TPI Composites, Inc.
Q4 2020 Earnings Call Transcript
Published:
- Operator:
- Good afternoon, and welcome to TPI Composites Fourth Quarter and Full Year 2020 Earnings Conference Call. Today's call is being recorded and we have allocated 1 hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Christian Edin, Investor Relations for TPI Composites. Thank you. You may begin.
- Christian Edin:
- Thank you, operator. I'd like to welcome everyone to TPI Composites' fourth quarter and full year 2020 earnings call. We will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risks and uncertainties.
- William Siwek:
- Thanks, Christian, and good afternoon, everyone. Thank you for joining our call. In addition to Christian, I'm joined today by Bryan Schumaker, our CFO. I'll briefly review our full-year results and activities, discuss the current operational status of our manufacturing facilities, including our supply chain, give an update on our global service and transportation businesses, and then a quick update on the wind energy market. Bryan will then review our quarterly and full-year financial results in detail, our 2021 guidance. And then, we will open up the call for Q&A. Please turn to Slide 5. We finished 2020 strong with 27% growth in adjusted EBITDA in the fourth quarter, while expanding this margin by 120 basis points year-over-year to 8.8%. For the full year 2020 with the backdrop of a difficult operating environment due to COVID-19, we achieved double-digit revenue and adjusted EBITDA growth. We delivered net sales of $1.67 billion, a 16.3% increase over 2019, and adjusted EBITDA of $94.5 million or 5.7% of net sales, notwithstanding the estimated impact of COVID-19 on adjusted EBITDA during the year of just over $60 million. These results speak to our business model and our team's ability to adapt and stay nimble in a dynamic macro landscape. We delivered approximately 12 gigawatts of wind blades during 2020. We started wind blade production in India for Vestas and added Nordex as a customer in India as well with production starting for them this quarter. We extended contracts with GE and Vestas, and in the fourth quarter we extended a contract with Nordex in Turkey. We continued to make progress in transportation, including hitting key milestones under the Super Truck II program with Navistar, production of commercial delivery vehicles for Workhorse. And we're now producing components for multiple passenger EV platforms under technology development and pilot production arrangements.
- Bryan Schumaker:
- Thanks, Bill. Please turn to Slide 11. All comparisons made today will be on a year-over-year basis compared to the same period in 2019. For the fourth quarter ended December 31, 2020, net sales increased by $43.5 million or 10.3% to $465.6 million. Net sales of wind blades increased by 12% to $445.5 million, this was primarily driven by an 8% increase in average selling price per set due to the mix of wind blades produced and a 4% increase in the number of wind blades produced year-over-year. Startup and transition costs for the quarter increased by $8.2 million to $13.1 million, as we continued to ramp up our India facility and transition lines to bigger blades in Turkey and Mexico. Our general and administrative expenses for the quarter decreased by $4.3 million to $7.8 million; G&A as a percentage of net sales decreased 120 basis points to 1.7% of net sales. This decrease was primarily related to the decrease in travel and training costs due to COVID-19 during the quarter. Before share-based compensation, G&A as a percentage of net sales was 1.4% and 2.6% in Q4 2020 and 2019, respectively. During the quarter, we incurred $3.7 million of restructuring charges associated with the reduction of 5 lines under contract in our Dafeng China facility.
- William Siwek:
- Thanks, Bryan. Turning to Slide 17, the health and safety of our associates and their families as well as the communities in which they live remain our number 1 priority. We continue to take the necessary steps on the COVID-19 front to ensure the safety of our associates and safe working conditions in our facilities. We continue to aggressively work our wind pipeline, and we remain very encouraged by the progress we continue to make in the service space. We are continuing to build on our momentum in the transportation space, and we'll continue to refine our long-term strategy to capitalize on the increased interest, investment and activity in the electric vehicle space. We continue to remain focused on managing our liquidity to provide financial security and flexibility, as we drive through the current environment and execute our strategy to capitalize on the acceleration of the energy transition. Our overall mission to decarbonize and electrify remains unchanged. We will continue to optimize our global footprint, while using the leverage our global scale provides for operating and supply chain efficiencies to continue to drive down cost, all while maintaining a strong balance sheet. We will continue to evaluate the global demand and update our long-term targets accordingly to better reflect the long-term opportunity we expect to see in wind and EVs under this accelerated energy transition. I want to thank all of our dedicated TPI associates for their commitment and dedication, and for their extraordinary efforts during 2020 to deliver on our commitments to our customers in the middle of a global pandemic. Thank you again for your time today. And with that, operator, please open the line for questions.
