Broadwind Energy, Inc. Stock

Greetings, and welcome to Broadwind's Third Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Tom Ciccone. Thank you. You may begin.

Good morning, and welcome to the Broadwind Third Quarter 2026 Results Conference Call. Leading the call today is our CEO, Eric Blashford; and I'm Tom Ciccone, the company's Vice President and Chief Financial Officer. We issued a press release before the market opened today detailing our third quarter results.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today.

As we noted last quarter, the results of the Heavy Fabrication segment, excluding pressure reducing systems, have been reflected as discontinued operations. Unless otherwise noted, the discussions today will relate to our continuing operations.

At the conclusion of our prepared remarks, we'll open the line for questions. With that, I'll turn the call over to Eric.

Thanks, Tom, and welcome to our call. During the third quarter, we continued to execute on a strategic transformation into a pure-play precision manufacturing business focused on domestic power generation and critical infrastructure markets. Our Industrial Solutions segment had yet another strong quarter as orders increased 42% year-over-year to a record $19.6 million, driving backlog to a new record of $57 million. Natural gas turbine demand remains strong, supported in part by broad global electrification trends, which include data centers.

Gearing orders were $9.8 million and backlog grew to nearly $38 million. Demand growth within the Gearing segment has been supported by strong customer activity within upstream oil and gas. Quoting activity remains robust in this segment.

Consolidated revenue increased 48% year-over-year to $22.3 million and adjusted EBITDA improved to $0.5 million. Total orders were $33.7 million, an increase of 13% with power generation-related orders representing more than 70% of our third quarter order book. Gearing sales increased 36%, while Industrial Solutions sales increased 32% and Gearing achieved its first operating profit since the second quarter of 2024. Tom will walk through the segment results in more detail.

On October 30, we completed our first acquisition in nearly a decade with the purchase of MCM. MCM is a vertically integrated component supplier serving the domestic electrical transmission and distribution market. Based in Alabama, MCM is a precision manufacturer with a 30-year track record of designing, engineering and fabricating metal components for the electric utility and critical infrastructure markets.

From its 37,000-square foot facility in Northport near Tuscaloosa, MCM supplies mission-critical hardware to some of the nation's leading utilities with products engineered to meet stringent standards for corrosion resistance, conductivity and performance under extreme weather conditions in high-power transmission line applications. Through a vertically integrated offering that includes machining, fabrication, assembly, kitting and delivery, MCM has established itself as a leading component provider to the domestic electrical transmission and distribution sector. MCM is 100% U.S.-based and sources all raw materials through an established domestic supplier network, creating a responsive and reliable supply of products for its customers on demand.

The acquisition expands our exposure to sustained investment in grid expansion, hardening and resilience and is consistent with our power generation and critical infrastructure vertical market strategy. MCM aligns with the key criteria of our acquisition strategy. It adds a higher-margin revenue stream, which we expect to be immediately accretive, serves stable growing end markets, has a strong competitive moat and consistent profitability, operates within a fully domestic footprint and offers a clear pathway toward integration. Our priorities are to integrate MCM successfully, protect customer service and operating continuity and begin capturing the commercial and operational benefits of the combination.

During my various visits to MCM, both prior to and immediately after the announcement, I've had the pleasure to meet with each team member and share our core values of commitment, accountability, respect, energy and safety. The MCM team is excited to be part of Broadwind and execute our growth plan, leveraging the opportunities we see in the electrical transmission and distribution market.

With that, I'll turn the call over to Tom for a discussion of our third quarter financial performance.

Thank you, Eric. Turning to Slide 5 for an overview of our third quarter performance. The third quarter was another strong period for Broadwind with significant revenue growth, improved profitability and continued backlog growth across both operating segments.

Third quarter consolidated revenues were $22.3 million, up 48% from the prior-year period. The increase reflects strong order activity and backlog conversion across both the Gearing and Industrial Solutions segment, along with higher PRS activity. Adjusted EBITDA improved to $0.5 million compared to an adjusted EBITDA loss of $1.2 million in the prior-year third quarter. Third quarter orders were nearly $34 million, up 13% year-over-year. Order activity was led by continued strength in Industrial Solutions and increased PRS demand, where we booked over $4 million in orders.

Turning to Slide 6 for a discussion of our Gearing segment. Q3 Gearing orders were $9.8 million, down from the $15.9 million in the prior-year period. The year-over-year decline is attributable to the absence of a $6 million order we received last year from a leading OEM of natural gas turbines. Oil and gas orders were nearly $6 million during the quarter, more than double the prior-year level, partially offsetting the impact of that large gas turbine order. We ended Q3 with $37.8 million in backlog, marking our fifth consecutive quarter of backlog growth. Through the early part of the fourth quarter, Gearing order activity is strong, and we are currently on pace to exceed third quarter order levels.

Segment revenue was $9.6 million, an increase both sequentially and versus the prior year, reflective of strong demand across all major end markets served, primarily power gen and industrial. Adjusted EBITDA was $0.7 million compared with $0.1 million in the prior-year period. As we noted previously, as our volumes continue to increase, we expect to benefit from improved capacity utilization and operating leverage, supporting higher margins over time.

Turning to Slide 7. Industrial Solutions booked $19.6 million in new orders during the third quarter, an increase of 42% over the prior year and 13% sequentially. Industrial Solutions maintained its solid momentum, again achieving new records in both orders and backlog while extending its backlog growth streak to 9 consecutive quarters.

Third quarter segment revenue was $10.4 million, up 32% versus the prior-year period, reflective of our growing backlog and strong demand for our natural gas turbine content. Third quarter adjusted EBITDA was $1.4 million versus $0.6 million recorded in the prior-year period. This improvement reflects higher capacity utilization and operating efficiencies realized during the quarter.

As we discussed last quarter, we expected EBITDA margin to moderate from the high-teens levels we experienced over the previous 3 quarters. Consistent with that expectation, third quarter adjusted EBITDA margin was approximately 13%. Looking forward, we believe a low double-digit EBITDA margin is a more appropriate expectation based on our current mix and operating profile. We also currently expect our revenue to remain above recent historical levels, subject to customer schedules, product mix and prevailing market conditions.

Turning to Slide 8. We ended the third quarter with total cash and availability on our credit facility of nearly $40 million or $31 million after adjusting for our minimum excess availability requirement. On a pro forma basis, after giving effect to the MCM acquisition and the related credit facility amendment announced on November 2, cash and availability under our credit facility was approximately $16.5 million with total debt of $13 million.

We believe our pro forma liquidity position provides us the financial flexibility we need to support our growing businesses in terms of operating working capital and any other growth capital that may be required. Furthermore, with the addition of MCM, we anticipate being able to generate free cash flow moving forward and bring net leverage below our long-term target of 2.0x through earnings growth and debt repayment.

That concludes my remarks. I'll turn the call back over to Eric to continue our discussion.

Thanks, Tom. As we look ahead, our priorities are clear: successfully integrate and grow MCM, continue optimizing our asset base around our vertical market strategy and drive focused organic growth with new and existing customers in power generation and critical infrastructure.

In Industrial Solutions, we continue to see strong demand for natural gas turbine components and related products. Our customers are filling our expanded capacity with new orders as they bring additional capacity online. This activity reinforces our view that investment in reliable generation capacity represents a durable multiyear opportunity. In Gearing, we remain focused on converting stronger demand into consistent earnings improvement through higher utilization, efficient production flow and continued expansion beyond traditional gearing for new opportunities in precision machine components for power generation, defense, aerospace and other critical applications.

As part of our strategy, our progress towards CMMC 2.0, or the Cybersecurity Maturity Model Certification Level 2, continues, and we expect to have that certification early next year. CMMC Level 2 certification represents a meaningful qualification advantage for programs involving controlled unclassified information and creates an additional barrier to entry for competing suppliers in the defense market. Additionally, we are seeing improved activity from our traditional oil and gas customers.

The MCM acquisition extends our platform into electrical transmission and distribution and provides Broadwind with a complementary higher-margin product offering. Our integration approach will be measured and customer-focused with an emphasis on preserving the capabilities and relationships that have supported MCM's consistent performance.

Our capital allocation approach remains focused on long-term shareholder value. Our priorities are to invest in profitable organic growth, integrate MCM and improve operations and reduce debt while maintaining healthy liquidity. Near term, our focus is integration and bringing net leverage below 2.0x. Over time, we will stay selective on acquisitions, looking for durable end markets, a clear competitive advantage, solid profitability, a domestic manufacturing footprint and a fair valuation.

In summary, we exited the third quarter with strong organic revenue growth, improved profitability in both reporting segments, robust order momentum and a broader, more diversified platform following the MCM acquisition. We believe Broadwind is increasingly well positioned to serve the growing needs of domestic power generation and critical infrastructure customers and to build a more consistent, higher-quality earnings profile over time.

With that, I'll turn the call over to the moderator for the question-and-answer session.

[Operator Instructions] Our first question comes from Eric Stine with Craig-Hallum.

So just maybe starting with Industrial Solutions. Obviously, great order trajectory, backlog. But just thinking about this going forward, I know that a big part of that business is tied to GE Vernova. And I know you've got a bit of a lag, but given what's happened with their order book and backlog, just curious if you could talk about capacity needs down the road. I know you've expanded in North Carolina here recently, but it would seem like you may need to do that again.

Yes. Eric, thank you. You're correct. Primary customers certainly are growing. GE Vernova even said their orders were up 178%. So we are expanding to match that capacity requirement. But keep in mind, the 30% we added this year, that's still only one shift. So we can move to a second shift to expand that quite a bit. And as we talked about before, if we need to, we can move our manufacturing to an adjacent site. We'd have to find that site to open up more capacity with that within our Sanford facility. So we feel confident that we can grow materially and keep up with our customers, at least for the next couple of years.

Okay. So not -- I mean, it sounds like fairly minimal CapEx and not really a heavy lift to do that to just stay in a good position there?

Correct. Correct. Of course, you have to find the people, which isn't always easy, but the brick-and-mortar is there, especially with this expansion, to match the growth of our customers.

Yes. Okay. Understood. And then maybe Gearing, you talked about -- thinking about the orders there. I mean, it's been elevated for 4 quarters, and you did talk about the step-down this quarter because you didn't have the $6 million order that you had last year, but offset by oil and gas strength. I mean, can you just dig into that a little bit more? I mean, because it is -- I mean, it sounds like things are robust in terms of quoting and that this is probably more of a timing issue than anything else, but maybe a little more detail would be helpful.

Sure, 100%. We're pretty -- we're very confident and bullish and constructive on power gen still. Some of the large orders, as we've said before, can be a little bit lumpy because they order quite a bit at a time. So we do expect that to continue. U.S. frac seems to be giving us a little bit of a lift. As we mentioned, frac spreads are up 22 or about 13% year-over-year. So we're starting to see that lift. For a while there, frac spreads were not increasing, but they have increased over the last year, and we're starting to get some lift from that. So we're seeing pressure pumping mid-single-digit growth. So we are expecting that to continue going forward.

So look for us to continue to have growth in orders in power gen and more traditional frac businesses. But of course, material handling and mining is also part of our core product set. And they are also constructive, although they're not growing to the extent that power gen and fracking is.

Yes. Eric, the only other thing I'll add is while the comps aren't favorable versus the prior year or sequentially, both of those totals around $16 million, those are near record levels for us. So when we compare back to those 2 numbers, it's not going to -- we knew we had a big hurdle here in terms of a comp. But as I pointed out earlier, we're already on pace to exceed that Q3 order total in the Gearing segment. So...

Our next question comes from Justin Clare with ROTH Capital Partners.

This is Stefan Thomson on for Justin Clare. With the Gearing facility in Illinois stepping down to about 197,000 square feet from 201,000 on December 1, does the remaining space still support the $65 million to $70 million of Gearing revenue you've discussed? Are you looking to replace the capacity? And is there any cost savings associated with the reduction?

Great question. Yes, great question. Thanks for that. So the space that we vacated was actually not optimum space. It was actually low ceiling height. So it wasn't optimum to build the products that we build. The space that we've maintained is definitely enough for us to be able to achieve that $65 million, $70 million run rate we've been talking about. What we simply did is optimize some underutilized space that was really not best for producing gearing and moved our equipment into the more optimized space.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Eric Blashford for closing comments.

