Broadwind Inc (BWEN) 2020 Q3 法說會逐字稿

Greetings, and welcome to the Broadwind Third Quarter 2020 Results Call. (Operator Instructions)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Jason Bonfigt, Chief Financial Officer of Broadwind. Thank you. You may begin.

Good morning, and welcome to the Broadwind Third Quarter 2020 Results Conference Call. Leading the call today is our CEO, Eric Blashford; and I'm Jason Bonfigt, the company's CFO.

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 to 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.

Thanks, Jason, and welcome to those joining us today. During the period of pandemic-related market disruption, we have continued to advance our long-term strategy through targeted end-market diversification, operational execution, cost discipline and a pursuit of new organic growth opportunities that leverage our precision manufacturing expertise. Our third quarter performance was mixed as our core wind markets outperformed our more cyclical, non-wind end markets in the period.

Pandemic-related disruptions to our supply chain and workforce had a material impact on margin realization during the quarter, resulting in lower operating efficiency despite a year-over-year growth in revenue.

Importantly, despite these headwinds, we continue to ship product to our customers on time while taking all necessary and appropriate actions to ensure business continuity.

Let's begin on Slides 4 and 5. Revenue increased 18% on a year-over-year basis, driven mainly by increased demand for wind towers. Wind market revenue increased by more than 35% versus the third quarter 2019 with tower section volumes sold, up approximately 30% year-over-year. We are in active discussions with our tower customers regarding 2021 capacity and have begun to accept orders for 2021. Currently, approximately 35% of 2021 tower capacity is booked.

Our total backlog declined 12% sequentially while total orders were flat sequentially, with the exception of our steel market, which experienced both sequential and year-over-year growth in orders. All other non-wind market segments posted year-over-year decline in orders. While manufacturing activity has increased at a modest pace in recent months, following shelter-in-place orders issued earlier this year, non-wind customer activity remains well below prior year levels.

In multiple cases, customers have indicated their intention to postpone orders initially planned for this year into early 2021, implying a gradual recovery in non-wind market demand heading into 2021.

Turning to a discussion of our segment-level performance. Heavy Fabrications revenue increased 28% year-over-year, supported by an acceleration in wind tower demand and increased diversification. Gearing revenue declined by 11% year-over-year due to a general pause in new customer orders and continued softness in oil and gas markets.

Revenue from industrial customers doubled on a year-over-year basis, offsetting some of the softness in our oil and gas, mining and steel markets. We are continuing with our actions to align our gear segment cost structure with current -- with the current demand environment, including workforce reductions and a hold on CapEx as we pursue sales opportunities in our diverse markets. We anticipate a recovery for this segment during the first half of 2021.

Industrial Solutions revenue was down 7% sequentially and down 5% in the third quarter when compared to the prior year period, impacted by some modest slippage of shipments due to supply chain disruptions. Segment backlog grew by 38%, supported by consistent order activity.

As I indicated at the outset of the call, the pandemic had a more significant impact on our supply chain and operations during the third quarter than in previous quarters. That said, our business remains on a stable footing, supported by continued strength within our core wind tower business, together with expectations for improved customer demand as we look ahead into 2021.

In the meantime, we continue to focus on expanding into new, diverse end markets. We're working closely with our suppliers and customers to capitalize on business opportunities as they arise.

With that, I'll hand the call over to Jason for a financial overview of our third quarter results.

Thanks, Eric. Third quarter consolidated sales were $54.6 million, up from $46.1 million in the prior year quarter despite pandemic-related operational challenges. These challenges were manifested both in significant supply chain disruptions, where multiple suppliers were either behind schedule or could not meet quality specifications, together with labor availability as the pandemic impacted both employees and their families in the states where we operate. Despite these challenges, we continue to meet our customer commitments.

The quarter-over-quarter increase in revenue was driven by improved plant utilization in our Heavy Fabrications segment, which benefited from increased tower demand, where we produced for 3 wind turbine OEMs in the quarter. Our TTM consolidated sales was $207.4 million exiting the third quarter, which now includes approximately $63 million of non-wind revenue. Since launching our revenue diversification initiative, we made significant progress into non-wind markets, and continue to focus building that book of business.