- Operator:
- Thank you. We will now begin the question-and-answer session. And the first question comes from Philip Shen with ROTH Capital Partners. Please go ahead.
- Donovan Schafe:
- Hi, guys. This is Donovan Schafe on for Philip. I have a couple of questions for you. The first one is on the - I was impressed with the guidance to see that there's a pretty big uptick in the ASPs. And I'm sort of trying to think about how to think about that or how to model that as a trade-off with volumes, because you're moving to larger blades, but then as you guys show on Slide 15, there's going to be a negative impact from volumes. That's a great bridge that you guys have provided. Is it accurate to think of like the increase, you had the increase in transition costs, startup costs, but some of the result of that is those higher ASPs, that are pretty significant jump that we're seeing? And is that - like if you held revenue and decreased volume, but perfectly offset it by the ASP uptick, is that generally going to be pushing the margins up? And should we be seeing that kind of phenomenon going forward?
- William Siwek:
- Yeah. Thanks, Donovan, for the question by the way. ASPs increasing, we've seen that year-over-year, and that's really all about bigger blades, right? So longer blades, heavier blades generally equates to higher ASPs. So that's why you're seeing that ASP growth. And we've talked a bit about this before, where over time, that's kind of why we went away a little bit from talking strictly about lines and talking more about gigawatts or megawatts of capacity, because over time, the number of lines may stay steady or actually reduce, but our megawatts of production may actually go up. As long as we continue to maintain the throughput, the way we do and drive cycle time, if we're driving the same number of large blades through the same CapEx investment that we were doing on the smaller blades, then you're going to see a revenue uptick for sure. And over time, as those blades mature, you should see a margin uptick as well. But it takes a little time to get through the transition and get to serial production. But once you do, you should see an uptick in margins as well.
- Donovan Schafe:
- Okay, great. And then my second question is, Vestas has been having some - there have been some headline blade issues. And there were some lightning strikes. And then they had the issue with the inserts and so forth. And so, I'm just curious, because I think in the last - in Q3 in your Q filing, it showed Vestas was something like 50%, approximately 50% of revenues for the trailing 9 months. Have you heard or seen anything from them or kind of any indications on the horizon of any type of slowdown coming from Vestas?
- William Siwek:
- Yeah, so on the blade issue, I think they were pretty clear that, that was a sub-supplier. It was a component that we clearly use in the blade, but it's not a TPI issue as it relates to that. Vestas will continue to be our largest customer. We will see a little bit of variation in their utilization at the back half of this year initially, although initial indications are showing that 2022 looks very strong starting right out of the gate, at the beginning of the year. So as we said, it looks like it's a temporary utilization challenge in the back half of the year, primarily the fourth quarter. Some of it was a little bit of pull ahead, I think, of build from 2020. But overall still we're going to be producing a whole bunch of blades for Vestas. They'll remain our largest customer. And we're continuing to work with them on optimizing our footprint, for not only our success but theirs as well.
- Donovan Schafe:
- Okay. Great, well, congratulations on the quarter. Thank you very much. I'll pass it on.
- William Siwek:
- Thanks, Donovan. I appreciate it.
- Operator:
- And the next question will be from Paul Coster with JPMorgan. Please go ahead.
- Paul Coster:
- Yeah, thanks for taking my question. So, China, perhaps you can tell us what happens to the facility and operations in China as the utilization rate falls? Do you idle it or what's the process there?
- William Siwek:
- Yeah, hey, Paul. This is Bill. Thanks for the question. Yeah, we're working on a number of options there, Paul. We have 2 blade facilities and a tooling facility. And the blade facility we built in Yangzhou is state of the art. Our other facility, although still performing extremely well, is kind of getting to its functional end of life just because the blade sizes have gotten so large. And so, we will look at consolidating in China a little bit more than we have. We are looking at some other options for our older facility. But likely it's a consolidation of the operations to reduce the footprint a bit and become a little bit more efficient and cost-effective out of China.