Yes. Thanks, everyone, for listening. We look forward to coming back to you after the year-end to discuss our 2026 results and give you an update on our execution of our strategy going forward. Thank you.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings. Welcome to the Broadwind Acquisition of MCM Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Tom Ciccone, CFO. Thank you, Tom. You may begin.

Good morning, and thank you for joining today's call. After the market closed yesterday, we issued a press release announcing Broadwind's acquisition of MCM. In addition to this release, a presentation related to the transaction is currently available in the Investor Relations section of our corporate website.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of historical non-GAAP financial measures discussed during our call in the press release issued yesterday.

With that, I'll turn the call over to Broadwind's President and CEO, Eric Blashford.

Thanks, Tom, and welcome to all of you joining today's presentation. After the market closed yesterday, we issued a press release announcing our acquisition of privately held MCM for a purchase price of $18 million plus an earnout, subject to meeting certain financial performance milestones within 14 months of the transaction close. MCM is an Alabama-based precision manufacturer with a 30-year track record of designing, engineering and fabricating metal components, the electric utility and critical infrastructure markets.

From its 37,000-square-foot facility in Northport near Tuscaloosa, MCM supplies mission-critical hardware to some of the nation's leading utilities and their suppliers with products engineered to meet stringent standards for corrosion resistance, conductivity and performance under extreme weather conditions in high-power transmission line applications. Through a vertically integrated offering that includes machining, fabrication, assembly, kitting and delivery, MCM has established itself as a leading component provider to the domestic electrical transmission and distribution or T&D sector.

MCM is 100% U.S.-based and sources all raw materials through an established domestic supplier network, creating a responsive and reliable supply of products for their customers on demand. MCM's management and its approximately 50 employees all joined Broadwind upon the closing of the acquisition. The acquisition of MCM marks a defining milestone in Broadwind's transformation into a more focused, higher-value solutions provider, serving the power generation and critical infrastructure markets.

Over the past several years, we have sold noncore assets, exited underperforming product lines and strengthened our balance sheet. We remain focused on building more stable, higher-value revenue streams, supported by distinct capabilities, lasting competitive advantages and strong long-term growth opportunities. Beginning in 2018, we launched a strategic campaign to diversify away from the wind market, which had represented a significant portion of Broadwind's revenue.

As recently as 2023, lower margin and often uneven wind-related revenue represented as much as 50% of our total revenue and depended heavily on tax credit support to achieve acceptable profitability. Over the last 2 years, we left the wind tower market entirely. Today, with the acquisition of MCM, we are taking the next important step in our evolution toward becoming a leading supplier of critical components for the power generation and grid infrastructure markets.

Following the wind down of our legacy wind business, MCM gives Broadwind an attractive platform to rebuild its skilled workforce and rescale domestic manufacturing capability. It also serves the electrical T&D market, which is seeing record investment in grid modernization, expansion, hardening and resilience. With approximately 95% of its trailing 12-month revenue generated from T&D component manufacturing, MCM gives Broadwind an immediate and strategic entry point into this attractive growing market.

MCM's experienced manufacturing team, technical expertise, long-standing customer relationships and track record of profitable growth make the business a strong strategic fit for Broadwind and a compelling foundation for the next phase of our growth.

Next, allow me to provide a bit more detail on our investment case and why we are excited about the value creation potential of MCM under the Broadwind umbrella. First, MCM gives Broadwind a strategic entry point into fast-growing power generation and critical infrastructure markets. It positions us to benefit from a multiyear wave of investment to upgrade, expand and strengthen the nation's power grid as rising electricity demand calls for a more reliable and efficient transmission network. The U.S. transmission network spans more than 600,000 miles, and it needs significant investment to meet growing demand and stay reliable and resilient.

Second, MCM adds a higher-value revenue stream in our target markets. MCM grew revenue at a compounded annual rate of 25% over the 4 years ending 2025. For the 12 months ending June 30, 2026, its adjusted EBITDA margin was approximately 23%, well above Broadwind's, with most of its revenue over that period coming from the domestic T&D market, which shifts our revenue mix toward power and critical infrastructure and directly advances our strategic priorities.

Third, the acquisition expands our domestic manufacturing footprint and skilled workforce. MCM adds about 50 skilled nonunion employees and a 37,000-square-foot engineering and manufacturing facility in Northport, Alabama. With MCM, our total employee base grows by more than 20%.

And finally, MCM brings long-standing customer relationships backed by sole source and preferred supplier positions. This customer base is entirely complementary to ours, which broadens and diversifies our commercial relationships. MCM stands out for short lead times, day-to-day of delivery and consistently meeting demanding utility grade specifications. As a result, its top customers have been with MCM for more than 20 years on average.

With that, I'll turn the call back over to Tom for additional details around the transaction.

Thank you, Eric. On October 30, Broadwind completed the acquisition of privately held MCM for $18 million in cash at closing. The transaction also includes up to $7 million of additional performance-based consideration tied to the achievement of defined financial milestones over the next 14 months.

Beginning in the fourth quarter of 2026, it is anticipated that MCM's results will be reported within a new Grid Infrastructure Solutions segment. The trailing 12 months ended June 30, 2026, MCM generated approximately $16.5 million of revenue and $3.7 million of adjusted EBITDA, representing an adjusted EBITDA margin of approximately 23%.

Over the past 5 years, MCM has invested in new capacity additions in support of backlog growth, including an expansion of the Northport facility in 2023. Moving forward into 2027, we expect near-term capital expenditures to be largely related to maintenance type spend, and we expect that these expenditures will not exceed 5% of revenue. On a pro forma combined basis for the trailing 12 months ended June 30, 2026, Broadwind and MCM generated approximately $90 million of revenue and $3.6 million of adjusted EBITDA, representing a blended margin of 4%.

After giving effect to the transaction, pro forma net debt to trailing 12-month adjusted EBITDA was approximately 3.7x. Based on MCM's trailing 12-month adjusted EBITDA as of June 30, 2026, the upfront purchase price represents a multiple of approximately 4.8x. This valuation excludes any performance-based consideration that may become payable upon the achievement of the specified milestones. We expect the transaction to be accretive to Broadwind's adjusted EBITDA margin and earnings per share beginning in the fourth quarter of 2026.

With that overview of the transaction economics and pro forma financial profile, I'll turn the call back to Eric for his concluding remarks.

Thanks, Tom. In conclusion, the acquisition of MCM represents an important milestone in Broadwind's strategic transformation. It advances our shift toward higher value, more durable revenue streams and strengthens our position as a leading domestic supplier to the power generation and critical infrastructure markets. The transaction, we expect to be accretive to both adjusted EBITDA margin and earnings per share, provides a compelling entry point into component manufacturing for the domestic T&D market, while positioning us to rescale our manufacturing capacity and skilled labor force at an attractive valuation multiple.

We believe this acquisition provides a strong template for how we intend to approach strategic acquisitions going forward as we pursue high-quality, lower-risk bolt-on assets that expand our domestic manufacturing base in a disciplined, ratable fashion while adding experienced management teams and capabilities to support Broadwind's next phase of growth.

On behalf of the entire Broadwind team, we're excited to welcome the people of MCM to our company. Our shared commitment to product quality, operational excellence and deep long-term customer relationships gives us confidence that MCM will be a solid long-term strategic fit and a meaningful contributor to shareholder value over time.

With that, I'll turn the call back over to the operator to begin our Q&A session.

[Operator Instructions] Our first question is from Eric Stine with Craig-Hallum.

So you mentioned that MCM brings all new customers to Broadwind, but I'm curious, are these customers that with your business as it stands today before the acquisitions, are these customers that, in some cases, could be your customers or ones that you have tried to penetrate, but you've had challenges for whatever reason? And then also just curious if there are any synergies within the supply chain based on this business?

Yes. This is -- thanks, Eric. This is Eric. This is a different segment than we've been attacking with our power generation. For instance, we're in power generation for utility scale, natural gas, utility scale, natural gas power generation customers. This is transmission and distribution. And I think of transmission as once the power plant is done, generating electricity, it goes to a transformer, which upscales it. And then the electricity is transmitted over these high-tension, high-power lines near towards where it's used or distribution point. So these customers are different than those customers than we would have been pursuing in the other businesses. There is some potential for cross-selling, but it's a different but complementary market.

Got it. And then in terms of -- I mean, the supply chain, then I would assume, I mean, is it any synergies there to be had? Or is it pretty separate?

Well, you're talking about the suppliers. Yes. I mean, there's steel used in all of our businesses. So there is a potential for synergies in terms of our buys being larger. And that, yes, we both use raw steel in Industrial Solutions and in this business. So yes, there is some synergies there on the supply chain side.

Okay. And then just a quick follow-up. I mean, obviously, a pretty impressive growth rate for this company over the last 4 to 5 years. But just curious, I mean, is that a growth rate still relatively small? Is that a growth rate that you think you can accelerate or that this business with a little investment behind it, a bigger company behind it, you can grow that faster?

Yes, definitely. As part of the diligence, I've spoken to the major customers, and they're both saying they're encouraged and excited to see growth in MCM because they have got demand that they want to pass to our business. So yes, we do expect them to grow with our support.

Our next question is from Justin Clare with ROTH Capital Partners.

Congrats on the acquisition here. I wanted to just follow up on the growth outlook here. And I guess, first, so yes, 25% CAGR over the last 4 years ending 2025. Wondering if you could share year-to-date in 2026, either through the second quarter or the third quarter, what the growth rate was for MCM? And then just what orders and backlog might indicate for the outlook into '27?

Well, this business continues to grow. I don't know that it would -- I can comment about the 25% growth so far this year, but I know it has seen growth. Its orders are definitely up. Its backlog is about 6 months at this point in time and growing. And like I said, I've spoken to both customers, and they are expecting demand because transmission in this country, which is why Grid was so interesting to us is because we all know that this country needs to have its grid updated. And so that's where these customers play, and that's where they're looking for MCM with some growth supported by Broadwind to grow. So again, backlog is about 6 months now and growing. Their orders have been very strong, especially in the last quarter.

Okay. Perfect. And then maybe just on margins. So I think in the trailing 12 months, it was about a 23% adjusted EBITDA margin. I wonder if you could speak to kind of what structurally supports that level of profitability? Is it specialized manufacturing capabilities or certain customer qualifications that provide a level of pricing power? And then just curious, was there anything unusual in terms of product mix or pricing in that trailing 12-month time frame? Or is that a level of EBITDA margins that could be sustainable going forward here?

Well, we tend to be conservative, as you know, Justin. So in our models, we're modeling high teens. The reason they're able to maintain these margins is because there's a lot of complexity in the grid. They maintain, as an example, 600 different SKUs for these couple of main customers. One of them is 400 alone. And why is that, you might ask, is because the grid is 60 or 70 years old, and it's different in all parts of the country. And so when they supply these yokes and fasteners and the equipment that holds these high-tension wires to these towers around the country, they've got to be able to respond to the exact specifications that were at that grid at that time because it has to be replicated in order to maintain the wind resistance and whatnot in that particular location.

So because of that diversification of products, they're able to -- and the responsiveness, they're able to maintain a respectable margin.

The only thing I will add, Justin, to that, a little added to the answer is sometimes, for example, if there's a natural disaster, there is a real immediate need for them to kind of turn over their manufacturing to emergency. That tends to generate some additional profitability. So that's where we can get maybe an extra 2 or 3 points because of the responsiveness we have to be able to provide to our customers so they can provide it to their utility customers.

Our next question is from Amit Dayal with H.C. Wainwright.

Congrats on the transaction. Just on the growth side again, do we need to add capacity or invest in sort of expanding the product line, et cetera, to maintain that 20%, 25% level of growth? Or this becomes a little bit more of a stable business with stable EBITDA margins going forward?

So yes, right as the transaction was closing, some capital was put into the business, which will be installed here in the next month or so. That adds necessary capacity to continue the growth path. Beyond that, we don't see heavy capital investment certainly over the next year or so. But again, in talking to the customers, they're both excited to have MCM be part of the Broadwind family because they know that we can provide growth capital, if necessary, for them to continue to grow as their customers are growing.

Understood. And this may be a little early, Eric, but are you continuing to target other acquisitions, like similar type deals, et cetera?