Compared to the prior year quarter, gross margins declined 190 basis points to 6.8% in the third quarter. The supply chain and staffing disruptions, which drives labor inefficiencies because we are working out of optimal process, impacted gross profit by approximately $600,000 to $700,000. Several customer projects delays into future periods, which we announced in early August, also weighed on margins during the quarter. The year-over-year change in gearing performance drove 270 basis point decline in gross margin.

Operating expenses as a percent of sales was approximately 8% and below our long-term target of 10%, primarily due to improved plant utilization, effective cost management and higher material content on the product mix sold. We are prudently managing operating expenses as evidenced by flat expenses year-over-year on an 18% revenue increase.

Within OpEx, increased self-insured medical expenses were offset by lower incentive compensation expenses. And interest expense declined to $500,000 from $600,000 in the prior year quarter due to lower debt levels.

Notwithstanding the pandemic headwinds, we generated $1.3 million of adjusted EBITDA in the third quarter, a decrease of $600,000 versus the prior year period. On a TTM basis, we've generated $9.5 million of EBITDA, a $5.8 million improvement when compared with the performance in the previous 12-month period. Over that period of time, adjusted EBITDA margins improved 220 basis points to 4.6%.

Moving on to our Heavy Fabrications segment. Third quarter sales were $43.4 million, a 28% increase on a year-over-year basis, primarily due to increased demand as the industry ramped up activity levels to support higher expected U.S. wind turbine installations. Third quarter orders were $31.4 million compared to $65.6 million in the prior year quarter. As a reminder, prior year order levels were abnormally high as turbine OEMs were securing capacity well in advance of historical lead times due to expectations of surging wind tower installations in 2020. Our backlog provides visibility to our remaining 2020 production, and we are in discussions with our customers regarding 2021 production.

Subsequent to quarter end, we have booked $13 million of tower orders for multiple OEMs for 2021 production. And as of this call, we have approximately 35% of our 2021 optimal tower production capacity sold.

We sold 312 sections in the quarter, our fourth consecutive quarter in which we have sold more than 300 sections. To support this level of demand, our tower plants operated near peak utilization during third quarter compared to approximately 75% in the prior year quarter.

Average selling prices per unit were higher in the quarter, primarily driven by a stronger commercial environment when the orders were placed in the prior year, together with the benefit associated with the production of larger, more complex tower designs.

Segment-adjusted EBITDA increased 63% year-over-year to $3 million, given the increased plant utilization and higher ASPs. Although we met our revenue target and customer commitments during the quarter, adjusted EBITDA margins declined sequentially by 280 basis points. The complexity of multiple design changeovers, supply chain and labor disruptions weighed on margins throughout the quarter, and they also continue into the fourth quarter. Notwithstanding the aforementioned challenges, segment performance was dramatically improved on a TTM basis, with adjusted EBITDA increasing from $3 million to $14 million this year.

Shifting to our Gearing segment. Gearing segment orders declined from $5.9 million in the prior year quarter to $3.2 million. Order activity remains below prior year levels and is constrained by lower capital spending by our customers since the onset of the pandemic, together with lower oil and gas activity as reflected by a sharp year-over-year decline in the North American rig count.

Importantly, we are beginning to see some green shoots in the oil and gas market with the North American rig count now having increased for 8 consecutive weeks. Despite this optimism for a future oil and gas market recovery, we remain focused on executing our strategy of diversifying our customers and products. We are beginning to see increased levels of quoting in many of our end markets, and we'll continue to focus our commercial efforts in other markets even when oil and gas markets recover. Our backlog was $15 million as of 9/30, flat on a year-over-year basis.

Third quarter segment sales declined to $7.1 million from $8 million in the prior year due to lower demand from oil and gas and mining customers. As a result of the operating leverage profile of the business, reduction in sales resulted in a $500,000 EBITDA loss during the quarter. We have and will continue to take actions to preserve margins and cash, including rightsizing labor and deferring capital purchases while we are in this challenging environment.