- Paul Coster:
- And the business that shifted from China to elsewhere, that there was capacity available to absorb that, you didn't need to build any new facilities or capacity?
- William Siwek:
- Yeah, I mean, if you think about it, it's possible that some of the capacity we built in India will supplement or will replace what was in China. Again, if that volume is going to the U.S., the tariff doesn't exist between India and the U.S., but it does between China. The cost of manufacturing in India is significantly less than in China as well. So we've talked about looking at globalizing and localizing and derisking supply chain. That's part of what we've done, and that's part of what our customers are doing too. So we did add capacity in India clearly and that could be some of the capacity coming out of China.
- Paul Coster:
- When I look at the EBITDA walk on Page 15, which I agree is very helpful by the way, and I look at the demand impact orange bar, is that all China? Is it the combination of China in the second half as sort of lower utilization rate? How do I think about that $50-million-plus, $60 million decrement?
- William Siwek:
- Yeah, it's not just China, Paul. There are clearly, there are some of that in China. But we've got in a couple of other regions some fourth quarter utilization reductions. Some of those will be used for transitions quite frankly. We're still in the planning phase with some of our customers on what exactly they want going into 2022 in a couple of different locations. So it's not strictly China. There's a little bit of volume degradation in a couple of other regions as well.
- Paul Coster:
- Okay, final question. As you start up the transportation business, is it going to be more decentralized and co-located, or closer located to this end-customer and smaller scale? Or is it likely to follow the same pattern as wind, very centralized facilities?
- William Siwek:
- No. I think it will depend a little bit, Paul. But our plan would be depending on what we're actually doing, whether we're doing a full body or if we're doing subcomponents, quite frankly and even in the case of cabs, we've talked both models where we could be centrally located for certain things and then co-located for others. So I think it will be a little bit of a mixed model. It will be different than the blade model. There will be much more co-location as it relates to the different OEMs that we're working with. I think eliminating the transportation between a central location and another location is clearly part of the goal. And so co-location is more likely.
- Paul Coster:
- Thank you.
- William Siwek:
- Yeah, thanks, Paul.
- Operator:
- The next question comes from Chris Tsung with Webber Research. Please go ahead.
- Chris Tsung:
- Hey, good afternoon, Bill and Bryan. How are you?
- Bryan Schumaker:
- Good.
- William Siwek:
- Great.
- Chris Tsung:
- So I'm on for Greg and we just have a couple of questions. I wanted to just touch on the transportation pipeline. Like I think we noted 2 of your customers recently announce the cooperation on hydrogen vehicles. And, could TPIC eventually be a part of that project? And I'm just trying to see how we should think about that pipeline developing.
- William Siwek:
- So that, we are working on a number of projects as we said in our prepared remarks, a couple of the development projects in the Class 8 space. Whether those are ultimately fuel cell or battery, could be either/or. So, again, then we're in the delivery vehicle space, as you know working collaboratively with Workhorse on their last mile delivery. And then a couple of passengers automotive EV programs that we can't discuss who they're with, but those are more subcomponents. So, yeah, our plan is to, much like we do with the blade OEMs, is to collaborate as deeply with those parties as they would like us to. The more collaboration, generally, the more value you can add, and the better the end product. So that's our mode going in is to collaborate deeply with these guys, figure out what the best solution is for the problem they're trying to solve. And then - and that's what our value proposition is. So collaboration is important for us in this space. We don't want to just be a commodity - a provider of commodity parts. That's not what our model is.
- Chris Tsung:
- All right. Yeah, great. Thanks for the color. I guess, it's a good segue into Workhorse. You see the recent news regarding Workhorse and the USPS deal. How much of the $500 million in transportation revenue that you guys have for the next 3 to 5 years is dependent on that deal? Like, I guess, put it another way, how much of it of the Workhorse and USPS deal is baked into that $500 million? And do you see that time line sliding out a little bit further?