Yes. I think this is a good example of what we're targeting, as I've been saying publicly, we're looking for $10 million to $15 million to $20 million acquisitions that would be bolt-on, but very, very particular in terms of margin, in terms of market, in terms of the profitability, in terms of the people. So we're still looking. We need to take some time to bring this part of our family. But then certainly, within next year, the year after that, we continue to expect to grow through M&A going forward as our plan.

We have reached the end of the question-and-answer session. I would like to turn the floor back over to Eric Blashford for closing comments.

Well, thank you very much for listening. We're very excited about this acquisition. We've met the people, spent a lot of time at MCM. We're excited for their growth and excited for them to be part of the Broadwind family. So stay tuned for more good news from Broadwind going forward. Appreciate your time.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to Broadwind's Second Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Tom Ciccone. Thank you. You may begin.

Good morning, and welcome to the Broadwind Second Quarter 2026 Results Conference Call. Leading the call today is our CEO, Eric Blashford; and I'm Tom Ciccone, the company's Vice President and Chief Financial Officer.

We issued a press release before the market opened today detailing our second quarter results. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially.

For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC.

Additionally, please note that you can find reconciliations of historical non-GAAP financial measures discussed during our call in the press release issued today.

As noted in the press release issued this morning, in conjunction with the April sale of our Abilene facility, the results of the Heavy Fabrications segment, excluding pressure-reducing systems, have been reflected as discontinued operations. Unless otherwise noted, the discussions today will relate to our continuing operations.

At the conclusion of our prepared remarks, we'll open the line for questions.

With that, I'll turn the call over to Eric.

Thanks, Tom, and welcome, everyone, to our call today. During the second quarter, we continued a successful strategic pivot toward becoming a pure-play precision manufacturing business focused on the domestic power generation and critical infrastructure markets. Customer demand was robust during the second quarter as momentum accelerated across our key verticals. Following our strategic exit from wind tower manufacturing over the last year, Broadwind is operating from a position of increased financial flexibility and strategic focus.

Given the strong foundation of our core Gearing and Industrial Solutions segments, we are building a precision manufacturing platform positioned to benefit from what we expect will become a sustained multiyear investment cycle in electricity generation, transmission and distribution, driven by accelerating load growth from AI data centers, a domestic manufacturing renaissance, a shift toward electrification alongside the need to replace and modernize an aging grid.

We believe our Gearing and Industrial Solutions businesses position us for stronger, more stable growth trajectory than at any point in our history, characterized by attractive margin profiles, greater revenue visibility and the potential for meaningfully improved earnings quality.

Further, we believe our 100% domestic manufacturing footprint, technical expertise and long-standing customer relationships position us well to capitalize on sustained momentum across our key vertical markets, providing customers with an integrated onshore solution for their most complex, large-scale manufacturing challenges.

At a segment level, Industrial Solutions generated EBITDA margin of nearly 19% during the quarter, reflecting strong execution and a higher value sales mix. Within Gearing, profitability also improved due to increased sales volume, reflective of our recent elevated order levels.

As customer demand has strengthened, we further optimized our asset base and human capital, a dynamic that's translated to improved operating leverage and visibility as we look forward to the second half of 2026.

On a comparable basis, total backlog for our Industrial Solutions and Gearing segments increased a combined 93% as of June 30 when compared to the prior year period. We ended the second quarter with a book-to-bill of 1.5x. Our capital allocation priorities remain centered on creating long-term shareholder value through a combination of sustained organic growth, together with opportunistic investments in complementary products and solutions within our targeted markets.

With a strengthened balance sheet and a streamlined operating structure, we are actively evaluating opportunities that seek to scale our precision manufacturing expertise through bolt-on acquisitions that meet our strict investment criteria.

We remain constructive on the opportunities we're seeing in the market, and we'll continue to remain patient, yet opportunistic acquirers of complementary precision manufacturing assets that meet our parameters around sector focus, profitability, model durability and valuation.

Within the Gearing segment, Q2 orders increased by 138% to $16 million, increasing the backlog to nearly $38 million. Demand growth within the Gearing segment has been supported by strong customer activity and power generation, including demand associated with data center-related powering requirements as well as improving activity within upstream oil and gas. Quoting activity remains robust in this segment.

Our Industrial Solutions segment had yet another strong quarter as orders increased 24% year-over-year to a record $17.2 million, driving backlog to a new record of $47.4 million. Natural gas turbine demand remains strong, supported in part by data center-related power demand and broader global electrification trends. We believe these represent important growth drivers for this segment. We are positioning the business to serve that demand.

Operationally, we continue to optimize our processes to increase throughput velocity and capacity. In our Gearing division, we are executing a floor space optimization initiative aimed at improving material flow and enhancing operational efficiency. As part of this effort, key machining centers are being reconfigured into cellular manufacturing layouts to streamline production processes. These improvements are expected to reduce wasted motion, increase productivity and increase throughput in support of the continued strong demand in power generation and critical infrastructure markets.

In the Industrial Solutions segment, we are already seeing the benefits of expanding our North Carolina facility footprint in Q2. The expansion of the warehouse by 30% has enabled us to handle the higher sales volume in a more efficient manner due to its improved layout. This has also opened much needed processing and packaging space to accommodate the continued growth we expect.

Gearing revenue increased 24% year-over-year to $9 million, driven by continued growth in power generation demand. Industrial Solutions revenue rose 79% to $13.2 million, primarily reflecting higher shipments of natural gas turbine components for both new build and aftermarket applications.

In summary, the business continues to perform well as we sharpen our focus within adjacent higher-margin precision manufacturing markets. Our strategic pivot away from the wind tower business and toward markets offering more attractive growth, margin and demand characteristics has repositioned Broadwind to pursue more consistent profitable growth and higher quality earnings.

With that, I'll turn the call over to Tom for a discussion of our second quarter financial performance.

Thank you, Eric. Turning to Slide 5 for an overview of our second quarter performance. We delivered another strong quarter marked by significant revenue growth, improved profitability and continued order momentum across both operating segments.

Second quarter consolidated revenues were $24.3 million, representing a 67% increase versus the prior year period. This increase is reflective of the strong order activity levels we've been recognizing in both the Gearing and Industrial Solutions segment.

As noted last quarter, we expected Q1 to be the low watermark in terms of 2026 revenue within our businesses, and we saw sequential increases within both segments.

Adjusted EBITDA improved from an EBITDA loss of $1.1 million in the prior year second quarter to a positive $1.6 million in the current year.

Second quarter orders exceeded $35 million, increasing more than $14 million from the prior year period, driven primarily by strength in Gearing and higher PRS activity. As a reminder, PRS activity was previously reported within the Heavy Fabrication segment. Going forward, the PRS activity will be included in the consolidated financial performance, but individually does not meet the reportable segment criteria.

Turning to Slide 6 for a discussion of our Gearing segment. Q2 Gearing orders remained strong at $16.2 million, an increase of 138% versus the prior year and 22% sequentially, reflecting broad-based demand across major end markets. We ended Q2 with $37.6 million in backlog, representing a fourth consecutive quarter with an increased level of backlog. Our Q2 orders and backlog totals are approaching the strongest levels in the segment's recent history, reflecting strength within our end markets, most notably within power generation and oil and gas. Segment revenue was $9 million, an increase both sequentially and versus the prior year, reflective of strong power generation deliveries.

We recognized adjusted EBITDA of $0.4 million compared to an adjusted EBITDA loss of $0.1 million in the prior year period. As we noted previously, as volumes continue to recover in this segment, we anticipate improved operating leverage and higher margins.

Turning to Slide 7. Industrial Solutions booked over $17 million in new orders during the second quarter, an increase of 24% over the prior year and 18% sequentially. Industrial Solutions continued its exceptional momentum, achieving new records in both orders and backlog while extending its backlog growth streak to 8 consecutive quarters. In addition, orders of $17.2 million exceeded the prior record by more than $2.5 million.

Q2 segment revenue was $13.2 million, up almost 80% versus the prior year period, reflective of our elevated order levels and strong backlog. The $13 million of revenue recognized in Q2 also represents a quarterly record for the segment.

Second quarter adjusted EBITDA was $2.5 million versus $0.7 million recorded in the prior year period. This improvement reflects higher capacity utilization, a favorable product mix and cost efficiencies realized during the quarter. While we expect EBITDA margin to adjust down to more typical levels moving forward, we currently expect revenue to remain above recent historical levels subject to customer schedules, product mix and prevailing market conditions. This expectation also reflects the recent expansion of our Sanford, North Carolina, facility, where we increased our manufacturing footprint by approximately 30% at the end of Q2.

Turning to Slide 8. We ended the second quarter with total cash and availability on our credit facility of more than $40 million, or $31.3 million after adjusting for the minimum excess availability requirement in place effective Q1. This strong liquidity position, together with our significantly reduced debt levels, gives us substantial financial flexibility as we enter the second half of 2026.

In terms of working capital, we've seen a modest increase in working capital within our continuing operations in Q2 as those businesses continue to ramp up. However, that increase is more than offset by a reduction in inventory associated with the Abilene tower operation, which declined by more than $6 million during the quarter.

That concludes my remarks. I'll turn the call back over to Eric to continue our discussion.

Thanks, Tom. Now allow me to provide some thoughts as we move into Q3 and beyond. We continue to make a decisive shift toward power generation and critical infrastructure markets that we believe offer attractive long-term growth characteristics. The strategic moves we've made to divest of our 2 tower manufacturing facilities position us to focus on higher growth and higher-margin opportunities to leverage our precision manufacturing expertise, supported by a strengthened balance sheet. Once we complete our remaining wind tower orders in Q3 satisfying our contractual obligations, Broadwind will have completed our strategic pivot away from wind, positioning us to fully advance our power gen and critical manufacturing vertical market strategy. Our remaining facilities in Chicago, Pittsburgh and Sanford, North Carolina, near Raleigh, have more than 450,000 square feet of manufacturing space available to serve our customers.

Quarter-upon-quarter strong order growth within the Gearing and Industrial Solutions segments from power generation, specifically with distributed power, as well as growing opportunities in both small frame and utility scale natural gas turbines, support our strategy to expand in this market. Quote activity continues to increase in both Gearing and Industrial Solutions, generated by our ability to solve the complex precision manufacturing and sourcing challenges faced by customers in this growing market. To that end, we have added engineering and manufacturing resources to meet this demand in both divisions.

In our Gearing segment, we continue to execute our strategy to move beyond traditional gearing for new opportunities in other precision machine products for power generation, aerospace and defense. We believe that the continuing strength in incoming orders from power generation sector may reflect the early stages of a sustained multiyear investment cycle, and we are positioning the business to participate in that opportunity.

Lastly, we also see improving order activity in traditional gearing markets supporting upstream oil and gas, specifically within the fracking aftermarket as certain customers evaluate or begin returning older rigs to service in response to strengthening commodity price environment.

In Industrial Solutions, our commercial performance continues to set records in both orders and backlog. The robust demand that began in early 2025 has continued for 6 quarters so far and continues to show strength. As the global demand for natural gas power generation equipment remains robust and our customers bring additional production capacity online, we believe this is an extended period of growth.

In summary, I am pleased with the order growth and the strategic actions we've taken over the last year, and I'm excited to execute our plan.

Within our core divisions, we have created a firm foundation for growth. This, combined with our strengthened balance sheet, positions us to execute our strategy, both organically and through acquisitions.

We have been working with several advisers to secure a pipeline of opportunities to consider and are being very selective and disciplined in our search and evaluation. Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long-term opportunities for us.

Our commitment to quality, technical expertise and the ability to solve complex manufacturing challenges for our customers continue to help us win new opportunities. We've strategically pivoted our business, are investing wisely and are taking decisive actions toward higher value and growing end markets.

We're pleased that our order intake continues to expand, positioning us for improved utilization of a reduced -- of our reduced manufacturing footprint in 2026 as we strengthen our foundation for steady, profitable growth serving the power generation, critical infrastructure and other key markets with high-quality precision components and proprietary products to capitalize on the improved demand in years ahead.

With that, I'll turn the call over to the moderator for the Q&A session.

[Operator Instructions] Our first question comes from Stefan Thomson with ROTH.

