Broadwind Acquisition Conference Call - BROADWIND INC

Explicit Guidance:

• Financial Performance: The transaction is expected to be accretive to adjusted EBITDA margin and earnings per share (EPS) beginning in Q4 2026.
• Margin Expectations: While MCM reported ~23% adjusted EBITDA margin for the trailing 12 months ended June 30, 2026, management is modeling high teens for the blended entity to remain conservative.
• Capital Expenditures: For 2027, CapEx is expected to be largely maintenance-type and not exceed 5% of revenue.
• Acquisition Consideration: An additional up to $7 million in performance-based consideration is anticipated if MCM meets defined financial milestones within 14 months of the transaction close (closing Oct 30, 2025).

Business-Segment Outlook:

• Segment Reporting: MCM's results will be reported under a new "Grid Infrastructure Solutions" segment beginning Q4 2026.
• Revenue Growth & Backlog: MCM's backlog is approximately six months and growing; orders are described as "very strong," particularly in the last quarter. Management expects MCM to continue its historical 20–25% CAGR (projected over the prior four years) supported by Broadwind's backing.
• Market Entry: The acquisition provides an immediate entry into the electrical T&D (Transmission and Distribution) sector, shifting revenue mix away from the wind market (which represented up to 50% of revenue in 2023) toward "higher value, more durable revenue streams" in power generation and critical infrastructure.
• Product Mix: MCM supports customers with 600+ SKUs (including 400 SKUs for a single major customer) to address the diverse specifications of the aging U.S. grid (60–70 years old), providing resilience against regional weather variations.

Market and Competitive Outlook:

• Demand Trends: Management anticipates a "multi-year wave of investment" to upgrade, expand, and strengthen the U.S. power grid (spanning 600,000+ miles) driven by rising electricity demand.
• Pricing Power: MCM maintains pricing power and high margins due to complexity, specialized manufacturing capabilities, and responsiveness (including emergency disaster response capabilities).
• Customer Relationships: MCM holds "sole source" or "preferred supplier" positions with top customers who have been with the company for over 20 years on average; these customers have explicitly expressed encouragement and excitement regarding MCM's growth under Broadwind.
• Supply Chain Synergies: Anticipated synergies include consolidated purchasing of raw steel across Broadwind's industrial solutions and MCM's grid infrastructure businesses.

Macro / Industry Outlook:

• Grid Investment: The U.S. transmission network requires significant capital to stay "reliable and resilient" amidst rising demand, creating a favorable structural environment for T&D component providers.
• Domestic Manufacturing: Emphasis on 100% U.S.-based sourcing and manufacturing capabilities to ensure supply reliability for utilities.

Strategic Initiatives:

• M&A Pipeline: Management plans to pursue further "bolt-on" acquisitions in the $10M–$20M range, targeting "high quality, lower risk" assets that expand the domestic manufacturing base. A disciplined, ratable approach is expected, with further deals anticipated within the next year or year after.
• Capacity Expansion: Necessary capacity investments to support continued growth have already been initiated; additional capital was installed upon closing, with no heavy capital investment required over the next 12 months.
• Workforce & Facilities: Integration of MCM's 50 skilled non-union employees and 37,000 sq. ft. facility in Northport, Alabama, expands Broadwind's total employee base by >20%.

Risks and Headwinds to Outlook:

• Regulatory/Government Dependency: Implicitly, the "tax credit support" mentioned as a driver for past wind market profitability is no longer a factor as the wind tower market was exited.
• Execution Risk: The "forward-looking statements" are subject to risks that actual results may differ materially, including the achievement of the MCM earn-out milestones.
• Market Volatility: The high margin sustainability (historically ~23%) may fluctuate due to potential changes in product mix or the frequency of "emergency" disaster-related demand spikes, which currently contribute an extra 2–3 percentage points to profitability.

Management Tone on the Future:

• Confidence: High confidence is expressed regarding the strategic fit and long-term value creation, citing the "compelling foundation" MCM provides for the next growth phase.
• Strategic Shift: A definitive pivot from the "lower margin and often uneven" wind market to "stable, higher-value revenue streams" in grid infrastructure.
• Customer Sentiment: Management highlights strong customer validation, noting that key utility clients are "encouraged and excited" about the acquisition and expect demand to pass through to the new entity.

Miscellaneous:

• Acquisition Cost: $18 million cash at closing plus up to $7 million earn-out for the Alabama-based precision manufacturer.
• Valuation: Pro forma net debt to trailing-12-month adjusted EBITA is approximately 3.7x; the upfront price represents a multiple of approximately 4.8x on MCM's trailing 12-month adjusted EBITDA (excluding earn-out).
• Pro Forma Revenue: Combined Broadwind and MCM generated approx. $90 million in revenue for the trailing 12 months ended June 30, 2026.