Broadwind - industrialization and energy

Company introduction

Broadwind is a small cap industrial company based in Illinois, current market cap is $118M. It has manufacturing plants in five different locations over the US and it focuses on the three segments

• Heavy fabrications, WI & TX
• Gearing solutions, IL & PA
• Industrial solutions, NC

Heavy fabrications

HF is Broadwinds legacy operations focused on wind turbine tower manufacturing. They have recently decided to terminate this business due to low margins and customer concentration risk.

Gears & Gearboxes

Broadwind manufacturers industrial gears and gearboxes. These are often custom made to the fit the needs of their customers. They offer repairs and services for gear boxes to avoid incidents and downtime in the end customers operations.

This business services different sectors such as oil and gas, mining, wind energy, steel material handling and more.

Industrial solutions

Supply chain solutions, inventory management, kitting, assembly etc.

This business unit is primarily focused on combined cycle natural gas turbine and solar power generation markets.

Industry and secular trends

Broadwind has historically had most of their business in the alternative energy and specifically the wind power sector. As a manufacturer of wind towers, it has faced a lot of headwind over the last few years, not least of which has been the removal of federal tax credits in the industry.

Simultaneously, companies have been stuck with over supply from Covid as they stocked up heavily to avoid outages. Stock levels are now returning to more normal levels which triggers restocking and purchase orders.

On the other side, the re-industrialization of America has been ramping up over the past years. Starting with the first Trump administrations stance on China, carried forward by the Biden administration and enforced further with the introduction of tariffs and a national security narrative in 2025.

Finally, power generation and transmission is already a huge bottleneck and it will only become worse. AI & data centers consume a lot of power but so does heavy industries. Hence the rush to buy gas turbines and other, local, power generators.

Management response

Faced with these trends, management has decided to divest their heavy fabrications segment and instead focus on their other two lines of business. This decision was made in June of 2025 and they expect the HF segment to be completely wind down by September 2026, all in all a fairly rapid response.

They will now focus on the growth markets of power generation and critical infrastructure, aiming to improve margins (wind was an over supplied industry) and reduce customer concentration risks (wind had one major customer).

Customers

Looking at their last financial report, the company shows impressive customers that can make help them in their transition

• GE Vernova - exposure to the gas turbine market
• Caterpillar - heavy equipment powering the rebuild of American industry
• Gerdau - steel industry
• Siemens energy - second of the three gas turbine makers in the world

With this exposure, they already have access to the key sectors in the re-industrialization race.

Financials

These numbers are from the companies Q1 report. I will not be going back to look at older numbers since the company is undergoing a strategic transformation.

Revenues and backlog

Numbers in M$.

|Business Unit|Q1-25 Rev.|Q1-26 Rev.|Q1-26 EBITDA|Y-Y|

|:-|:-|:-|:-|:-|

|HF|$25.2|$16.4|$1.7|\-33%|

|Gearing|$6.0|$8.5|$0.6|41%|

|Ind. Sol.|$5.6|$9.2|$1.8|64%|

|Total|$36.8|$34.1|$2.2|\-7%|

GAAP net income for the quarter was ($0.5). As can be seen, the business is currently shrinking which is according to the company strategy.

Orders & Backlog

|Business Unit|Orders|Q1-25 Backlog|Q1-26 Backlog|Y-Y|

|:-|:-|:-|:-|:-|

|HF|$9.7|$79.3|$25.3|\-68%|

|Gearing|$13.2|$14.7|$30.5|107%|

|Ind. Sol.|$14.6|$22.9|$43.3|89%|

The industry trend is impacting Broadwind and we are provided with good visibility into their backlog and they are booking into 2027 already. Compare to the statements from GE Vernova that gas turbines are sold out until 2030 and the visibility of Broadwinds revenue becomes even clearer.

Cash and debt

The company as of Q1-26 has $16.4 in cash and lines of credit, down from $22.6 last year. During April they closed the sale of their Abilene facility to a value of $17.6 raising their cash position from $1 to above $18.

Their net debt is as of Q1-26 $14.1 of which $5 is maturing this year. $14.1 in debt is roughly 1,5 times EBITDA as HF is winding down, manageable.

Capital allocation

No dividends has ever been payed out and the management team does not plan on changing this. Instead they are focusing on opportunistic investments in complementary, accretive bolt-on acquisitions, organic investments, debt reduction, and share repurchases.

Net Operating Loss

The company has run some years with losses and have accumulated $300 in net operating losses. These can now be used to lower taxes for both their existing business and any potential acquisitions. This is important as it will provide an extra growth driver for the coming years as it will improve their cash flow.

Valuation and potential

Let's analyse the company with a reverse DCF to see what assumptions lies behind the current valuation and if they are over, under or fairly valued.

Enterprise value

Based on the sale of their Abilene facility, Broadwind now sits on a cash position of 18.1M, a market cap of $118 and a debt of $14.

EV = 118 + 14 - 18.1 = 113,9

Free cash flow

For 2026, we assume they make an EBITDA of $10, Q1 Gearing + IS (0.6 + 1.8) x 4. Using their Net Operating Losses which shield from taxes we assume a FCF of $7 for the year.

WACC at 11,5% and a terminal growth rate of 2,5%, to reach an EV of $113,9 we need a growth rate of FCF of 15%.

Sensitivity

We assume that they successfully scale up during the second half of the year, we can instead assume a FCF of $9 for the year. In this case, the necessary FCF growth rate if just 6% to reach the current EV.

This can be compared to FCF in 2024 which was close to $10 including the capital intense and low margin wind tower business.

Margin of safety

If FCF growth stalls at 5%, we are looking at a current enterprise value that is close to 30% lower than the current value. This 5% growth in FCF should be compared to the growth in revenue of ~50% and backlog growth ~100%.

Conclusion

CEO calls the current times a natural gas super cycle and Broadwind is positioned and ready to execute on it. The increase in both revenue and backlog seems to indicate that this is true.

From here, it should be a question about prudent execution and then ride the tail winds in the energy and critical infrastructure transformation.

Position

Long, initial position of 772 shares and looking to increase.

Just a simple investor looking to make an above market return, feedback appreciated!