This is Stefan Thomson on for Justin Clare. You had another quarter of strong orders and started to improve visibility in the balance of '26, but did not reinstate guidance. What has to happen here to give you guys enough confidence to re-guide?

Yes, I'll take that. Just 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.

Okay. Good to know. And then my next question would be on Gearing. So what drove the strong Gearing orders? Was there any outsized notable orders? Or is this a good indication of future demand?

Yes, I would say this is a good indication of future demand. And guys, sorry, we got a thunderstorm warning behind us. If you hear the siren, that's what it is, but we're fine. So yes, it was -- 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.

Our next question comes from Eric Stine with Craig-Hallum.

So I mean, you're almost done with the remnants of wind. I know it's another quarter. So just curious, I mean, it sounds like you're certainly being thoughtful in terms of potential additions to the platform. But any thoughts you can share on areas, capabilities that you might be looking at? Any details would be very helpful.

Yes. We're really -- thanks, Eric. This is Eric. 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.

Okay. Not too far afield from what you've got in place now, it sounds like?

Yes. We see power gen and critical infrastructure and grid as really long-term plays. I mean, it's a 10- or 15-year demand cycle here. So I think investing in those markets would prove well from an acquisition standpoint for us.

Got it. Okay. And then maybe just turning to Industrial Solutions, good that you've completed the 30% expansion. But I mean, if you could talk about your potential to do that longer term, and I guess the reason for that question is, correct me if I'm wrong, but I think you lag your largest customer by 5 to 6 quarters. And that customer, in the last quarter or 2, have seen a massive upstep in orders and their natural gas turbine backlog. So just thoughts about your potential to expand more beyond the 30%.

Yes, that customer, again, that's GE Vernova. It's common knowledge that they are a primary customer in that segment. They're expecting growth of 18% to 20% given their guidance, and we think we can keep up with that. As I mentioned before, when we move into this new part of our facility, it opens up for packaging -- picking and packaging space there, but it also -- what it also does is allows us to expand our manufacturing footprint in the original space.

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.

Okay. And maybe just sneak one last one in. I mean talk about the growth opportunity, as you said, I mean it's well known. It's very much tied to GE Vernova, which is a good thing. But maybe any limiting factors or the potential to add additional OEMs to that list?

Yes. We are -- we actually -- we're working with all 5 of the top players in natural gas turbines, both in the large scale -- sorry, guys, that's another warning here. We've got thunderstorms in the background here. But we are looking at other customers in that same segment, both in Gearing and Industrial Solutions. They have somewhat different supply chain solutions required, so It's not exactly a match to what we primarily do for GE Vernova. But we are looking at other customers in both Gearing and Industrial Solutions in that space, in the power generation space to grow. So we're not so concentrated within that one customer.

Our next question comes from Sameer Joshi with H.C. Wainwright.

So in your backlog that you already have in the bag, is there any component of revenues that are expected from the data center market? And a corollary to that is, in your pipeline, are you seeing any slowdown because of the various states and regional bans on data centers coming up?

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.

Yes. Yes. Just wanted to see that. And then will you remind us, in both Gearing as well as Industrial Solutions, what is sort of the conversion cycle from backlog -- adding to backlog to actually realizing those revenues in terms of months, period? Is there any average for those 2?

Well, I'll take that. Typically, we've said publicly that the conversion rate for a typical Gearing order is about 6 months. Now given the demand that we have, again, in power generation, some of those customers have asked us to plan production beyond 2026. So it's beyond that 6-month normal cycle. 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.

Yes. I'd also say that with the improved visibility that some of our customers have, we're seeing backlog well into the out years. We're seeing significant backlog in 2028 already. So I think that really helps kind of level set that in terms of when we're going to convert that backlog into revenue.

Yes. No, it's good to see that. I mean, the 6-month conversion cycle for Gearing is sort of typical, but then you already have advanced orders and visibility into, as you said, '27, '28. So that's always good to see.

Just switching quickly to cost side. I think in the prepared remarks, you mentioned you're expecting to increase engineering and manufacturing resources. So how should we think of costs -- operating costs going up, and maybe how does it impact gross margins in the near term?

I would say that, that would be ratable going forward. I wouldn't expect any degradation in gross margins due to those increases. Think in terms of quality engineers, general engineers and production people, just to keep the volume moving in the direction we're going. It's not going to be a lag on gross profit percentage.

Yes, I would say that particular example won't be a drag on margin. You may see some degradation due to mix change, especially within -- sorry, guys, again, we might have to take shelter here, but you may see some margin degradation due to mix, especially within our business unit, but any other cost increases would be in response to higher volume.

Yes. And I guess, it also speaks to leverage that you may have as you add these resources and revenues grow. So that's good to know.

Yes, we're in Chicago here. So if any of our investors is in Chicago, you might need to take shelter as well.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Eric Blashford for closing comments.

Well, yes. Thanks for listening in, everyone. We're excited about our opportunities. We're excited about the strategic pivot and look forward to coming to you after Q3 to tell you about our results then. Thank you very much, everyone.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to Broadwind's First Quarter 2026 Results Conference Call.

[Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Tom Ciccone. Thank you. You may begin.

Good morning, and welcome to the Broadwind First Quarter 2026 Results Conference Call. Leading the call today is our CEO, Eric Blashford. And I'm Tom Ciccone, the company's Vice President and Chief Financial Officer. We issued a press release before the market opened today, detailing our first quarter results.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC.

Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today.

At the conclusion of our prepared remarks, we will open the line for questions. With that, I'll turn the call over to Eric.

Thank you, Tom, and welcome to our call today. During the first quarter, we advanced our business transformation strategy while delivering strong revenue growth, margin realization and order momentum in our core Gearing and Industrial Solutions segments. Higher demand in the power generation and critical infrastructure end markets drove revenue growth of more than 40% in Gearing and more than 60% in Industrial Solutions year-over-year.

We anticipate our strategic exit from wind tower production will be complete in the third quarter of 2026. So Gearing and Industrial Solutions will represent our core businesses moving forward. Excluding the divested product lines within the Heavy Fabrications segment, Broadwind generated approximately $64 million of revenue on a trailing 12-month basis through the end of the first quarter. Our remaining businesses are higher growth, more predictable, more profitable and not policy dependent, with meaningfully improved earnings quality. Over time, we will use our core Gearing and Industrial Solutions segments as a platform to grow a business of increasing scale and profitability.

Within the Gearing segment, Q1 orders increased more than 65% to $13.2 million, supporting a backlog of $30.5 million. Demand growth within the Gearing segment has been largely driven by strong customer activity in power generation driven by the AI data center boom as well as industrial and mining markets. Quoting activity remains robust, with green shoots now forming in defense.

Our Industrial Solutions segment had yet another strong quarter as orders increased 44% year-over-year to $14.6 million, driving backlog to a record $43.3 million. Natural gas turbine demand remains very strong, also driven by the AI data center boom as well as global electrification, representing key growth drivers for this segment, and we are happy to meet that demand.

Operationally, we continue to invest in equipment and technology to increase our process capabilities, reduce costs and improve our profitability. In Gearing, this quarter, we commissioned new very high-precision grinding and mechanical balancing equipment to improve quality and reduce lead times in the production of high-speed reduction gearing such as the gearing used on natural gas turbines. These technology improvements make us one of the most vertically integrated manufacturers of these types of critical components in the U.S.

In the Industrial Solutions segment, we continue to make investments to improve our capacity and capabilities in order to meet the strong customer demand that we're experiencing from our key gas turbine equipment customers. We are on track to expand our local footprint in our North Carolina facility in Q2. This expansion will increase production space in North Carolina by 30%, which is necessary to service our strong backlog that position us to handle the future growth projected in this market.

Within our Heavy Fabrications segment, Q1 revenue decreased by 35%, reflecting the sale of the Manitowoc industrial fabrications business last year, lower PRS demand and the residual impact of the OEM directed-buy material supply issue we experienced late last year.

Revenue on our Gearing segment increased 42% year-over-year, to $8.5 million, given the steady ramp-up in power generation related demand. Within Industrial Solutions, revenue grew 64% year-over-year to $9.2 million, primarily due to stronger shipments of natural gas turbine components.

In summary, the team and business continued to perform well as we sharpen our focus within adjacent higher-margin precision manufacturing verticals. Our progress on industry-specific certifications, such as AS9100 for aerospace and defense and the Cybersecurity Maturity Model Certification or CMMC 2.0 for the defense market and others, combined with targeted investments in capacity and capability, is yielding the results we expected and more.

Our decision to strategically pivot from the unpredictable, uncertain and policy-dependent wind tower business and repurpose that capital toward higher-growth, more predictable, more profitable markets positions us well for the future.

With that, I'll turn the call over to Tom for a discussion of our first quarter financial performance.

Thank you, Eric. Turning to Slide 5 for an overview of our first quarter performance.

First quarter consolidated revenues were $34.1 million, representing an 8% decrease versus the prior-year period. As expected, we experienced a decrease in our Heavy Fabrications segment. However, outside of the Heavy Fabrications segment, first quarter revenues within our Gearing and Industrial Solutions segment increased more than 40% and 60%, respectively, reflective of the strong order activity levels we've been recognizing.

Adjusted EBITDA declined slightly to $2.2 million versus the prior year of $2.4 million. However, adjusted EBITDA increased approximately 16% sequentially, driven by improved capacity utilization and a more profitable mix.

First quarter orders remained strong at over $37 million. Orders increased within our Gearing and Industrial Solutions segment, driven by strength in the power generation and natural gas turbine verticals, while orders decreased within our Heavy Fabrications segment reflective of our exit of the Manitowoc facility late in 2025.

Turning to Slide 6 for a discussion of our Heavy Fabrications segment. As expected with the wind-down of the Manitowoc operation, we continue to see decreases in revenue, orders and backlog. We anticipate this to continue going forward, especially in light of our recently announced sale of our Abilene facility, pursuant to which we strategically exited the wind market.

First quarter orders of $9.7 million primarily consists of wind tower production that will continue through Q3 of 2026 out of the Abilene facility, as well as some baseline PRS activity. As a reminder, we will retain the PRS business, and we are evaluating segment reporting following the divestiture. We'll provide additional detail as the process is finalized.

First quarter revenues of $16.4 million and adjusted EBITDA of $1.7 million are both down versus the comparative prior-year period due to the wind-down of our Manitowoc operations, the resolved raw material supply issue and lower PRS demand.

Turning to Slide 7. Q1 Gearing orders remained strong at $13.2 million, an increase of 66% versus the prior year and 36% sequentially. We ended Q1 with over $30 million in backlog, a level we have not reached since 2023. As we noted in prior quarters, we continue to see strong orders from power generation and oil and gas customers, and that momentum continued into Q2 as we booked more than $6 million in orders in April alone.

Segment revenue was $8.5 million, an increase both sequentially and versus the prior year, reflective of the stronger recent order intake level. We recognized adjusted EBITDA of $0.6 million, compared to an adjusted EBITDA loss of $0.2 million in the prior-year period. As our volumes continue to recover, we are improving our capacity utilization, driving improved operating leverage.

Turning to Slide 8. Industrial Solutions booked almost $15 million of new orders during the first quarter, a 44% increase over the prior year. During the first quarter, the segment set a new record for both orders and backlog, and is on track to do so again in Q2 as it has already recorded over $10 million in orders during April alone. The $43 million backlog total is more than $5 million above the previous high watermark set in Q4. Q1 represents the sixth straight quarter setting a record backlog level.

Q1 segment revenue was $9.2 million, up over 60% versus the prior year, reflective of the elevated order levels received recently. As we noted last quarter, we expect this business will operate at these elevated revenue levels over the medium term. First quarter adjusted EBITDA was $1.8 million or 19% of revenue. This represents a significant increase over the $0.5 million in adjusted EBITDA and 8.7% EBITDA margin in the prior year, as the segment benefited from improved capacity utilization and a more favorable mix of products sold.

Turning to Slide 9. We ended the first quarter with total cash and availability on our credit facility of more than $25 million or $16.4 million after adjusting for the minimum excess availability requirement in place effective Q1. Pro forma for the sale of the Abilene facility, our liquidity improves approximately $10 million, reflective of credit availability adjustments and required debt payments.