- William Siwek:
- Yes. So we set our $500 million target before, Workhorse was even a customer at the time. So there was 0 from USPS baked into that number. That would have been an upside opportunity for us. Clearly, in our long-term plans, we do have last mile delivery in our transportation plans. But as far as the USPS and the $500,000, there was nothing for USPS in the $500 million.
- Chris Tsung:
- All right. Great. That's it for me. I'll turn it over. Thanks, guys.
- William Siwek:
- Great. Thanks, Chris.
- Operator:
- The next question will come from Eric Stine with Craig-Hallum. Please go ahead.
- Eric Stine:
- Hi, Bill and Bryan.
- William Siwek:
- How are you doing?
- Bryan Schumaker:
- Hey, Eric. How are you?
- Eric Stine:
- Very good. Thanks for taking my question. So can we just go back to China a little bit? As I think about on the one hand, you'll be down to 50 lines from I believe 53 at the end of the year. But then also your commentary seems quite bullish about 2022. Should we think about that as due to you're kind of in the interim where you're trying to figure out what your OEM partners want to do? And maybe just what are some of the discussions happening around as those OEMs try to get away from China or reduce China exposure? What that's looking like in other locations?
- William Siwek:
- Yeah. Again just to be clear, I don't - it's not like they're running for the hills. I mean, they're just - they're rebalancing where their capacity is to make sure that it's efficient and to de-risk for any potential issues in the future. So, again, they're not running for the hills by any stretch, but they are de-risking. And we think that's a smart thing to do. So it's a - Eric, I almost equate it a little bit to the calm before the storm. I mean, there's a lot going on in the energy world right now. Everybody is trying to figure out what the EU Green Deal means, what's it going to mean for western OEMs with China's goals for decarbonization. We have a new administration in the U.S. Clearly, everything is going to be looked at through the lens of climate change, but what exactly does that mean? So, I think 2021, there's a lot of trying to figure out exactly what's going to happen. It's not if, it's when. And so, I think that's why there's a little bit of pause throughout stretches of the year. But with all that said, we're still growing our top-line 10%. We're still growing EBITDA by 30%. This is in a year where we've got utilization that's down a little bit, lower than we would like it to be. So, again, I see it as a year of transition and don't think of transition as the way we think of a transition. But it's a year of transition in the space, right, and people trying to figure out what all of this very positive potential, whether it's legislation, regulation or just demands of the consumer and decarbonization mean and how that gets implemented into the bigger picture long-term.
- Eric Stine:
- Right. So, I mean, I guess to put another way, your - you said near-term there's still some uncertainty as to what that looks like. But, clearly, constructive conversations and relationships you've got with those OEMs are leading to that pretty bullish outlook for 2022?
- William Siwek:
- That's correct. Absolutely.
- Eric Stine:
- Okay. All right. And maybe just last one just sticking with China. I know you mentioned that you were looking to some - maybe work for some Chinese OEMs. And I know historically that's been really not available because that - they've mostly in-sourced production. So have you seen any changes in the market? Or just what are your thoughts about potentially replacing some of that business with some players in China?
- William Siwek:
- We've always been in discussion, and it's a - it has been a challenge just making sure that we get to the right financial terms that make sense for us. And we're not going to compromise financially to do that, but it is changing. We've had opportunities with them outside of China as well, which doesn't mean you can't build for them inside of China and export. So again, we're going to continue to work those relationships, continue to look at the opportunities. There is significant demand in China for wind over the next several years. The numbers this year were staggering. I'm not quite sure how to take them, but the numbers are staggering. And so is there enough capacity in China to satisfy the demand from the OEMs? And we think there's an opportunity there for us to play. There's also an opportunity for the western OEMs to gain share there, especially as large as that market is. So we'll continue to work with them on opportunities there as well.
- Eric Stine:
- Okay. Thanks a lot.
- William Siwek:
- Yeah. Thank you, Eric.
- Operator:
- And the next question will be from Laura Sanchez with Morgan Stanley. Please go ahead.
- Laura Sanchez:
- Hi, Bill. Hi, Bryan. How are you?
- William Siwek:
- Good, Laura. How are you?