Industrial Solutions recorded $4.9 million of new orders in Q3, down slightly compared to the prior year period. TTM segment orders are approximately $19.5 million, up roughly 21% over the prior year period due to our customer regaining share, higher aftermarket activities and our progress expanding share within our primary customer. Segment backlog has grown 38% year-over-year, ending at $10.3 million, offering solid visibility to revenue over the next several quarters.

Third quarter segment sales decreased to $4.1 million from $4.3 million in the prior year, mostly driven by supply chain delays on just-in-time deliveries and customer-driven project delays to Q4. Segment-adjusted EBITDA was $200,000.

The operating leverage associated with increased volume and effective cost management has resulted in TTM EBITDA of $1 million, a significant increase over the comparable TTM period. At September 30, 2020, operating working capital was $13.5 million or 6.2% of sales and nearly $7 million sequential improvement, primarily due to increases in inventory turns to 8x and timing of receipts.

DSO continues to trend favorable at 40 days. We are continuing to manage AR aggressively and new credit responsibly. And as a result, we have not experienced significant write-offs following the onset of the downturn.

Deposits in AP were modestly lower, resulting in a cash conversion cycle of roughly 23 days. Total cash and availability under our credit facility remains above historical levels with nearly $22 million of liquidity at quarter end. We had approximately $8 million drawn under our credit facility and had $2.5 million of cash on our balance sheet. We generated $7 million of free cash flow during the quarter, positioning us to reduce debt by approximately $5 million. With low ongoing CapEx requirements, our capital allocation strategy continues to focus on repayment of debt, which should position us well to make future investments as our non-wind end markets recover.

Subsequent to quarter end, we executed an amendment to our loan and security agreement. This amendment extended our line of credit maturity date to July of 2023, and more importantly, lowered our borrowing cost to -- by approximately 300 basis points. Reduction in borrowing cost reflects a strength in credit profile, a result of our improved operating performance over the last 18 months.

As we highlighted on previous calls this year, we received approximately $9 million of proceeds under the Paycheck Protection Program. We believe we met all the requirements set forth by the treasury to apply for the loans and did so in good faith, and ultimately, ensuring continued employment for our employees during the period of widespread economic uncertainty, which continues today. For reference, these loans can be forgiven by the small business administration if borrowers can demonstrate that they use the funds on eligible expenses, such as payroll, rent, mortgage interest and utility obligations over a 24-week period. We utilize 100% of loan proceeds on these eligible expenses, and we are planning to submit our forgiveness application to our lender and the SBA in Q4.

The U.S. treasury previously announced that all borrowers that received PPP loans in excess of $2 million will be audited. However, the timeline for that audit is unclear at this time. To the extent the PPP loans are not forgiven, the company is required to repay the loans over a 2-year period at a 1% interest rate.

Our net leverage declined to the lowest level seen in several years, ending the quarter at 0.9x trailing 12-month EBITDA after netting out the PPP loans. We believe we are positioned well to manage through the COVID-19 challenges, given our low leverage profile and strong liquidity position.

We received proceeds of $300,000 during the quarter under our now-expired ATM program. This $10 million ATM was largely unused during the 3-year period. And at this point, we do not have plans to reintroduce this program in the future. As we look at Q4, we are continuing to see similar challenges like we did in Q3 in our production facilities, starting from the spread of COVID in the communities we operate in and ongoing supply chain disruptions, both of which will weigh on margins in the quarter.

We expect revenue to be approximately $43 million to $46 million and EBITDA to be approximately $0.5 million to $1 million. And lastly, we anticipate providing full year 2021 guidance on our Q4 conference call.

That concludes my remarks. I'll turn the call back over to Eric for an overview of conditions within our end markets, in addition to some concluding remarks.

Thanks, Jason. Our country has been hit with a series of historic challenges this year. During this period of widespread volatility, our leadership team remains focused on positioning the business for profitable growth. In application, this means continuing to grow market share in both our legacy onshore wind and non-wind markets while continuing to explore potential entrance into the offshore wind space.