During Q1, operating working capital increased slightly as a decrease within our Heavy Fabrications segment was more than offset by increases within our Gearing and Industrial Solutions segments, in line with our increasing activity levels.

Finally, with respect to our financial guidance, as noted last week, with the sale of the Abilene facility, we have elected to withdraw our full year 2026 financial guidance.

That concludes my remarks. I will turn the call back over to Eric to continue our discussion.

Thanks, Tom. Now allow me to provide some thoughts as we move into Q2 and beyond.

We continue to make a decisive shift toward increasingly stable, growing power generation and critical infrastructure markets. The strategic moves we've made with our tower facilities position us to focus on higher-growth and higher-margin opportunities that leverage our precision manufacturing expertise, and to do so with a strengthened balance sheet. We will complete our remaining wind tower orders through Q3 and then direct our full attention to our growth strategy.

Our remaining facilities in Chicago, Pittsburgh and Sanford, North Carolina, near Raleigh, have more than 450,000 square feet of manufacturing space ready to serve our customers. Quarter upon quarter of strong order growth within the Gearing and Industrial Solutions segments from power generation, specifically within distributed power, as well as growing opportunities in both small-frame and utility-scale natural gas turbines support our strategy to expand in this market. Quote activity continues to increase in both Gearing and Industrial Solutions, generated by our ability to solve complex precision manufacturing and sourcing challenges faced by our customers in this growing market. So we have prudently added resources to meet this demand in both divisions.

In our Gearing segment, we continue to execute our strategy to move beyond traditional gearing toward new opportunities in other precision machine products for power generation, aerospace and defense. We see the continuing strength in incoming orders from the power generation sector as the beginning of a super cycle for which we are prepared. The expansion of our very high-precision and vertically integrated capabilities to serve the high-speed gear segment I mentioned earlier increases our value-add to key customers.

We're pleased with the increasing level of customer activity we're seeing in various new infrastructure-related opportunities such as material processing and defense. We expect further inroads in defense as we complete our CMMC 2.0 certification later this year, which is a requirement when producing certain defense-related products. Lastly, there is also improving order activity in traditional gearing markets supporting oil and gas, specifically the fracking aftermarket, as certain customers begin putting older rigs back in service.

In Industrial Solutions, our commercial performance continues to set new records in both orders and backlog. The strong demand that we began experiencing in 2025 continues to accelerate in 2026. As the global demand for natural gas power generation equipment grows and as our customers bring additional production capacity online, we believe this is an extended period of growth. Some of our key customers have sold out their production capacity for the remainder of the decade, which gives us confidence that this period of strong demand is still in its early stages.

In summary, I am pleased with the order growth and the strategic actions we've taken over the last year, and I'm excited to execute our plan. Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long-term opportunities for us. Our quality, quick response and ability to solve complex manufacturing challenges for our customers continue to help us win new opportunities.

We've refocused our business, are investing wisely and are taking decisive strategic actions towards higher-value, growing end markets. We're encouraged that our order intake continues to grow, positioning us for improved utilization of our reduced manufacturing footprint in 2026, as we strengthen our foundation for steady, profitable growth, serving the power generation, critical infrastructure and other key markets with high-quality precision components and proprietary products to capitalize on improved demand in the years ahead.

With that said, I'll turn the call over to the moderator for the Q&A session.

[Operator Instructions] Our first question comes from Justin Clare with ROTH Capital Partners.

I wanted to start out with Heavy Fab, and just wanted to see how you'd frame the conversion of the remaining backlog for Heavy Fab, the $25 million, how do you expect that to convert between Q2 and Q3? And then just wanted to see how you're thinking about the inventory levels for the overall business as you convert the remaining orders for Heavy Fab here, and then what the effect could be on your overall liquidity? Because I'm imagining you may have a lower inventory level as you convert the remaining orders here.

Yes. Justin, so of the $25 million of backlog, the overwhelming majority of that is tower related that we'll be completing out of the Abilene facility here. And that should be very, very ratable over the next 2 quarters. So it's probably 5 months, think of it 1/5, over the next 5 months, if you will. So I think you can call that fairly ratable post-close 3 -- I mean, post Q1 here.

The other thing I would mention is, overall, when we're looking at, not just inventory balances, but our operating working capital, we have maybe about $10 million of operating working capital associated with our wind business at the end of the quarter. So we expect that that will obviously decrease, but we are expecting that to be partially offset by increases within our Gearing and our BIS segment as those businesses continue to ramp up here over the balance of the year. So there may be some benefit, but I think it will be muted. Yes.

Got it. Okay. And then with the sale of Abilene, just wondering how we should think about the overall operating expenses for the business here and how you anticipate that changing as you exit that wind tower business? And then any other actions we should be looking for in terms of things that you may be looking to do to optimize the business as you shift to a focus on power generation and critical infrastructure?

Well, yes, we do have -- obviously, the operating expenses associated with that facility will go away as we exit the facility. I don't think that their cost structure is significantly different than what we have within the other business units. So we shouldn't see any consolidated impact there.

In terms of other costs that we're looking at, we're looking at all of our costs and trying to optimize that in light of this transaction going forward.

Got it. Okay. And then maybe just one more. You had indicated natural gas content drove order growth for Industrial Solutions and Gearing. Wondering if you could talk about the opportunity for Broadwind to expand content per turbine or wallet share within the nat gas end market. And then also, I guess, what you're seeing in terms of order size or project scope and how that's trending?

Yes. Justin, this is Eric. Well, I will tell you that we are engaged with a couple different producers of gas turbines, primarily the ones that are in the utility scale. We're engaged right now with 4 of the top 10 right now. Of course, we do have some concentration on a couple of those.

As far as content, the content for Industrial Solutions is broad. As we discussed before, we tend to support those installations on what's called not hot gas path, but surrounding the hot gas path. So we continue to invest in capabilities to grow share within that product set. So I think we are growing within our primary customer and another 3 on top of that. We're also growing content from Industrial Solutions kind of beyond what we traditionally do by taking more manufacturing on ourselves.

With regard to Gearing, we do reduction gearing, and we're looking at some other components within the natural gas turbine, but it will be limited primarily to that reduction gearing that we discussed before because that's primarily what these turbines need from us as far as precision machine gearing.

Our next question comes from Eric Stine with Craig-Hallum.

So obviously, you're focusing here, you've been investing in Gearing and Industrial Solutions for some time. Curious, could you update us on, you've got really strong backlog in both segments, update us on how you would expect that backlog to flow in both businesses, whether that has changed or improved your ability to execute on that, and then just what that implies over the next, say, 12 to 18 months?

Sure. Sure, Eric. I think what we're seeing is we think that Q1 is probably the low watermark for our revenues for both of those segments. We do expect these revenues to ramp up. I don't think we can take our order run rate and extrapolate that to mean what we're going to book in terms of revenue, because we are probably booking further into the future than we have in the past. But I think just suffice to say, I think we can expect a steady ratable growth for the balance of this year.

And we are -- I should add that we are booking into '27 and actually a little bit into '28 now. That's depending on when the customers want the product, not depending on our capability to deliver. It's when the customers want it. They are looking further out.

A couple of our customers are booked literally to the end of the decade. And so we have some advanced notice of some of their products. They want to secure capacity now instead of waiting.

So I don't want to put words in your mouth, but you could -- it sounds like you could execute on this backlog in both segments perhaps over the next 12 or so months. But in some cases, as you said, it has to do when the customers want that production, and that that would potentially be the limiting factor.

Correct. Which also means there's more capacity we have to fill in the interim.

Yes. Okay. Got it. I mean, is it something where you're able to disclose kind of what your -- the percentage? And it sounds like it would be more skewed to Industrial Solutions when you're talking about booking further out. But are you able to kind of give a high-level view of, say, what, in that backlog, what is kind of earmarked for '26 versus '27 and '28?

We could probably provide that on the next call, we can provide some color there. At this point, I would say it's primarily '27. Anything that's not in this year would be '27. I think we're just starting to touch 2028. But we can add some color to that maybe on the next call, for sure.

And you're correct, the -- you are correct. The customer that is pushing some or requesting some 2028 due dates -- delivery dates, would be out of the Industrial Solutions segment, not so much out of Gearing.

Yes. Okay. Got it. And then could you just talk a little bit about Gearing, you mentioned some positive trends in oil and gas. And certainly, you are hearing just -- I mean it's a distant memory, but early in the year, gas prices -- or I'm sorry, oil prices, pretty depressed. And you're hearing people start to talk about that that's really weighed on their oil and gas business and that it really has not picked up even with oil price appreciation given geopolitical factors. So maybe talk about that. I mean, is that something that you're kind of concerned about or on the lookout for? Or is there a reason that Gearing would be a little bit insulated from what some others are seeing?

Well, Gearing has been -- or oil and gas gearing, as you know, has been at a low for, shoot, 6 or 7 quarters now. And it's because of a couple of things. One is the customers are being more frugal with their capital. Their rigs are a lot more productive, so you don't need to add rigs to add output. However, what's going on now is we have customers that are putting some of their old rigs back to work and replacing some components within their existing rigs. So what we're seeing is what I would call quick-turn domestic supply for our customers as they put some of their old equipment back to work.

Got it. So I mean maybe, is this a possibility that that actually -- I mean, you are seeing some improvement there, as you said, low levels, but you're seeing some improvement there because customers are in fact a little bit cautious, but they're trying to get more out of their existing equipment rather than new capital?

Right. That's correct. So the rig count in the U.S. remains down. The customers aren't really putting new rigs back to work. There's been a couple over the last couple of weeks that have been redeployed. But where we are seeing the demand is what I would call aftermarket, meaning the customers that have rigs working, need to keep those rigs functioning and they're replacing some of their wear -- their gearing wear parts with the new components. Not new rigs; upgrading existing rigs.

Okay. All right. That's helpful. Last one for me. Just I mean, pretty clear signaling that you aim to use a stronger balance sheet to add to your business. So I'm curious, maybe it's too early or maybe you just can't talk about some specific thoughts, but just curious, when you look at your platform order, what are some areas where you potentially could fill in?

Well, of course, we have been pretty open about wanting to grow inorganically. We're going to use those 2, both of those platforms, Gearing and Industrial Solutions, as platforms to grow. We like precision machining with exposure to defense and aerospace. We already have some exposure to power generation. If we can find something in power generation that would make sense, we'd certainly like to bolt that on.

We also like grid hardening. Think in terms of transmission distribution. A lot of the grid in the U.S. is quite old and in need of upgrade. And we think there is position for us to take to support that upgrade.

Our next question comes from Amit Dayal with H.C. Wainwright.

So it looks like you have a pretty clear strategy in front of you with the new segments you're focused on. In that context, what should we expect EBITDA margins to sort of come through maybe over the next 12 to 18 months as you sort of clean up the businesses you're exiting and focus on these new segments?

Sure. Yes, I'll take that one, Amit. So I would say within our Gearing segment, we should expect margins to continue to improve. For them, it's really about volume and operating leverage. They have a big fixed cost structure, and the more revenue that we can produce out of that plant, the more profitable the overall plant is. So we should see that continue to improve ratably.

In terms of our BIS, we should see our mix normalize. The last 2 quarters, I think we've got a very strong mix of products sold. And we expect that to increase -- we expect that to normalize, I should say, over the balance of the year. Although revenue going up, but in terms of margins, I think you'll see that normalize a little bit over the balance of the year.

Understood. And then we've spoken about this, guys, one-on-one in prior calls, but with the Heavy Fabrication now sort of out of the way, is there a potential rebranding coming for the company overall?

Yes. The question, really is we don't know yet. There is certain of our divisions are already operating with different names, Brad Foote Gear, which we would not rebrand. But the overall company, we're thinking about it. I would stay tuned on that. The word Broadwind has wind in it, but there's a lot more that Broadwind means to many people than just a wind company.

So stay tuned. We've thought about it. We're considering it. But no decision at this point.

Understood. And then just last one, on the defense side, who are the customers on the defense side, Eric?

Some of them, well, there's...

Or what kind of customers? Just to get a sense of...

Yes. What I would say is some of them don't want us to disclose their name. But let's say there are parts for weapon systems, there's parts for the naval systems and there's parts for helicopters.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Eric Blashford for closing comments.