- Laura Sanchez:
- Doing well. Thank you. I was wondering if you could comment on the impact to margins from moving those lines out of China. Are costs in India and other locations similar, so that in net it wouldn't have an impact on margins? Or how should we think about that?
- Bryan Schumaker:
- Yeah. I mean overall if you look at it, there is an impact right now in the short-term, basically due to going from a mature plant to one of the new plants. But over the long-term, we believe we'll recover those margins as the lines mature in these other regions. So that's why, I mean, as Bill kind of spoke to as we get the utilization up, hopefully in 2022 as we're seeing, that's where we see some improvement in the margins with that shift from kind of the smaller blades to the bigger blades with additional margin.
- Laura Sanchez:
- Got it. So is the 12% EBITDA margin goal still on the table?
- Bryan Schumaker:
- Yeah. I think if you look kind of at this bridge and kind of do the math, you can see some different areas of where you can get that and figure out how to achieve those 12% margins. So yeah, we're not adjusting that at this time.
- Laura Sanchez:
- Okay. Okay. And 1 more for me. So going back to commentary on Vestas, they posted some margin pressure in the fourth quarter. So I was wondering if you could comment on your conversations with customers in regards to pricing dynamics. Are you seeing any pressure these days? And how is your ability to negotiate with them in terms of translation - timing of concessions?
- William Siwek:
- Yeah. So Laura, we've seen pressure on margins for a long time, and I think we always will, right? That's just the nature of it. But with the nature or with the structure of our contract, we're able to be pretty successful in maintaining the margins or even increasing margins over time, just based on the structure of our contracts. So I think, if you look in the - for our OEM customers, they have seen stabilized pricing probably over the last 6 to 8 quarters now. So that has helped quite a bit. But we're going to continue to try to drive cost and drive LCOE down. We'll continue to have pressure from our customers, and we'll continue to pressure our customers to work with us to drive the cost. So I think it's a healthy - there's healthy - I guess, there's healthy stress in that kind of that relationship where we're pushing them. They're pushing us and together we push costs down, and that benefits both of us. So I don't think that dynamic will change.
- Laura Sanchez:
- Okay. Okay. Perfect. Last one, you had comment - you had said before that for transportation business, you could see double digit margins. Are you seeing those levels these days based on kind of conversations or looking at the numbers of some auto companies that seems a bit high for the auto industry? So how should we think about the competitive dynamics there?
- William Siwek:
- Yeah, I think, we're not seeing double digits today, Laura. Obviously, we're investing in that business. We're investing from a development standpoint. Some of the development agreements we have are not meant to be significant margin projects. But we do - as we've looked at modeling, as we've looked at volumes, as we've looked at what our costs are and what the ask has been from the customers we've been working with, we think we can get there quite frankly. So again, we're not - it's not like we're an auto OEM or a supplier or a sub-supplier, a little bit different dynamic. But based on what we've modeled to date on some of the projects we've looked at, we do believe that that's attainable. But, again, it's still early days on that and, again, more as we get further down the path with production contracts.
- Laura Sanchez:
- Understood. Okay. Thank you.
- Bryan Schumaker:
- Thanks.
- William Siwek:
- Thank you, Laura.
- Operator:
- The next question will be from Graham Price with Raymond James. Please go ahead.
- Graham Price:
- Hi, good afternoon. This is Graham Price on for Pavel Molchanov. I guess just kind of a broad question on the transportation side. I was wondering if you could speak to the roadmap for reaching your $500 million long-term revenue target and also if any recent developments might lead you to believe that that could be conservative at this point?
- William Siwek:
- Yeah, I think, the roadmap is - it's going to take time to get there. We've focused - we've kind of - we've spent some time over the last 4 to 6 months to refine our strategy. And we're kind of looking at the cab space, which is Class 8 cab structures as well as cabs for that last mile delivery. We look at battery enclosure. If you think about - that's a key component of any EV as well as in subcomponents for an EV, so all the way from a full body structure to a subcomponent. And we've got development agreements in each of those segments that we're working on right now with customers. And so again, it's a $500 million is over time, over several years. Any one development program could take a significant chunk out of that. So we're continuing to work those programs diligently, educating the market as to what the benefits of composites are, and educating them to what the cost of composites can be in volume, that it's not cost prohibitive. And we're looking at a lot of - and developing a lot of innovative technology around that. So again the roadmap, we haven't put a public roadmap out there obviously, but we have an internal roadmap that gets us there over time. And so we're going to continue to focus on execute and keep our heads down and win some projects. So that's as much as I can give you on the roadmap.
