capabilities to support the growth, breadth and strength of our business. Our overall mission to decarbonize and electrify remains unchanged. We will continue to optimize our global footprint while using leverage of our global scale for operating and supply chain efficiencies to continue to drive down costs, all while maintaining a strong balance sheet. Given the broader wind and electric vehicle industry tailwinds, our position in the market and our relationships with our customers, we remain excited for the future here at TPI. Finally, I want to thank our dedicated TPI associates for their commitment and dedication and for their continued resilience, enabling us to deliver on our commitments to our customers in these challenging times. Thank you again for your time today. And with that, operator, please open the line for questions.
Operator: . And our first question comes from the line of Eric Stine with Craig-Hallum.
Aaron Spychalla: It's Aaron Spychalla on for Eric. Maybe first on outsourcing. Given some of the things we've seen on the supply chain and just other industry dynamics, do you think that that's going to strengthen the trend toward outsourcing here as we look over the next year or so?
William Siwek: Yes. I don't think we've seen anything that would suggest otherwise. So we still have a pretty robust pipeline with a lot of activity. So yes, we haven't seen anything that would suggest the trend would slow or reverse in any way.
Aaron Spychalla: All right. And maybe second, on the EV side. Thanks for the color on kind of the number of programs. Can you just maybe give a little more detail on how those conversations have trended, maybe in recent months, and how many more programs you might look to add as we kind of progress towards that $500 million goal?
William Siwek: Yes. It's hard to tell how many we'll add going forward, clearly, but the conversations have obviously progressed very nicely. We've seen a lot of activity, a lot of interest, which is why we've added a number of development agreements over the last quarter. So I think it's been extremely active. I think people are starting to understand the true value proposition of a composite structure, whether that'd be a body or a component with the strength and the lightweight nature of it. We're getting down to a place where we're working towards a cost parity model. I think once we get there, then you'll see some more traction.
Operator: Our next question comes from the line of Laura Sanchez with Morgan Stanley.
Laura Sanchez: Adjusted EBITDA for the quarter, it came in a little bit above the guided level. And you talked about the impacts from increased raw material costs. And we also hear the OEMs talk about transportation challenges. So are there any factors offsetting these challenges that allow you to keep 2021 guidance unchanged?
William Siwek: Yes. I think I'll jump on that one first, and then I'll let Bryan speak. But I think we've got some pretty aggressive cost-out goals in a number of areas that we're executing on. I think when we talk about raw material cost increases, and I think most of you remember, we have shared paying gain in our contracts, so there is a bit of a sharing. But I think, more importantly, is our supply chain team just does an amazing job of locking in pricing on virtually all of our commodities with the exception of resin and that kind of adjust quarterly. But almost everything else, we're locking in a year in advance. So you may see market prices increasing on some of these commodities, but that may not actually impact what our pricing is. So although we will see a bit of an impact from resin, as Bryan suggested, most of the other commodities, we've locked in pricing. So any increase there is impacting us much less than it might otherwise.
Laura Sanchez: Perfect. And a follow-up on that, about the 70-30 sharing mechanism. How often does that get reset? Or how does the accounting work?
William Siwek: Well, I'll let Bryan handle the accounting. But from a contract standpoint, it varies a bit by customer. So some of our customers, it's 2 times a year, some of our customers, it's quarterly. And then another customer we have where it's just an annual adjustment, so it does vary across the board. So really, you're -- on 1 customer, it's 1 year and everything else is generally quarterly or semiannually, but most of them are quarterly.
Bryan Schumaker: Yes. And then from an accounting standpoint under the 606 that we talked about quite a bit, if you look at that, I mean, it gets smoothed out the margins over the life of the contract, so just keeping that in mind. But again, this piece of it, the $5 million, we believe, will hit in Q2, which will be the primary portion of it for the year.
Laura Sanchez: Perfect. Yes, that's a good reminder. And last one, I mean, and this is more longer term. Is there any potential -- do you see any potential in kind of being part of the decarbonization of the shipping industry? If I remember correctly, before you started manufacturing blades, you manufactured sail and power boats, so I'm wondering if the ocean shipping industry would represent another market for you longer term?