Yes. Thanks, everyone, for listening today. We're on the move. We're excited to execute our strategy. So stay tuned on that. We look forward to speaking with you again after Q2 to discuss our results. Have a great day, everyone.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to Broadwind's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Tom Ciccone. Thank you. You may begin.

Good morning, and welcome to the Broadwind fourth quarter and full year 2025 results conference call. Leading the call today is our CEO, Eric Blashford; and I'm Tom Ciccone, the company's Vice President and Chief Financial Officer. We issued a press release before the market opened today detailing our fourth quarter results.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call, in the press release issued today.

At the conclusion of our prepared remarks, we'll open the line for questions. With that, I'll turn the call over to Eric.

Thanks, Tom, and welcome to our call. 2025 was a pivotal year in our evolution. As a leading manufacturing partner of choice for global OEMs in power generation and critical infrastructure, while becoming a leaner, more diversified business equipped to deliver profitable growth through the cycle.

The divestiture of our Industrial Fabrication operations in Wisconsin in the third quarter represented an important step in optimizing our asset base and increasing our balance sheet optionality, which positions us to redeploy capital toward higher-value opportunities. Our fourth quarter performance was in line with the preliminary results we issued in early February 2026. Fourth quarter results were impacted by a raw material supply disruption in our Heavy Fabrications business associated with an OEM customer's directed-buy program, which reduced manufacturing throughput and operating efficiency during the period. The company has implemented corrective actions to address the issue and expects operations to normalize during the first quarter of 2026.

Demand conditions and customer activity were strong during the fourth quarter, supported by robust project activity across our Gearing and Industrial Solutions segments. Orders were led by 38% year-over-year growth in the Gearing and Industrial Solutions segments, partially offset by a 20% year-over-year decline in the Heavy Fabrications segment, reflecting the divestiture of the Wisconsin operation. Gearing orders increased to nearly $9.7 million as we saw strength in power generation, along with some resurgence in oil and gas and the wind aftermarket. In March 2026, we received a $6 million follow-on order for precision machine gearing components used in midsized natural gas turbines, which power data centers and other applications. This order represents the second half of the significant order we received in July of last year.

Within the Industrial Solutions business, we received orders of $11.1 million, reflecting increased demand across all segments served, including natural gas turbine components for new and aftermarket applications, wind repowering and solar. The backlog for this business reached $38.1 million in the fourth quarter, yet another record. Operationally, we continue to invest in equipment technology to improve our process capabilities, reduce costs and improve our profitability.

In Gearing, we successfully completed three complex PPAPs or Production Part Approval Processes, specific to the large orders for the power generation market and installed and qualified the critical equipment used to ensure precise balancing of high-speed gear components using what's called electromechanical runout or EMRO technology.

In the Industrial Solutions segment, we made prudent investments in equipment and staffing to double our capacity across all production processes, including machining, welding, assembly and kitting, to address our growing backlog and to meet future customer demand in the gas power generation equipment market. Additionally, in Q2 of this year, we are expanding our local footprint in North Carolina by about 30% to accommodate future growth.

Within our Heavy Fabrications segment, Q4 revenue grew by 6% to $21.6 million year-over-year, primarily due to an increase in wind towers and repowering adapters sold. Revenue in our Gearing segment fell 8% year-over-year to $7 million due to lower demand from the wind aftermarket and mining sectors, partially offset by power generation and oil and gas. Within Industrial Solutions, revenue grew 60% year-over-year due to stronger shipments into the natural gas turbine equipment market, both new and aftermarket and increased solar shipments, partially offset by a reduction of wind repowering shipments.

In summary, the team and business continued to perform well as we sharpen our focus within adjacent higher-margin precision manufacturing verticals. This past quarter, we quickly identified and addressed the supply disruption by working with our customer, to bring on an alternative supplier, minimizing the overall impact to our business. Furthermore, recent strategic actions to divest our Wisconsin facility positions us for increased balance sheet strength and flexibility while improving capacity utilization at our Abilene facility and reducing overhead costs. Despite the volatile trade policy environment, our 100% domestic manufacturing base remains a key competitive advantage as we partner with Tier 1 OEMs who value our deep technical expertise, commitment to quality and on-time service.

With that, I'll turn the call over to Tom for a discussion of our fourth quarter financial performance.

Thank you, Eric. Turning to Slide 5 for an overview of our fourth quarter performance. Fourth quarter consolidated revenues were $37.7 million, representing a 12% increase versus the prior year period. Fourth quarter increase was driven primarily by strength within the Industrial Solutions segment in which revenue was up 60% year-over-year. Furthermore, the fourth quarter revenue level within the Industrial Solutions segment represents a 40% increase versus the average over the past 4 quarters, and we believe that this volume level will continue, based on current customer indications.

Outside of our Industrial Solutions segment, lower Gearing deliveries were more than offset by increased revenue within the Heavy Fabrications segment, which benefited from increased wind revenue versus the prior year quarter. Adjusted EBITDA declined to $1.9 million versus the prior year of $2.1 million. Despite higher volume, adjusted EBITDA decreased due primarily to lower capacity utilization within our Gearing segment and operating inefficiencies associated with the directed-buy raw material supplier issue, we referenced in our February 5 press release.

Fourth quarter orders were strong at nearly $39 million. Orders increased within our Gearing and Industrial Solutions segments, driven by strength in the power generation, oil and gas and natural gas turbine verticals, while orders decreased within our Heavy Fabrications segment, reflective of our exit of the Manitowoc facility late in 2025.

Turning to Slide 6 for a discussion of our Heavy Fabrication segment. Fourth quarter orders were nearly $18 million, a 20% decrease versus the prior year quarter. However, after backing out the $6.3 million in Industrial Fabrication product line orders received for the Manitowoc facility in the prior year, orders increased more than 10% on an adjusted basis due to meaningful tower orders being recognized in the current year quarter. Fourth quarter revenues of $21.6 million are up 6% versus the prior year quarter. Despite delays associated with the raw material supply issue we experienced, we were still able to recognize increased wind tower and repowering revenue in the fourth quarter. However, adjusted EBITDA was down versus the prior year due to manufacturing inefficiencies associated with the aforementioned raw material supply issue.

Turning to Slide 7. Q4 Gearing orders remained strong at $9.7 million, an increase of 38% versus the prior year fourth quarter. We ended 2025 with approximately $26 million in backlog, a level we have not reached since 2023. As we noted in the prior quarter, we continue to see strength in the power generation and oil and gas verticals, and that momentum continued into Q4. Additionally, as we announced via this morning's earnings release, we recently received just over $6 million in follow-on orders from a leading OEM in the natural gas turbine segment of the power generation end market. Including this order, we have already booked almost $11 million in Q1 orders.

Segment revenue was $7 million, down almost 8% versus the prior year quarter. We recognized an adjusted EBITDA loss of $0.3 million compared to $0.1 million of adjusted EBITDA in the prior year period. Due to the lower revenue levels, earnings were adversely impacted by reduced capacity utilization. As volumes recover, we expect operating leverage to improve in 2026.

Turning to Slide 8. Industrial Solutions booked over $11 million of orders during the fourth quarter, a 38% increase over the prior year quarter. Orders remained at an elevated level, the resulting backlog again hit a new record level of over $38 million at the end of the fourth quarter, eclipsing the previous record of $36 million set at the end of Q3. This quarter represents the fifth straight quarter setting a record backlog level. Q4 segment revenue was $9.4 million, up both sequentially and versus the prior year quarter, reflective of the elevated order levels received recently. Fourth quarter revenues represent a 60% increase over the prior year quarter and is the highest revenue level ever recorded within the segment. We believe this business will operate at these elevated revenue levels throughout 2026. Adjusted EBITDA of $1.5 million or almost 16% segment EBITDA margin increased significantly over the $0.6 million or 10% segment EBITDA margin recorded in the prior year quarter, reflective of the increased revenue levels.

Turning to Slide 9. We ended the fourth quarter with total cash and availability on our credit facility of nearly $25 million. This is down from the prior year, and we were carrying significantly lower working capital levels as we had received advanced payments from a major customer late in 2024. Working capital levels were flat during the quarter, and we expect them to remain relatively consistent moving forward. Finally, with respect to our financial guidance, today, we are reaffirming our full year 2026 guidance. We expect full year 2026 revenue to be in the range of $140 million to $150 million and the adjusted EBITDA to be in the range of $8 million to $10 million. That concludes my remarks.

I'll turn the call back over to Eric to continue our discussion.

Thanks, Tom. Now allow me to provide some thoughts as we move into 2026. We continue to make a decisive shift toward increasingly stable, growing power generation markets with an emphasis on oil and gas, renewables and potentially nuclear. Our strategic emphasis on pursuing the highest growth and the highest margin opportunities that leverage our precision manufacturing expertise.

Our facilities in Abilene, Texas, Chicago, Pittsburgh and Sanford, North Carolina near Raleigh have more than 600,000 square feet of manufacturing space ready to serve our customers. Quarter upon quarter of repeat wins within the Gearing and Industrial Solutions segments from power generation, specifically within distributed power as well as growing opportunities in both small frame and utility-scale natural gas turbines support our strategy to expand in this market. Quote activity continues to increase in both Gearing and Industrial Solutions, generated by our ability to solve the complex precision manufacturing and sourcing challenges faced by customers in this growing market. So we are expanding resources to meet this demand in both divisions.

In our Gearing segment, we continue to execute our strategy to move beyond traditional gearing markets for opportunities in other precision machine products. We're pleased with the increasing level of customer activity we're seeing in various new infrastructure-related markets such as road maintenance, cement plants and aggregate material processing, along with some early green shoots in defense. Recent sizable orders we received from the power generation sector are the beginning of a multiyear cycle for which we are prepared. The expansion of our capabilities to serve the high-speed gear segment, such as the dynamic balancing capabilities I mentioned earlier, allow us to bring more processes in-house, decreasing lead times while improving quality and profitability.

In Industrial Solutions, continued growth in the natural gas turbine industry, driven by the global demand for power is having a positive commercial impact on our business. New data center installations are driving increased demand for distributed power solutions, including those that provide redundancy, and many of our key customers are adding significant production capacity in order to meet both the current and foreseeable future demand from power generation. We are proud to have recently received the 2025 Supplier Quality and Delivery Award, from our largest customer in recognition of our quick response to their significant growth and demand, all while meeting their strict quality and delivery requirements.

In our Heavy Fabrication segment, we believe that domestic onshore wind tower activity will continue at its present rate through 2026 and into 2027. We have good visibility for tower production into Q3 of 2026 and good customer indications beyond that. We are seeing increased quoting activity for our PRS line of natural gas pressure reduction units and expect sales to increase proportionately.

In summary, I'm pleased with the order growth and strategic actions we've taken this year as we continue to demonstrate our strong execution of our strategic priorities. Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long-term opportunities for us. Our quality, quick response and ability to solve complex manufacturing challenges for our customers continue to help us win new opportunities. We've reduced our cost structure, are investing wisely and are taking strategic actions to refocus our resources toward higher value and growing end markets. We value our people and are committed to keeping them safe, fulfilled and productive.

This year, we will be implementing an ISO 45001 Occupational Health and Safety Readiness Program with plans to add that certification to our existing ISO 9001 and AS9100 certifications. Our 100% U.S.-based plants are expanding capabilities to take advantage of opportunities afforded by the pro-domestic manufacturing policy backdrop afforded by the current Administration. We're encouraged that our order intake continues to grow, positioning us for improved utilization of our manufacturing footprint in 2026 as we strengthen our foundation for steady, profitable growth, serving the power generation, critical infrastructure and other key markets with high-quality precision components and proprietary products to capitalize on improved demand in the years ahead.

With that said, I'll turn the call back over to the moderator for the Q&A session.

[Operator Instructions] Our first question comes from Eric Stine with Craig-Hallum.

So I know Gearing and Industrial Solutions backlog up 2x or more year-over-year. You did mention your expectations for revenue for Industrial Solutions in 2026. I'm curious if you could just talk about Gearing a little bit. I know that -- I mean, obviously, the demand is there, but the quarter was limited by utilization. So just curious, I mean, maybe thoughts on that, steps you need to do to get through that and what 2026 growth might look like in Gearing throughout the year?