As for our response to the COVID-19 pandemic, we're continually monitoring the potential impact of the virus on our operations, customers and supply chain. We've implemented all necessary and appropriate protocols as recommended by the U.S. CDC to ensure the continued well-being of our team. Our businesses are considered essential and critical infrastructure as defined by the U.S. Department of Homeland Security, and we remain open and operational.

Throughout this pandemic, we've continued to produce and ship products to meet our customers' needs. Our order rates have declined since the COVID-19 outbreak as our customers are dealing with the overall economic uncertainty we're all facing. However, our quoting activity has increased in recent weeks, pointing to a first half of 2021 recovery in orders. The full impact of the virus on our business and end markets remains difficult to quantify. But we anticipate the current availability under our credit line and PPP proceeds will provide adequate liquidity to support our business during this period of uncertainty.

Moving on to an update of markets served and our continuing diversification initiative. On a TTM basis, our non-wind revenue represents about 30% of total revenue. We continue to pursue opportunities outside of the wind sector to offset the lumpy timing of wind orders. We are seeing continued growth in our industrial markets, which include material handling and infrastructure projects, with power generation and mining remaining relatively stable. These markets are partially offsetting the softness in oil and gas we continue to see.

On a TTM basis, the rebound in our wind-based revenue has caused non-wind revenue to represent about 30% of total, and we continue to invest business development resources toward markets with the biggest opportunities for growth as we continue to press for market diversification.

Turning to our demand outlook by end market, beginning with the wind sector, which represents about 70% of TTM revenue. The outlook for this sector continues to be positive, driven by various economic forces such as the PTC, including a 1-year extension announced late last year, the competitiveness of wind power versus other sources and the nation's desire for clean energy. There are currently more than 60,000 turbines operating across some 41 states in the U.S. with individual state renewable portfolio standards supporting further growth. 13 states have more than 1 gigawatt of wind projects either under construction or advanced development with Texas, Colorado and Kansas leading the way.

While underlying demand conditions continue to support strength for this sector over a multiyear period, our customers acknowledge that some projects scheduled for this year and early next could be delayed due to the pandemic. In 2020, Wood Mackenzie projects that more than 16 gigawatts of wind power will be installed in the U.S., followed by 13 gigawatts next year, both significant achievements. And as a reminder, the federal government has given an extra year to bring projects slated for 2020 online without jeopardizing important tax credits.

Looking ahead, in addition to the strength expected for onshore installations through 2021, Wood Mackenzie forecast increasing demand in the out years as offshore turbines gain traction in the U.S., adding to a stable onshore demand. This long-term projection for U.S. wind now has improved to include nearly 25 gigawatts of offshore installations for Wood Mackenzie. Although some projects have moved from 2023 to 2024 and '25, the industry still expects 2023 to be a strong initial year for offshore wind development.

We generated about 8% of our TTM revenue from the industrial sector, which has an outlook of positive to neutral. Much of our revenue in this sector comes from customers in material handling with ultimate end users in defense and similar vital applications, which are less cyclical than some of the other markets we serve.

Our deepwater port in Wisconsin, combined with our heavy lifting capacity, unique fabrication capabilities in huge paint boost continue to draw strong customer interest. 8% of TTM revenue came from the power generation sector, we see a positive demand outlook. Our primary customer in this market is gaining share, and we continue to expand our customer base in the new gas turbine space.

The mining sector drove about 9% of TTM revenue, and our customers report a neutral outlook. Orders from this sector, which was strong in Q1, have softened since. The oil and gas sector, which comprised 4% of TTM revenue, has seen a significant decline in demand. Hydraulic fracturing economics are less attractive with the recent pullback in crude oil prices causing customers to defer their capital expenditures.

Customer activity levels have improved in recent weeks as rig counts have increased. Construction drove about 1% of TTM revenue, and we see the outlook for this segment as neutral to negative in the near term. An infrastructure bill, if introduced, would certainly benefit us as this would create demand for new equipment purchases to support road building, bridge construction and waterway projects. At this juncture, expectations are for a successor to the FAST Act sometime during 2021.

Our key initiatives for Broadwind remain consistent. Our near-term and medium-term strategy for the business remains unchanged in spite of the challenges of COVID-19.