- Graham Price:
- Got it. Thank you. And then, I guess, quickly for my follow-up, the 2021 guidance for $100 million to $125 million for the non-blade sales next year. I was just wondering if I could get some color on what the breakout is for that portion.
- Bryan Schumaker:
- Yeah. I mean if you look at kind of the ratio we've had historically with the molds and some of those and then the other category with transportation, so it's probably about one-third, one-third, one-third actually when you look at it.
- Graham Price:
- Okay, perfect. Thank you.
- Bryan Schumaker:
- So again, we're not forecasting a huge jump in transportation this next year. It will take time to get there, but we still see momentum behind it.
- Graham Price:
- Got you. Okay. Thanks.
- William Siwek:
- Yeah. Thanks, Graham.
- Bryan Schumaker:
- Thanks.
- Operator:
- The next question is from Joseph Osha with JMP Securities. Please go ahead.
- Joseph Osha:
- Hello, there, everybody.
- William Siwek:
- Joe, how are you?
- Bryan Schumaker:
- Hi, Joe.
- Joseph Osha:
- Very well. Very well. Thank you. I'm looking at that backlog chart that you showed on Page 9 and then going back and looking to one from last quarter subtract the revenue, it looks like you basically didn't have any bookings in the quarter. And A, am I kind of on track with that? B, could we be in an environment now, given the comments you're making about demand dislocations and stuff, where the visibility of the business declines for a while?
- William Siwek:
- No. I think - so we didn't add any new lines, Joe, but we did extend Nordex in Turkey. So we would have had a net add there. But we didn't add anything new to the pipeline, so you're right. It's interesting, Joe, because as - when we were early on in this process, we were signing 5-year deals. So we have really - the visibility was a little bit different. As we get - as these deals get to their maturity and we are extending them, so you're extending them for 1 year or 2 years at a time. So by definition, you have a little bit less visibility from a longer-term perspective, but you might have better visibility in that 2- or 3-year window, if you will, as to what we're actually going to do, yeah. So I would say we still have very good visibility a year or 2 out. But as you extend contracts versus sign new contracts, it's for a shorter duration. So that's why it kind of - you would think you might have less visibility, but from an operational standpoint, we actually have as good or better visibility when we're doing kind of 2-year extensions.
- Joseph Osha:
- Okay. So I shouldn't overly focus on that $4.6 billion number and how that changes over time?
- William Siwek:
- Yeah, I would not. I mean that's clearly something that we've had out there for a long time. It's - we are - we have a lot of focus obviously on making sure we're extending contracts as well as signing new ones. And so, we'd clearly like to see that grow, but that's not something that is driving exactly how we're working the business today.
- Bryan Schumaker:
- Yeah, I'd just add to that, I mean, if you look at the overall pipeline and what we're seeing, I mean it's still what plus over 6 gigawatts of kind of pipeline there. And so that hasn't changed kind of longer-term.
- Joseph Osha:
- Yeah. That makes sense. Thank you. And then just shifting gears a bit, obviously, some broad comments about demand. But, I mean, there are some very different drivers here in the U.S. You've got some of these PTC shifts in China you alluded to, just the kind of the crazy numbers. Is this just kind of a bunch of things aligning at the same time? Or is there some sort of broader global phenomenon here behind the reduced demand that I'm missing?
- William Siwek:
- Behind the reduced demand? Again, I think....
- Joseph Osha:
- So behind your cautious comments…
- William Siwek:
- Yeah, and I - I'm not sure I understand, Joe. Can you say that again?
- Joseph Osha:
- Well, just again, you've talked about an environment where you were going to take lower utilization in China. And then you made some more cautious comments about the U.S. My point was just that those are very different things driving those 2 different markets. So I'm just trying to understand if there is some more unifying theme here, whether it's just that we happen to have some things going wrong in different markets for different reasons at the same time.