Sure, Eric. Yes. So as you mentioned, our backlog is about double where we -- from where we entered 2025 with. So we are expecting significant growth within that segment in terms of revenue for sure. Double-digit growth can be relied on there. We're entering with a much stronger backlog. So it's about execution versus commercial success this year.

I mean on execution, can you talk about that a little bit? I mean -- so this is not limited by timing of when customers want these components. It's more about you driving higher throughput? Or just any details about kind of how the year ended and why 2026 may be different or may be limited at the start or anything along those lines?

Well, I can add a little bit. We've got a lot more visibility. This is Eric, with the backlog that we have. We are working towards the customers requested dates, which are spread out throughout the year. So I'd say there's a ramp-up going to happen in Q1 with steady revenue in 2, 3 and 4. Again, much visibility for the full year. Some of our backlog is into 2027, but most of it is 2026, if that helps you.

Yes. No, that is helpful. Okay. Maybe -- I mean, after selling Manitowoc, balance sheet is in solid shape. You talked about redeploying it to different areas that includes bolt-ons and some new capabilities. I mean what -- maybe it's hard to share, but if there's anything you can share about areas that you think need added to whether organic or inorganic?

Well, we're definitely focused on power generation and critical infrastructure in all of our divisions. And our M&A search is in those areas, especially with grid or power generation. I think we're entering a super cycle for power generation and grid both, that's going to last at least 10 years, and that's where my focus is, my targets are in M&A. also for organic growth, both in BIS, which is obviously power generation and in -- BIS is Industrial Solutions and in Gearing with power generation in these turbines that are, I would call midrange, which are 100-megawatts and less.

Got it. And maybe I mean so we -- but these are not -- I mean, I guess, bolt-on certainly implies that these are not necessarily significant acquisitions, but more about adding capabilities, whether it's a new product line, new manufacturing footprint, that sort of thing?

Yes. So to that extent, they would be bolt-on acquisitions to our existing platforms, yes.

Our next question comes from Justin Clare with ROTH Capital Partners.

I wanted to just start out on the capacity outlook for Industrial Solutions. So you mentioned that you're expanding the capacity there, I think, by 30% to accommodate future growth. So just wondering with that added capacity, how much potential revenue might be supported for the Industrial Solutions segment when it's fully utilized? And then if you could speak to how you anticipate utilization increasing over time here?

Sure. Just for clarification, our footprint is increasing 30%. But our capacity, we've already doubled it through staffing and equipment. So that floor space is just over and above that. So I think we can easily double our revenue if not, maybe 2.2x more than 2025 revenue in our existing facility before we end up having capacity constraints. We're right now only operating at one shift, so we can add another shift, if necessary. So I think we could certainly get into the $70 million range revenue within our existing facility.

Okay. And any sense for the timing in which you might be able to achieve that level of revenue given the visibility you have into demand and the discussions that you're having with your customers?

Well, the growth in the combined cycle natural gas, utility-scale natural gas turbines, which we serve in that market is really, really strong. Primary customer, one of our primary customers, so our primary customer, GE says their orders increased 77% in 2025 alone. So I expect that the demand will be there from our primary customer and others all the way through 2030. So with customer indications, I think we've got a real strong chance of hitting that revenue number over the next several years.

Got it. Okay. That's helpful. And then maybe shifting over to the Heavy Fab business here. So the backlog was down in Q4, but that partly reflects the Manitowoc divestiture. Just wondering if you could speak to the underlying demand trends that you're seeing, the visibility you have and maybe the timing for backlog conversion and what you're expecting in terms of the cadence in orders in terms of the timing of bookings relative to when revenue would be recognized?

Sure. As has been the practice in the market for some time now, we tend to get -- our customers tend to release orders about 6 months or so in advance of their production needs. We've got good visibility for towers and adapters into Q3 2026 and customers have indicated that, that level of volume should continue through the remainder of 2026 and into 2027.

Yes. Just to add to that, Justin, you asked about converting backlog. We see this as a ratable conversion consistent through 2026. So we're not seeing any really spikiness in terms of revenue. It should be pretty ratable over the 4 quarters of '26.

Our next question comes from Amit Dayal with H.C. Wainwright.

Eric, with respect to sort of the 20% roughly level of organic year-over-year revenue growth you are guiding for, with the kind of visibility you have right now and sort of the macro conditions, I mean, they look favorable. Do you think this is a level of growth you can maintain for the next few years at a minimum?

Well, the markets that we're growing into have CAGRs of about 6-plus percent year-over-year, but they're in great demand cycles that we're in, on the products that we're in, such as natural gas turbines in medium and high capacity, the growth is beyond that CAGR that I mentioned to you. So I think we can. Those 2 divisions achieve that kind of growth rate going forward over the next several years, really through 2030, which is as far as we can see out now.

Okay. Understood. And then the $6 million follow-on order, is this with just one customer? And then adjacent to that, are there other opportunities similar to this that you may be pursuing that are in the pipeline, but not in the backlog?

Sure. Again, this is the power generation market, which we're really excited about. That's the market that we're attacking because we have the capital, equipment in place. We've got the certifications in place. We've got the customer relationships in place now. That is one customer that we're talking to with regard to that particular order, but we're talking to several others in that space.

Okay. And just given sort of the recent volatility around events taking place in the Middle East and your exposure to the oil and gas space, are you seeing a little bit more inquiries, et cetera, or activity from that segment right now?

We are. Several of our customers, the orders aren't huge like they were several years ago, but they're -- I would call them substantive and it's multiple customers. So I think what they're doing is hedging their bet, if you will, that, A, there could be a disruption in their supply, which sometimes come from overseas, but there's demand because the price of oil is an indicator of demand in the U.S. and our customers are in the fracking and drilling U.S.-based space.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Eric Blashford for closing comments.

Yes. Thanks, everyone, for being on the call today and your interest in our company. We look forward to coming to you again at the end of Q1 to talk about our results. Thank you.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to Broadwind's Third Quarter 2025 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Tom Ciccone. Thank you. You may begin.

Good morning, and welcome to the Broadwind Third Quarter 2025 Results Conference Call. Leading the call today is our CEO, Eric Blashford; and I'm Tom Ciccone, the company's Vice President and Chief Financial Officer. We issued a press release before the market opened today detailing our third quarter results.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC.

Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. After the conclusion of our prepared remarks, we will open the line for questions.

With that, I'll turn the call over to Eric.

Thanks, Tom, and welcome to our call. This quarter, we continued to transform Broadwind into a leading precision manufacturing partner of choice for global OEMs. As we advance our priorities to focus on high-value end markets while becoming a leaner, more diversified business equipped to deliver profitable growth through the cycle. Recent actions to consolidate our manufacturing footprint, reduced fixed overhead and strengthened the balance sheet have created a strong foundation, one that positions us well entering 2026.

This quarter, our performance was driven by strong demand across our power generation and renewables markets, with third quarter orders increasing 90% year-over-year, supported by broad-based growth across all of our reporting segments. Importantly, orders from our power generation customers more than doubled versus last year and now represent nearly 20% of revenue, driven by strong demand for our natural gas turbine product offerings.

In early September, we completed the sale of our industrial fabrication operations in Wisconsin, resulting in a net gain of $8.2 million. By consolidating our heavy fabrications operations into our Abilene, Texas facility, we continue to enhance asset utilization and position Broadwind to capitalize on opportunities with higher value growing end markets, where our technical expertise and 100% domestic manufacturing footprint are in high demand. Along with closing the sale in Manitowoc, we announced a $3 million share repurchase program underscoring our continued confidence in our long-term value creation potential.

Customer activity remains robust with incoming orders rising to $44 million, up 90% year-over-year and doubling sequentially, led by strong demand from power generation, increasing demand from oil and gas and industrial customers, combined with strong wind orders. These market dynamics reinforce the importance of our diverse customer base and our strategy to pursue the capabilities and quality certifications required to expand in growing markets, specifically power generation.

Orders within our Heavy Fabrications business reflect an increase in orders for our wind products, offset by softness in our natural gas pressure-reducing systems, or PRS. Gearing orders continued to rebound nicely, increasing 250% to $16 million as we continue to see strength in power generation and some resurgence in the wind and oil and gas aftermarket.

In Q3 2025, orders within our Industrial Solutions business continued to be strong, increasing 86% to nearly $14 million, driven by strong demand for both new gas turbine installations and aftermarket upgrades and services. We are pleased to have set yet another record for backlog in this segment. Operationally, we continue to invest in equipment technology to improve our process capabilities, reduce costs and improve our profitability.

In the third quarter of 2025, margins were temporarily impacted by production process inefficiencies relating to a unique low-volume tower build at our Manitowoc and Abilene facilities as well as lower capacity utilization levels within our Gearing segment. As production normalizes, we anticipate improved operating leverage through the duration of the year and into 2026.

In the Industrial Solutions segment, we are investing in additional manufacturing capacity to address our growing backlog and meet future customer demand and the gas power generation equipment market. Within our Heavy Fabrication segment, Q3 revenue grew by 43% year-over-year, primarily due to an increase in wind towers and repowering adapters sold, offset by lower demand for our proprietary PRSs.

Revenue in our Gearing segment fell 23% year-over-year due to lower demand from the mining and industrial sectors, partially offset by power generation and steel. Within Industrial Solutions, revenue grew 37% year-over-year, primarily due to stronger shipments into the new gas turbine equipment market, both domestically and internationally.

In summary, the team and business continued to perform well as we sharpen our focus within adjacent higher-margin precision manufacturing verticals. Recent strategic actions to divest our Manitowoc facility, position us for increased balance sheet strength and optionality while improving capacity utilization at our Abilene facility and reducing overhead costs.

Despite the volatile trade policy environment, our 100% domestic manufacturing base remains a key competitive advantage, positioning us to partner with Tier 1 OEMs who value our deep technical expertise, commitment to quality and on-time service.

With that, I'll turn the call over to Tom for a discussion of our third quarter financial performance.

Thank you, Eric. Turning to Slide 5 for an overview of our third quarter performance. Third quarter consolidated revenues were $44.2 million, representing a 25% increase versus the prior year period. The third quarter benefited from restarting Manitowoc tower production as well as increased repowering revenue in both our Manitowoc and Abilene facilities. Outside of our Heavy Fabrication segment, lower Gearing deliveries were more than offset by increased revenue within our Industrial Solutions segment, reflective of the strong order levels we've experienced recently. Sequentially, revenue increased nearly 13% due primarily to the increase in heavy fabrication shipments.

Adjusted EBITDA declined $2.4 million versus the prior year of $3.4 million. This decrease was primarily due to lower capacity utilization within our Gearing segment, costs associated with unplanned machine downtime and manufacturing inefficiencies related to the production of unique low-volume tower build within our Heavy Fabrication segment.

Third quarter orders were strong at nearly $44 million. This represents an increase of 90% versus the prior year quarter and 108% sequentially. Orders increased across all of our segments versus the prior year and were up or flat across all segments sequentially. The $44 million of orders represents the highest quarterly order level since 2022.

Turning to Slide 6 for a discussion of our Heavy Fabrications segment. Third quarter orders were nearly $14 million, a 25% increase versus the prior year quarter. Just a reminder, during the second quarter, we received purchase order releases satisfying the volume associated with the long-term customer supply agreement that we announced in January of 2023. As such, the growth in Q3 was primarily attributable to resuming the recognition of new tower orders with this customer, partially offset by the decrease attributable to winding down the industrial fabrication operations at our Manitowoc facility.

Third quarter revenues of $29.4 million are up 43% versus the prior year quarter, driven by an increase in wind tower [indiscernible] sold as we restarted Manitowoc tower production in the previous quarter, a limited run, which was completed during the third quarter and increased repowering revenue. This was partially offset by a decrease in the industrial fabrication shipments as we wound down the Manitowoc operations, had fewer shipments of our PRS units.

Despite the increase in revenue, third quarter segment adjusted EBITDA was down versus the prior year due to the manufacturing headwinds and unplanned machine downtime previously mentioned.

Turning to Slide 7. Q3 gearing orders increased $11.5 million year-over-year to $16 million, a level almost 3x the average quarterly total over the past 2 years. Most notably, Q3 included a $6 million follow-on order from a leading OEM in the natural gas turbine segment of the power generation end market, which we announced in July. This order represents the year 1 volume of a multiyear supply agreement for Gearing products.