In the Heavy Fabrications segment, we are in discussions with our expanded base of tower customers to sell our 2021 capacity. We will continue to improve processes and system capabilities to maximize throughput and profitability. We continue to see progress around offshore, particularly given the recent announcement of multiyear projects on the East Coast, reflecting the growing demand for offshore wind in that region. We will leverage the investments made in our engineering and supply chain teams to better support the evolving tower market as well as other opportunities.

And lastly, we will continue to -- our built-in quality continuous improvement action to ensure smooth process flows and good throughput in our plants.

In the Gearing segment, we remain focused on accelerating our efforts towards end market diversification by leveraging our experienced engineering and sales teams. We will grow our custom gearbox business and leverage our service and repair facilities in Illinois, Pennsylvania, North Carolina to better serve customers in the Midwest, Northeast and Southeast regions. Lastly, we will continue to size our business in accordance with market demand.

In our Industrial Solutions segment, we continue to focus on expanding our core product line of new gas turbine and aftermarket components as we push into adjacent markets. Our rebranding initiative continues with the rollout of our new website and support materials. We are following that with an increased digital marketing campaign designed to reach customers where they are in a time where trade shows and customer visits are significantly limited.

Looking ahead, we remain excited about our growth potential in wind, renewables and clean tech, but also see opportunities to grow in the other markets we serve, such as material handling, power generation and other industrial applications.

We're continuing a multi-year diversification plan to leverage our core process capabilities in other markets and have achieved TTM revenues in excess of $60 million outside of wind, even as we grow our position in wind. The extension of the PTC for a sixth year, which is a real benefit for our wind market, and the recent favorable trade case findings provided catalyst for growth in our Heavy Fabrications segment.

Thank you for your interest. And we look forward to providing updates throughout the coming year as our business navigates through this period of uncertainty.

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

(Operator Instructions) Our first question comes from the line of Eric Stine with Craig-Hallum Capital Group.

So I'm wondering if we could start with wind. I know that you've been looking at this for a bit of time in terms of offshore. And I'm just curious, I mean, obviously, whether it's the political backdrop, any number of other factors that go into it, what are kind of the next things that we should look for in terms of your actions here and potentially the timing, if that's something that you could share?

Well, what I will share is that we've been out to site, taking a look at -- evaluating different sites on the East Coast to do a greenfield -- to do a greenfield plant. You've heard me mention that the Manitowoc operation has the capabilities to do offshore wind, and that would be the quickest entrance into the market, but that might be a long putt because of the cost of transport from our Manitowoc plant to the East Coast. So we are evaluating, as I said, locations on the East Coast.

As far as the next steps, again, we're in discussions with our OEM customers and they're in discussions with their developers. And as they mature and get closer, then we will come to a conclusion together as -- whether or not this makes sense commercially to actually do a build on the East Coast.

As far as timing, Eric, if we're to hit the first tranche of offshore installations, which is occurring in 2023, assuming it doesn't move more to the right because of permitting or whatnot, then we would likely need to have a decision sometime in Q1 or Q2 2021, which would give us enough time to build a factory and get it up to speed in order to hit those initial installations in 2023.

Yes. Got it. No, that's helpful. And maybe just sticking with wind, you mentioned that for 2021, you've got 35% of your effective or the effective capacity that you'd like to run at. Can you just give us a sense? I mean, at this time -- and maybe it's a tough comparison to make because last year was so heavy as people tried to get in front of long lead times in the PTC here in 2020. I mean, how do you feel about this number? In a more typical year, is 35% a typical number? Or are you ahead or, I guess, potentially behind where you would have been?

Yes, that's a good question. We are -- this is a typical year, and we're right, frankly, where we normally are in a normal year. So as this quarter continues towards the end of this year and into next year, we'll have a lot more visibility. But yes, this is common. Last year was an anomaly because of the -- they order ahead, if you will, because of the strong 2020. And we're in discussions with multiple OEMs for that production as well. So that is encouraging to us as well.