William Siwek: No. We really -- I mean, we've -- interestingly enough, we've been approached on some unique propulsion systems for oceangoing ships as it relates to wind. But as far as the ships themselves, no, that's not something that we're focused on at this point.
Operator: And our next question comes from the line of Greg Lewis with BTIG.
Greg Lewis: I was hoping to get a little bit more color around the other revenue. You maintained the guidance of that, so it looks like that's going to step up just roughly. It looks like on the revenue more of a leg down, transport was flattish. Any kind of color around that? Knowing that you'd have the component part that probably -- on the transport side, that probably picks up before the chassis body, any kind of way to think about that through the next few quarters?
Bryan Schumaker: Yes. I mean the guidance I gave earlier was about 1/3, 1/3, 1/3 of kind of the overall total guidance that I gave. Now with that number is in there is the field services. So you'll continue to see, I mean, that increase as we have a bigger focus on that. So that's why we're continuing to focus and continue to drive that and growing it, so you will see that going up over the period of the year.
Greg Lewis: Okay. And so then as I think about transport, realizing that it's still kind of in the incubation phase, when we think -- you mentioned the 6 OEMs with bodies and then the parts, any kind of way we should be thinking about the growth of either? I mean are they going to kind of be in parallel? Or do we think it could be something where one leads the other? And then as we think about that, should there be any differentiation around margin? Or should that kind of be the same?
William Siwek: So you're asking whether cab or component will grab fast -- or grow faster and then whether there's a differentiation in margin, is that the question?
Greg Lewis: Yes. Yes, exactly.
William Siwek: You know it -- Greg, it really just depends on which grows faster. I mean clearly, we've got opportunities in both. Some of the cab stuff takes a little bit longer to develop, as you might imagine, compared to the component, but it might be longer run. So I think it's a little hard to say. We're obviously focused on both. So that's the answer as far as what the split may be or the speed of growth for each. And on the margin side, I think, as I mentioned, we're working the cost side pretty hard to bring you down to not only be a benefit because of the lightweight, but also be more to cost parity. But we believe, right now, margins should be relatively consistent across both. And part of it will just depend on volumes and what the CapEx requirements are from our customers. But at this point, it's a little early to tell which will be a better margin, but we're working to be consistent kind of with where our wind margins have been in the past.
Operator: Our next question comes from the line of Graham Price with Raymond James.
Graham Price: You spoke a bit last quarter about potentially consolidating your blade facilities in China. Just wanted to check in and see if there are any updates on that front, and I guess if the COVID situation kind of plays into that in any way?
William Siwek: Yes. So we're still looking to optimize our China footprint. We've got 3 facilities there now, and so we are continuing to look at what the optimal situation for us is in China based on not only demand from our existing customers and other Western OEMs, but also, as I think I mentioned in the last call, discussions we're having with some of the Chinese OEMs. So we're still working on the optimization of the footprint. So that's where I would leave that. And as it relates to COVID, I mean, COVID, really no impact on what we're doing in China or as it relates to the footprint there. I mean we've had a COVID -- hit us in China very first, but it's had the least amount of impact on operations there throughout the whole period. And so really no impact from COVID for us there.
Graham Price: Got it. And then for my follow-up, thinking specifically about sourcing balsa wood. Any inflation concerns there, I guess, in addition to the epoxy resin?
William Siwek: No, actually, quite the opposite. We've seen a pretty significant drop in market price for balsa since last year. If you recall last year, we had some challenges at the end of '19 and into '20, exacerbated by COVID, but we are in very good shape from a balsa standpoint and a balsa market at this point today.
Operator: And our next question comes from the line of Stephen Gengaro with Stifel.
Stephen Gengaro: So two things for me. The first, can you help us a little bit with sort of the stair step or the big drivers of the EBITDA ramp in the second half versus first half? Just some of the -- what are the major components which move us sharply higher in the back half of the year?
Bryan Schumaker: Yes. There's a few things going on, right? You have, one, is the cost that we talked about that will be impacting, which is minimal, but it's about the $0.05 that we referenced from the raw material increase. The other portion, I mean, you have India ramping up, so they'll continue to ramp up. We have 7 lines in transition right now across Mexico, Turkey, and those will be ramping up that back half of the year also. And we see some, I'll say, revenue shift from Q2 out to the Q3, Q4 time frame, so that's another big push that we're seeing. So we feel, I mean -- right now, I mean, it's starting to fill in that back half of the year and kind of where we're coming out to see that utilization going up to achieve those numbers.