In addition, during the quarter, oil and gas orders remain elevated relative to prior year levels as we are benefiting from reshoring in reaction to recent U.S. trade policies. Segment revenue was $7.1 million, down over $2 million versus the prior year quarter. We recognized adjusted EBITDA of $0.1 million, down $0.5 million versus the prior year period, driven by lower revenue and reduced capacity utilization.

Turning to Slide 8. Industrial Solutions booked nearly $14 million of orders during the third quarter, maintaining the strong demand seen this year. The segment participates in the natural gas power equipment industry, which is experiencing significant resurgence driven by the increasing demand for reliable and flexible power supply. Segment backlog hit a new record of almost $36 million at the end of the third quarter, eclipsing the previous record of $30 million set in Q2. This quarter represents the fourth straight quarter setting a record backlog level.

Q3 segment revenue was $7.9 million, up both sequentially and versus the prior year quarter, reflective of the strong commercial environment. Revenue was up 37% versus the prior year quarter, but adjusted EBITDA of $0.6 million was flat versus the prior year due to a lower margin mix of products sold as well as additional overhead to support increased production volume.

Turning to Slide 9. We ended the third quarter with total cash and availability on our credit facility of nearly $27 million. Liquidity was boosted in the quarter by the September closing of the sale of our Manitowoc industrial fabrication operations which resulted in over $13 million in cash. We used that cash to pay off a portion of our term loan with the balance applied to our line of credit, which decreased from $17.6 million, down to $3.8 million during Q3. Also boosting liquidity was a decrease in our operating working capital of almost $5 million, primarily driven by reduced inventory levels. We anticipate that working capital levels will decrease again during the fourth quarter.

Finally, with respect to our financial guidance. Today, we are updating our full year 2025 guidance. We're increasing our full year 2025 revenue expectations to be in the range of $155 million to $160 million, up from $145 million to $155 million. And the adjusted EBITDA range is maintained at $910 million, which excludes the $8.2 million gain on the sale of our Manitowoc industrial fabrication operations.

As a reminder, in 2024, Manitowoc facility generated over $25 million of revenue with an adjusted EBITDA margin rate of approximately 8% to 9%. The majority of that 2024 revenue was industrial fabrication work that we do not anticipate replacing organically in 2026. We expect to provide more detail around the full year 2026 outlook on our fourth quarter conference call.

That concludes my remarks. I will turn the call back over to Eric to continue our discussion.

Thanks, Tom. Now allow me to provide some thoughts as we move into Q4 and 2026. We continue to make a decisive shift toward increasingly stable, growing power generation markets, with an emphasis on oil and gas, renewables and potentially nuclear. Our strategic emphasis is on pursuing the highest growth and the highest margin opportunities that leverage our precision manufacturing expertise. Our facilities in Abilene, Texas, Cicero, Illinois near Chicago, Pittsburgh, Pennsylvania and Sanford, North Carolina, near Raleigh, have more than 600,000 square feet of manufacturing space ready to serve our customers.

Given the consolidation of our manufacturing base, we anticipate Broadwind should be on pace to materially improve capacity utilization going forward. Recent wins within the Gearing and Industrial Solutions segments from power generation, specifically within distributed power as well as growing opportunities in utility scale natural gas turbines, support our strategy to expand in this market. We continue to see robust quote activity in both Gearing and Industrial Solutions generated by our ability to solve a complex precision manufacturing and sourcing challenges faced by customers in this growing market. Accordingly, we're expanding resources to meet this demand.

In our Gearing segment, we continue to execute our strategy to move beyond traditional gearing markets for new opportunities and other precision machine products. The recent sizable orders we received from the power generation sector are exciting, with more expected to come next year. We're pleased with the increasing level of customer activity we're seeing in various new infrastructure-related markets such as road maintenance, cement plants and aggregate material processing, among others.

Additionally, we're seeing an increase in orders from our traditional oil and gas customers, partially due to reshoring efforts. Accordingly, we continue to expand our capabilities to serve the high-speed geared segment with additions to our dynamic balancing capabilities as we bring more key processes in-house. In Industrial Solutions, continued growth in the natural gas turbine industry driven by the global demand for power is having a positive commercial impact on our business.

In Q3, we had near record bookings, which led to a new record quarterly backlog. New data center installations are driving increased demand for distributed power solutions, including those that provide redundancy and many of our key customers are adding significant production capacity in order to meet both the current and foreseeable future demand. Accordingly, we are expanding our internal capabilities in production, fulfillment and the customer response team to address this growing opportunity and better serve our customers. Expanding on the investments made in robotics, coatings and machining made earlier this year, we added another vertical machining center in Q3 to expand our fabrication capability.

In our Heavy Fabrication segment, we believe that domestic onshore wind tower activity will continue at its present pace through 2026. We are encouraged by the continued momentum in the wind repowering market as we are seeing sustained demand from our OEM customers for the adapters we manufacture, which are required to upgrade most legacy turbines. We have good visibility for tower production through the first half of 2026 and good customer indications beyond that.

In summary, I'm pleased with the order growth and strategic actions we've taken this year as we continue to demonstrate strong execution of our strategic priorities. Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement which we see as long-term opportunities for us. Our quality, quick response and ability to solve complex manufacturing challenges for our customers, continue to help us win new opportunities.

We're reducing our cost structure, investing wisely and taking strategic actions to refocus our resources toward higher value and growing end markets. We value our people and are committed to keeping them safe, fulfilled and productive. Our 100% U.S.-based plants are expanding capabilities to take advantage of opportunities afforded by the pro domestic manufacturing policy backdrop afforded by the current administration.

We're encouraged that our order intake continues to grow, positioning us for improved utilization of our manufacturing footprint for the rest of the year and into 2026. As we strengthen our foundation for steady profitable growth, serving the power generation, critical infrastructure and other key markets with high-quality precision components and proprietary products to capitalize on improved demand in the years ahead.

With that, I'll turn the call over to the moderator for the Q&A session.

[Operator Instructions] Our first question comes from Amit Dayal with H.C. Wainwright.

Looking into 2026 a little bit, it looks like you having pretty good traction on the Industrial Solutions side with the power infrastructure ramp that is underway. Is that going to be the key driver for you guys next year in terms of growth?

Yes, I think we -- I think -- well, in terms of the vision, yes. But I think in terms of market, power gen and critical infrastructure are going to lift both Industrial Solutions and Gearing in 2026.

Okay. So that's why I was wondering why Gearing was soft. I know you indicated some sort of organic near-term issues. But is the general business environment for the Gearing segment positive, I guess, given some of the headlines we're seeing about maybe an economic slowdown, et cetera?

Well, again, with certain markets, we are seeing a -- we're seeing power generation with distributed power, primarily with reciprocal turbines below maybe 50 megawatts. So that's a strength for us. We're also seeing some strength in aggregates and even road maintenance of all things. So we're seeing some general infrastructure lift as well as power generation in Gearing.

Gearing, reminder, does have a bit of a lead time. So what we're seeing is softness in revenue is because of the lack of orders we had a couple -- 3 quarters ago. These orders that we're receiving now, we will be delivering in 2026.

Okay. Understood. And then just last one for me. Are you seeing any sort of cost increases? Are you fairly confident about sort of the margin profile for 2026 with the level of visibility you have right now?

It's pretty stable. We are having some increases because of tariffs. We're able to pass those on. Some of our sourcing has to come from those countries that do primarily for industrial solutions that are subject to tariffs. But we do -- we are able to pass those on with the timing difference to our customers. So I'd expect the margin profile to be about the same in '26 as it is in '25. However, the increase in capacity utilization does help us.

Yes. I think the only thing I'd add there, Amit, is that we did have some operational headwinds in '25 here. And I think maybe all else being equal, we could expect a marginal improvement just due to the absence of those headwinds.

Our next question comes from Sameer Joshi with H.C. Wainwright.

Tom, just following up with some more questions on the cost front. Now that the Manitowoc overhead is out of the way, do you expect to have higher gross margins going forward?

Yes. I would say it's probably more to do -- yes, the answer is yes. And I think it probably has more to do with the, again, with the lack of operational headwinds that we had. The Abilene facility is an owned facility versus Manitowoc being a rented facility. So we do see slightly higher margins out of that facility. And I think capacity utilization is a big factor here is the more we can run across that plant we should see some good returns on that.

Understood. And then the BRS sort of -- it's showing some weakness, at least in this quarter, is that because of this timing? Or is there a general lack of demand for that?

Well, we like to think it's timing. We talk with our customers about it when we're on road shows and demos, and they really like the specifications of that. But what they say is, at least right now, the price of oil is restricting their ability to increase capital. Once that turns a bit for them with new budget season, we should expect a resurgence in volume from that product line.

Our next question comes from Eric Stine with Craig-Hallum Capital Group.

So maybe it sounds like -- I mean, you're clearly making investments for growth across the business. I just want to specifically look at Industrial Solutions, given where the backlog is, I guess, first, could you just talk about -- you've done it sounds like quite a few. You've got more upgrades planned, what that might mean from a CapEx perspective? But also how quickly can that come on because your backlog would imply that you could have a pretty meaningful step-up in revenues once those investments kind of come to bear?

Yes. I think to answer your question about CapEx, we've made some investment this year. They've been relatively modest. We don't expect anything that would move the needle from a consolidated perspective. As we look forward, historically, we've been about 2% to 3% of revenue as CapEx. We don't anticipate exceeding that in '26 -- or Q4 or '26.

But what I will tell you is we do intend to expand that plant into another portion of the larger building, which we can get into. It increases our floor space by about 35% going into the second half of 2026. So that, along with the increases we're making in staffing and equipment, we should be able to respond to this demand. But the demand is there. And it is coming. It is there and it is continuing. So we definitely need to make these investments to keep up with it.

Right. And okay, so second half it should be more of the expectation potentially for a step up there. I mean, maybe a good segue just on -- I mean, obviously, it's no secret what's going on in energy markets, demand need for resiliency, et cetera. But I mean, I would think that this is a tailwind for your business for multiple years. And so curious if you agree with that first? But then secondly, I mean do you have -- you mentioned what you're doing in Industrial Solutions. But even in Gearing, I mean, do you have kind of additional ways to expand capacity? As you think about that, not just for 4Q 2026, but as you look at '27, '28 and beyond, given these trends?

Sure. Well, first of all, the demand for electricity is going to keep on going up and we all know that. The demand for data center is projected to go from 22 gigawatts up to 35 gigawatts through 2030, just for data centers alone. So we know that's a demand driver for us. Regarding capacity, I'm sorry, the visibility that we have for the gas turbine market goes beyond '26 into '27 and even into '28. So we do expect that tailwind to be behind us for the next certainly 2 or 3 years which is as far as we can see out right now. Gas turbines sold are about 30% up year-over-year, '25 versus 2024 and '24 was a strong year. So the basics are there for the growth.

Regarding the capacity, we're really only still about 45-ish percent full in our Gearing facility. So we have plenty of capacity to fill there as this business grows. But what we're doing is specifically adding technology to bring more in-house. That was the balancing equipment I mentioned because the more we can bring in-house, the more control we have over quality, over timing and over price. So those are -- where you're going to see our investments made going forward.

Yes. Okay. That is helpful. And then just on Heavy Fab and specifically wind. I would assume we should expect this to be the new norm now that you have satisfied that long-term contract. I mean, not that you would turn down an order of that magnitude should it happen. I mean this is going to be a -- maybe not quarter-to-quarter, but this is going to be a -- you get a large order, it's probably going to mean that you're at elevated levels for the next few quarters and -- but no one should expect necessarily that Heavy Fab backlog is meaningfully higher until wind really picks up. I mean, is that a [indiscernible]?

Yes, you're correct. Our customers like to issue us ratable POs because it also helps them because they don't necessarily know the turbine they're going to sell that far out. They know that we know they want our capacity. We've got good visibility through the first half of '26 and really good customer indications beyond that. But when it comes to which turbine they sell and which tower goes under it, they really can't look out that far. So yes, what we saw this quarter, you should expect to see going forward.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Eric Blashford for closing comments.

Yes. Thanks, everyone, for listening. We look forward to coming back to you again early next year to talk about our full year 2025 and how 2026 looks. Thank you for your interest.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.