Yes. Okay. Got it. And then maybe last one for me. Just on the fourth quarter commentary, you gave a lot of detail in terms of trends in the various end markets, wind, but also non-wind as part of that diversification. But maybe from a high level, just kind of some puts and takes that would get you to the low end versus the high end of that 4Q outlook?

We have this range on the revenue side is that is in our backlog today. Now it's about executing. So we think we expect the wind demand to come down for towers in Q4 based on the announcement that we had in early August. We'll offset that with some increases in our Industrial Solutions segment, industrial fab. And then gearing there, there'll be a little bit of an increase as well.

But overall, it's going to be a down quarter from the top line, primarily because of the volume reduction. We'll probably be operating at close to 75% plant utilization in towers. And then additionally, there's about a $5 million reduction because our customer is supplying materials, and that's just the pass-through. And that will just be a change in the margin profile.

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

So I guess, first off, for Q3, just wondering, did supply chain and staffing constraints result in any delays in your ability to meet orders, like was there an impact to revenue? Or did you just see the impact on the cost side?

And then looking forward, I guess, a similar question, do you expect any impact to order, your ability to meet orders or margins in Q4? How do you see that trending?

I'll start with the impact on Q3. So we met our commitments to our customers in Q3. Certainly, it was a challenge on the execution side to do that based on those disruptions that we talked about. And that, as we had in our prepared remarks, that was approximately $600,000 to $700,000 of erosion in our gross profit during the quarter. So it had a pretty -- it had immaterial impact on our business.

As we look into Q4, we feel like we're -- the supply chain is starting to recover, and we feel like we're in a position to have all of our supply chain covered for Q4 shipments, but there still is some risk. So we're mindful and being cautious on that side.

Yes. Justin, and what -- how it really impacts us is what I would call, out-of-process work. And as the materials come in, we're able to complete them on time, but sometimes we've got to set a project aside and then go back to it to complete it on time. And that's what I mean by out-of-process work, it's extra handling. It's not really rework, but it's out-of-process work, Justin, and that can be expensive in a manufacturing operation.

Okay. Got it. And then shifting to ASPs. You indicated that tower ASPs in Q3 moved higher. Is that something you expect to continue in Q4 and into 2021? Could you talk about a little bit more about why the ASPs are moving higher? Is it more complex towers? And then how does that impact the margin? Like are you able to capture a higher margin with that higher ASP? Or is -- or margins likely to still be kind of in the same level?

Well, I'll start, Jeff, and then I'll ask Jason to add some color. The towers are getting bigger, which affects the individual average selling prices. And whereas a couple of years ago, the average tower was 3 sections. We're producing 3, 4, 5 and sometimes 6-section towers. So that drives the average selling price just naturally up. As far as the margin profile, those would be basically consistent.

Jason, any color?

Yes. Q3, a small increase, about $8,000 per section first sequentially. We're looking at our order book for Q4. That comes down by about 20%, and a lot of that is because a chunk of these jobs or these orders are -- the materials are basically provided by our customers.

As we look to next year, I think it's a little early to look at what the ASPs -- I think they'll be relatively consistent on a year-over-year basis. So we've had a lot of fluctuations this year based on different designs, different amount of materials provided by our customers for these different projects. I think as you model it, and as we're thinking about next year, it'll be fairly consistent.

Okay. That's helpful. And then turning to your customers. In Q3, you produced for 3 of the top 4 OEMs in the U.S. What do you see going forward? Do you anticipate continuing relationships with each of those 3 customers? Could you add another customer? And then if you could speak to -- are you seeing a more consistent order flow from GE? Are you able to grow that relationship?

Well, we're certainly talking with those 3 of the 4. And reminder, the fourth one, which we can produce for, they produce their own towers. So we'd love to produce for all 4. But that fourth one doesn't really need our capacity at this time. So we are in communications with those remaining 3. And I do expect to build, at least, for 2 of those 3, in 2021, possibly 3 of the 3, depending on where they might have their projects and which projects they win, Justin.

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

So my most questions have been discussed. But just trying to touch on sort of the non-wind contribution expectations for the near term? Are we hitting a little bit of a ceiling in terms of how much the non-wind side can bring in, given sort of the macro environment right now?