- William Siwek:
- Yeah, I think it's more - it's not that demand is down. It's that there's more capacity, right? A couple of customers have probably some excess capacity today. And so, it's trying to optimize that capacity going forward so that the utilization is much higher. And so, it's not necessarily that demand is down, it's that demand for what we're building this next year is down a little bit, because of the overcapacity in the industry in key areas, in key regions. Does that make sense? So it's not necessarily that gigawatts installed are going to go down, it's just from - there's been enough capacity added, that the demand on our capacity is going to be a little bit less next year. We're only going to sell 126 sets less next year than we did this year. So it's not like it's a major drop, right? So it's less utilization than we would like. And we want to re-optimize our footprint, so that we keep that utilization in the high 80s, low 90s as opposed to the low 80s.
- Joseph Osha:
- And protect the margin. Yeah, that makes…
- William Siwek:
- And protect the margin, exactly right.
- Joseph Osha:
- One final quick comment, I don't know if the question - if you can comment on this or not. We were pretty excited about some of these city transit bus projects a year or two ago, and hearing less about that. Can I assume that maybe we shouldn't be looking for some of those projects to really ramp at this point or just wondering if you can give me a little color about that.
- William Siwek:
- On the transit bus stuff, I will tell you, you should probably talk directly to Proterra about that. Our volumes will actually be up for them in 2021 over 2020 by a fair amount. We're seeing good volume from them. And we're working closely with them on continuing to drive cost so they can be even more competitive than they already are, so.
- Joseph Osha:
- Okay, thank you very much.
- William Siwek:
- You bet. Thanks, Joe.
- Bryan Schumaker:
- Thanks, Joe.
- Operator:
- The next question comes from Greg Lewis with BTIG. Please go ahead.
- Gregory Lewis:
- Yes, thank you and good afternoon, everybody.
- William Siwek:
- Hey, Greg.
- Gregory Lewis:
- Hey. I kind of had like a general question, like - thank you for the guidance, super helpful. Is there any way to kind of balance or think through, this is what utilization is, and then this is what our margin is at this utilization? But if we can maybe squeeze whether it's 100 basis points or 200 basis points of incremental utilization, is there any way to think about like would that be additive to margins? Any way to kind of think about balancing cost absorption maybe with - in a world where utilization maybe is a little bit better?
- Bryan Schumaker:
- Yes. I think, I mean, if you look at the last couple of quarters and what we've been able to produce, if you think about kind of the 8.8% margins, we had this quarter with 92% utilization, and then prior quarter, I mean, we had 93% utilization and fairly robust margins there too. So, I guess, that kind of gives you an indication with 10.4% margin on those, and that was with the impact of COVID on those quarters. So that kind of gives you an idea that 80% to 85% and then margin, that's if you don't do any other cost-out initiatives and drive cycle times and other things that we're continuing to work through. But the cost - or if you just look at utilization alone, that's kind of the margins you can expect to see.
- Gregory Lewis:
- Okay. That was super helpful. And then, just realize we're running a little long here. Just as I think about and you touched on it as the transportation business goes forward, the numbers that we've heard, the CapEx for 2021, does any of that start to point to co-locations? Or is that really all just still for things that we're looking at that are - that are kind of pilot projects at this point?
- Bryan Schumaker:
- Yeah, at this point, that CapEx number, the $55 million to $65 million is primarily the transitions and start-up that we've already disclosed, and then some of the retooling and that combining some of the factories. I mean we have some on the transportation side, but not a significant amount that would drive kind of what you're thinking of kind of co-locating in that type of activities at this point in time.
- Gregory Lewis:
- Okay, super helpful. Thank you very much.
- Bryan Schumaker:
- Thanks.
- William Siwek:
- Thanks, Greg.
- Operator:
- Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Bill Siwek for any closing remarks.
- William Siwek:
- Thank you again for your time today and for your interest in TPI. And please watch for our second annual ESG report, which we'll be releasing next month in March. Thanks and we'll talk soon. Thank you.
- Operator:
- And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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