William Siwek: Yes. I think that's the key is the utilization. If you look at the utilization numbers going out in Q3 and Q4, you'll see numbers that are much higher than we experienced here in the first quarter for sure.
Stephen Gengaro: Okay. Great. And just as a follow-up, when we think about the opportunity offshore, and I'm thinking probably more U.S. than international with this question. When do you -- what's sort of the lead time on when you start to set up relationships contracts, book work with the OEMs for the offshore side? Just give me a sense for the timing.
William Siwek: Yes, it's right now. I mean if you think about the time it takes to set up a new facility, secure the land, et cetera, et cetera, so we were in discussions today and have been for quite some time with OEMs on opportunities for offshore, specifically on the East Coast of the U.S. So that's happening now. We would expect maybe announcements would probably be -- it shifted a little bit to the right, but we're thinking early 2022 right now with production likely in '24 time frame. So there's quite a long lead time. There's a lot that has to happen between now and the time we -- by the time turbines get erected in the water, so.
Operator: Our next question comes from the line of James West with Evercore ISI.
James West: So Bill, you laid out the recent policy changes within Washington and other places around the world that are kind of -- or accelerating the energy transition. And you guys have a number of lines that are also in transition, and you just talked a minute ago about preparing for offshore. But has this acceleration, this policy-driven acceleration, has it caused you to sort of think about even incremental lines from what you already have planned?
William Siwek: Yes. No. Good question, and absolutely. I mean I mentioned we're in discussions and having talks with customers and our customer's customers, et cetera. But absolutely, that's part of what we've been doing through the first quarter and into the second quarter is having long-term planning discussions with customers understanding markets where the growth is, where the needs are, where capacity is today and where it needs to be tomorrow or over the next 5 to 10 years. So that's an active and ongoing exercise right now. But if you look at -- if the numbers that some people are putting out there come to fruition, I mean, there's going to be more capacity needed in different parts of the world or in our existing locations as well, to certainly meet the demands of the market. I mean there's talk of 3x the number of -- or the amount of installations just in the U.S. market, right? And then it would need even more than that in Europe to hit their targets. So yes, the answer is we will be looking at that footprint over the next 6 to 12 months and then deciding kind of where the next growth location may or may not be.
James West: Okay. Okay. Good to hear. And then just maybe a follow-up on the resin cost issue. I know you expect that to come down in the third quarter. Is that -- is the supply already contracted, so you have good visibility on that?
William Siwek: So we have supply secured pricing is what can move. So the pricing moves quarterly based on some indices that we've agreed on with a couple of our strategic suppliers, so the price can move. But as you recall, as we reset with our customers, there's a sharing of that price increase or as prices come down, the price decrease, right?
Operator: . Our next question comes from the line of Jeff Osborne with Cowen.
Jeffrey Osborne: Bill, I just had two quick questions on the EV side. So the 6 and 9 customers that you referenced, are those people you're making -- are those prototypes? Or are those contracted volumes? What's the nature of that? So like is Proterra in the 6 and 9 or no?
William Siwek: Yes. Proterra would be in there, and that's obviously contracted, right? And then there are -- from a cab standpoint, it's more development, if you will. Clearly, we've discussed the Navistar arrangement we have, so that's in there as well. But most of them are development that would -- that we anticipate will lead to production down the road. And on the component side, there are 2 of them where it was -- they were production parts for existing vehicles. And then we've got a bunch of stuff that's in, again, development phase with a number of OEMs. And again, hoping to give you -- I'm sorry, the plan is that that development obviously would lead to production deals.
Jeffrey Osborne: Got it. And I know years ago, you had a DOE-funded program with GM, if my memory is right. If something like that for door panels or to take off for, say, the F-150 making roughly 1 million vehicles a year, what's the CapEx implications for this sort of broader vision? Because it seems like you're getting quite a bit of success in moving the ball forward here, but I wasn't sure is Rhode Island equipped to do this? Or Newton, Iowa? Where would this be done?