We've seen -- since the pandemic, we had a really strong Q1 in the Gearing markets that we're in. It was a very healthy quarter. And the same -- and I would say the same for the Industrial Fabrications, which are in those other cyclical markets like mining, material handling, construction. Since Q1, it has -- the order book certainly has come down and the quoting activities, we think, have bottomed in Q3. We're starting to see some recovery but certainly, we are starting to feel the impacts on our revenue in Q3 from reduced orders in Q2.

We're expecting some growth in Q4 in those markets that I just talked about. And I think we're encouraged as we look into 2021 that the quoting activities and our funnels and pipelines are starting to improve. That would indicate that the volumes should be higher next year in those non-wind markets.

Understood. And maybe just a sort of a high-level regulatory type question. And given where we are with sort of the election results today, can you share your view on the regulatory setup that could sort of drive or create challenges for the next 12 to 18 months?

Well, yes, that's a great question. We're all kind of wondering that same thing, right? But regarding our market -- because we're so diverse, which is our intention as some markets are stronger, some markets might become weaker and whatnot. But the gradual step on the PTC, we're anticipating that. We don't know if there will be a PTC extension. But even without a PTC extension, we're confident in wind. There's bipartisan support for wind in Congress. We're confident that it's a viable and competitive source of power generation for years to come. That's the wind piece.

The other piece, there's been discussion of an extension of the FAST Act or perhaps in 2021. Also, the Infrastructure bill that Congress has been kicking around. I think once the election gets past us, I think both parties are talking about an Infrastructure bill, and I think that could certainly lift a lot of the markets that we serve, mining, construction, material handling, et cetera.

Our next question comes from the line of Martin Malloy with Johnson Rice.

On the recent antidumping, countervailing duty petition that was filed at the end of September, I think India, Malaysia, Spain, for wind towers. Can you maybe give us an update there? And what percent of the market are those 3 countries responsible for in the U.S. market?

Yes. What's interesting is the first suit or the suit against Korea, Canada, Indonesia and Vietnam represented about 1,000 towers out of a general market of about maybe 4,000 towers. That case was one, and we found that, that shift or the imports shifted from those countries to these countries, Malaysia, India, and Spain. There has been a surge of imports from those countries up to an annualized pace of between 600 or 700 towers and climbing, or about, I think, it's 1,500% increase, which is why they became on our radar screen and we had to file this case. So where the case is, it's in preliminary investigations by the ITC. And we expect their preliminary findings in December.

Okay. And then the other question I had. In terms of opportunities for you on the onshore wind side, when older wind installations are replaced with turbines with higher capacity. Is there an opportunity for you on the replacement wind tower side? Are you seeing that out there?

Yes. Excellent question. We refer to that as repowering. And there is a repowering initiative, and we are selling into that market. We've done repowering jobs for a couple OEMs right now, and we're quoting on a third. So that's definitely a market we're interested in. We're quoting to that market in 2 or 3 OEMs right now.

As you look at the revenue attached to that, it's a much lower steel content, the adapters could be maybe 1/5 of the revenue. But certainly, the volumes are -- seem pretty healthy, at least, in the commercial environment right now. So we're optimistic that, that can provide some lift in that business.

Yes. And by the virtue, we're just explaining it a little bit differently, Jason referred to it as an adapter. That adapter can either be at the top of the tower, at the bottom of the tower or actually a replacement section of one of those towers. And the whole point is to try to make sure that, that tower can receive a new and more efficient turbine or nacelle on the top with perhaps larger blades. So those adapters come in various forms, and we produce multiple different forms of those adapters.

So if a new wind tower is -- I'm just going to make up an ASP, say, $400,000 something like that. What would -- on a replacement wind tower, what would the scope be or average selling price for you all?

It would depend on the size of the adapter, but maybe 10%, 10% to 20%.

Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Blashford for any final comments.

Well, thank you, everyone, for joining the call. We appreciate the interest in our business. Stay safe out there, and vigilant as we're all fighting through this crazy time. And just look forward to meeting with you in another 3 months. Thank you much.

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