TPI | Net losses improve

TPI Composites Inc (NSQ: TPIC) manufactures and sells composite wind blades, and related precision molding and assembly systems to original equipment manufacturers (OEMs). It operates in the United States, Asia, Mexico, Europe, Africa, India, and the Middle East. The company was founded in 1968 and is headquartered in Scottsdale, Arizona.


(Source: TPI Composites Inc)

TPI Composites posted their Q2 for the year on 03 August, 2022. Although their revenue decreased 1.41% to $452.4m compared to last year's quarter - their net losses improved by 86.2% in the same timeframe with a loss of ($6m). As a result, their net margin loss improved from (8.7%) to (1.2%), hovering just below the breakeven threshold.

(Property of EcoShares)

Looking at the last few quarters, net losses are significantly more controlled - which was especially high at the end of 2021 with a loss of ($87m).

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TPI Composites has been consistently growing its revenue and has a yearly growth streak of four years since FY17. The company has also been previously profitable in FY17 and FY18, having achieved a small net income of $39m and $5.28m, respectively - before net losses began in FY19 onwards.


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Their largest losses were over 2021, seeing their share price significantly decrease from over $78 to less than $10 in early 2022. Prices have since started to slightly rebound, closing at $24.50 on 12 August, 2022.

(Source: Google Finance)

The first thing worth checking when a company is seeing consistent net losses is how strained its current assets to current liabilities are becoming.

In the short term, the current assets and current liabilities can measure a company's ability to pay short-term debt or obligations due within one year. TPI Composite's short-term liquidity percentage in Q2 was 69.6% (current liabilities/current assets) - which represents unfavourably high levels of short-term liabilities. Current assets and current liabilities were $620m and $431m, respectively. However, compared to last year's quarter current assets were actually up 11.2%, while current liabilities decreased by 1.7%. Last year's short-term liquidity percentage was 78.7%.

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Investors should still note that only nine months ago, current liabilities had actually become higher than their current assets. All eyes will be on whether this year's Q3 can avoid the same problem occurring again and ensuring this isn't a cyclical financial strain.


In the long-term, total assets for Q2 climbed 4.4% to $982m from levels one year ago - while total liabilities decreased by 1.8% to $431m. This actually represented a much more controlled long-term liquidity of 43.9% than compared with short-term, as well as improving from last year's 46.7% - however, with uncertainty around where interest rates are heading, companies should be aiming to continue improving their liquidity. Total cash levels have actually increased 26% since last year to $155m, slightly relieving investor fears of the company increasing debt or potential share dilution if cash was urgently needed. To have increased total assets and total cash, while decreasing total liabilities simultaneously is a remarkable achievement (if it doesn't reverse).


(Source: Google Finance)

Looking at previous years, FY21 was actually the first time since 2018 that the company has decreased its total liabilities for the year ending. Total cash has been rising to it highest levels and total assets haven't broken its growth streak which saw levels rise above $1bn at the end of 2021.

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TPI Composites release its Q3 earnings for the year on approximately 07 November, 2022.