William Siwek: Yes. So we've got the pilot production line in Rhode Island right now that we are running production parts off of. But no, that -- we couldn't do that type of volume out of Rhode Island. Our thought here is that if we were running components like that, we would likely be co-located either in or near our customers' plant. So I can't tell you what the CapEx would be today for 1 million F-150 doors. I'd like to have the opportunity to figure that out, and we certainly would. But yes, that -- it's too early to tell what that would be. But clearly, that's -- our plan would be to co-locate or locate near where our customers are for those types of volumes for sure.
Jeffrey Osborne: Makes sense. And the last question, it's probably been a year since you talked about it, but I think you were working on with your customers' segmented blades in terms of larger form factors. Is that something that you're still working on? Or can you give us an update on blades that would be assembled on site at the location of deployment?
William Siwek: Yes. We are producing segmented blades today.
Operator: Our next question comes from the line of Greg Wasikowski with Webber Research.
Greg Wasikowski: I'll start with transportation. Just a quick one. I'm curious if there's any overlap between those cab OEMs and the EV parts OEMs, or if they're all individual.
William Siwek: There is some overlap. So we're looking at cabs as well as certain components for a couple of them, for sure.
Greg Wasikowski: Got it. Okay. And then how should we think about the time line for growth in this segment? I know we've talked about longer-term plans and targets over the next few years. But as you start to add more relationships and build your backlog, how should we think about that conversion period? When we see you add additional OEMs in the mix for collaboration agreements or partnerships, generally speaking, should we automatically be thinking 12 or more months before seeing any translation to the P&L? Or could it be sooner than that?
William Siwek: I would just say patience. And the reason I say that is it -- these development programs do take a little bit longer to get to production than I think maybe was originally anticipated. So your point that 12 months, I'd probably say, in sum, it could be 12, it's probably more like 24 months from -- as you get through a development process, 24 to 36 before you get to production, especially if you're going through testing phases and what have you with the cab structure specifically. So it is a long cycle for these development projects. And so again, it's probably that 24 to 36 months before you start seeing meaningful revenue from a production deal out of a development project we're working on today.
Greg Wasikowski: Got it. Okay. And then one more, if I could. Just on labor. I'm curious if you've seen any labor constraints, either at TPI or somewhere within your supply chain or your customer base? I'm thinking particularly, in the U.S., just as a result of stimulus checks and kind of favorable unemployment benefits. Just wondering if you've seen anything there at all.
William Siwek: In the U.S., it has -- it's -- early on, in the early part of the pandemic, we had a few challenges in Iowa, but we've actually been in pretty good shape. Now we're always looking for skilled workers. But the answer -- short answer is no, we're not seeing significant or impactful labor challenges, whether it'd be because of the unemployment checks or just because of the overall market. We're in pretty good shape at this point.
Operator: Our next question comes from the line of William Grippin with UBS.
William Grippin: So I just wanted to dive into the second half EBITDA ramp implied in the guidance a little bit more. I appreciate that you gave a little bit of color earlier. But just -- I think last quarter, you were talking about second quarter, third quarter being strong, and then a little bit of a step down in 4Q. This new guidance seems to imply like a pretty significant shift out of 2Q and then into the second half of EBITDA. So you quantified the $5 million from higher costs. But as far as like the 7 lines transitioning, India ramping, that stuff I would think you would have known when you gave guidance last quarter. So just help us understand if you can quantify or just help us -- any additional color you can give to help us understand what's going on here that would help.
Bryan Schumaker: Yes. For the most part, again, Q2, that pushed off into Q3 into Q4. Some of the demand is also filling up in Q3 and Q4 that we spoke about maybe being a little softer before, so that's also helping us out the back half of the year. Some of the key things that are kind of driving that from a utilization standpoint in the factories to give us that confidence. But for Q2 and why that's down, again, part of it is the raw material input cost we talked about. Part of it is this demand slipping. So that's part of the two main factors there.
William Siwek: Well, it's a demand push to the right, right? So does that make sense? Well, so when we -- on the fourth quarter call, we talked about back half of 2021, being a little -- still filling up, being a little bit soft. Well, that's firming up. And so that's why Q4 looks better. And then some of the volume from Q2 that we anticipated is getting pushed into Q3, customer request.
William Grippin: Right. I get that. Do you think utilization in the second quarter will be lower sequentially?
Bryan Schumaker: Not necessarily lower sequentially. It will be higher because you have more of India coming online. So that's why, I mean, overall adjusted EBITDA goes up a little bit. We just try to give you that kind of thermometer to tell you how it's progressing throughout the year.
Operator: Our next question comes from the line of Phil Shen with ROTH.
Philip Shen: So Bryan, I think when you're talking about the guidance and the sequence of EBITDA, you said the majority would be in Q3 and 4. I know we've talked a bunch about that. But you also did say these numbers could be significantly impacted by COVID. So I wanted to explore that a little bit more. And specifically with India's COVID situation, can you talk more head on about how are you guys preparing for that? Or what do you think could happen in the case of a possible shutdown of parts of the countries? Is there a shutdown for Tamil Nadu, for example, being contemplated, which I believe is where Chennai is the capital. So just maybe talk through India and what the risks might be to that back half guidance as well.
William Siwek: Yes. Phil, this is Bill. Just -- it's a typical caveat risk factor, right, when you've got a global pandemic. So if something happens, you never know. So -- but specific to India, right now, we're okay. There is not -- although there are curfews and there are shutdowns both in Tamil Nadu and throughout India, industry has continued to be open. There's no restrictions between districts like there was early in the pandemic, so we're fine there. And actually, the oxygen situation where we're at is actually easing up a bit. But nonetheless, it's still very serious, and we're watching it very closely. We're monitoring our supply chain there as well. So the risk is that we have either an outbreak, which we're doing everything we can to prevent that. And we have to slow down production. But at this point, we have not had an impact on production nor do we anticipate it unless something changes significantly here over the next few weeks.
Bryan Schumaker: Yes. The only thing I'll add is in our prior call, we talked about kind of $5 million a quarter COVID impact being through Q2. With our run rate, we kind of gave about the $2.4 million in Q1. We believe $10 million will go through the full year, and that's because of what we're seeing in India and Turkey. So that's why we're still confident in those numbers we gave about the $10 million that just will go through the whole year now instead of just the first half.
Philip Shen: Okay. I appreciate that, Bryan. Thank you, Bill. I think we talked through resin earlier. Can you talk about the logistics outlook? Do you also see an improvement in Q3 there? Or is that just resin? And if not, what is the visibility on the improvement for logistics pricing?
William Siwek: Yes. I think the further down the road you get past the pandemic, not that we're past it, we're still in the middle of it, but that's a tougher one, Phil. I think I rely on our supply chain team, and they've done a phenomenal job of finding alternative routes and modes and methods to get materials where they need to go. I don't have a crystal ball on this one. I see it remaining tight through the balance of the year, but we'll continue to manage just the way we have over the last 12 to 18 months.
Philip Shen: Okay. Great. And I know that impacts the entire economy, so it's not isolated to you guys. Bill, in terms of the passenger EV that was slated for possible serial production, you guys were looking for -- and we were looking for some time in Q4 last year and then Q1 this year. Can you talk about what the status is of that converting to actual live production? And what is the road block? Perhaps you can just talk through some color on that one.
William Siwek: Yes. So we have two different programs. The one that was the earlier program, probably will not go to serial production on this particular part. We're still working with the OEM, and we've got options on other parts. But that particular part that we had spoke about will likely not go to serial production under -- with TPI. The other program we're working on, it's a tens of thousands of parts that we will be delivering between now and kind of the end of Q3, early Q4. And we'll see from there whether that goes to full serial production or whether it's just a pilot as well. So the first one, again, still dealing with the OEM on other options. But for that particular part, we didn't go serial. And now we're working on another one that -- we'll see, but it's high volume. It's a high-profile customer and so we're excited about the opportunity, and we're executing on that right now.
Philip Shen: Can you explain what the root cause was for the first program?
William Siwek: The OEM went a different direction, I think the part turned out to not need to be as structurally significant as we originally anticipated it to be. And so as a result, our cost was fine if the part would have remained as is, and then they needed that structural integrity. But it turns out they didn't need something as structurally significant as what they originally believed. So they went with a different technology that was cheaper.
Operator: There are no further questions at this time. I will now turn the call back over to our speakers.
William Siwek: Thank you. And again, appreciate your interest in TPI Composites, and we look forward to our next discussion. Thanks again. Be safe.
Operator: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
