Good afternoon, welcome to TPI Composites' fourth quarter and full year 2019 earnings conference call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I will turn the conference over to Christian Edin, Investor Relations for TPI Composites. Thank you. You may begin.
Thank you, operator. I'd like to welcome everyone to TPI Composites' fourth quarter and full year 2019 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. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect because of other factors discussed in today's earnings news release and the comments made during this conference call or in our annual report on Form 10-K that we will file with the Securities and Exchange Commission or in the latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, www.tpicomposites.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures.
You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliation of historical non-GAAP measures to comparable GAAP financial measures. With that, let me turn the call over to Steve Lockard, TPI Composites' CEO.
Thanks, Christian. Good afternoon, everyone. Thanks for joining our call. In addition to Christian, I'm joined today by Bill Siwek, our President, and Bryan Schumaker, our CFO. On this call, Bill and I will provide a summary of the year and comment on our path forward. Bryan will then review our financial results in detail, then we'll open up the call for Q&A. Please turn to slide five. We delivered very good results in the fourth quarter with adjusted EBITDA of $31.8 million, a 226% increase over Q4 2018, and net sales of $422 million, a 46% increase over Q4 of 2018. For the full year, we delivered adjusted EBITDA of $81.9 million, a 20% increase over 2018, and net sales of $1.4 billion, a 40% increase over 2018.
We ended the year with cash of $70 million and net debt of $72 million and total liquidity of $167 million, including the additional debt capacity added yesterday with the exercise of the accordion feature under our senior credit facility. We have 52 wind blade lines currently under contract in world-class locations around the world, representing 15 GW of dedicated capacity and will have total capacity under roof for 18 GW with the completion of our new Chennai, India facility during 2020. With anticipated blade model transitions, along with startups over the next several years, we are planning to run at an 80% annual utilization rate to produce about 15 GW of blades per year and achieve our long-term target of $2 billion of annual wind revenue and double-digit adjusted EBITDA.
With an estimated average of 75 GW of on and offshore wind installed each year through 2028, we expect to have about 20% global market share in the coming years. Our pipeline remains strong with the potential to add onshore lines as well as offshore lines once the offshore volumes reach levels to provide critical mass for efficient outsourcing. During 2019, we grew our global market share to approximately 18%. We stabilized our operations globally, including our new plants in Matamoros, Mexico, and Yangzhou, China. Our new plant in Chennai, India began operations earlier this year, and we fully expect that all the additional effort put into the startup planning and team building during 2019 will result in one of our best startups ever. We are pleased to be serving Vestas from each of these new TPI locations and growing our business with them.
We executed a joint development agreement with GE to cooperatively develop advanced blade technology for future wind turbines. We signed an agreement with Nordex to transition multiple lines in Turkey to longer blades and extended our contract with them through 2022. We acquired the former EUROS team based in Berlin that's focused on blade design, tooling, materials, and process technology development, strengthening our technical capabilities in support of our global operations and growth. We executed our transitions very well with ramp times better than planned and overall costs less than budget. We executed an agreement with Workhorse to develop and produce a prototype chassis and cab structure for a purpose-built electric delivery vehicle and continued to gain ground on our target of $500 million of annual diversified markets revenue over time.
We added key members to our senior leadership team to add depth and breadth in both wind and diversified markets, as well as to spearhead our global service and recycling initiatives. We continued to evolve our board of directors, adding global automotive experience, independence, and diversity. We plan to continue this process in 2020. We continue to remain focused on building long-term sustainable value by capitalizing on two major macros, decarbonizing the electric sector and electrifying the vehicle fleet. Trends driven more and more by economics, what customers want to buy, what investors want to invest in, and the need to positively affect climate change. Now I'll turn the call over to Bill to provide a more detailed business and market update. Bill?
Thanks, Steve. I'd like to first give a brief update on the global and U.S. wind markets. Please turn to slide six. We continue to be pleased with the growth of wind energy as a cost-effective and reliable source of clean electricity, as we in the industry continue to drive down levelized cost of energy, while consumers and corporate customers increase the demand for renewable energy. We see the future of global electricity growth as a strong combination of cost-effective and reliable wind, solar storage, and transmission. The U.S. wind market remains strong, and we believe it will continue through the decade, driven by consumer and industrial demand, and decarbonization goals set by states, cities, and utilities. The additional year added to the PTC will also likely be a net positive for the wind market over the next four to five years.
I'd now like to update the comments I made at our Investor Day regarding the coronavirus or COVID-19. Although we cannot predict the full impact of COVID-19 on other businesses or global economies, we have a better picture today than we did three weeks ago of how this may impact our plants and our results in 2020. Our plants in China have now all reopened, and we are in the process of ramping up production to normal speed as our associates return and complete quarantine requirements, our supply chain gets back to full production, and logistics challenges get resolved. Clearly, our Q1 results in China will be impacted negatively. We do have plans in place to recover most, if not all the volume we expect to lose in Q1 from the temporary shutdowns. We also can increase production at our non-China facilities to fill some of the gap.
Another example of why our global footprint is such a differentiator. Our initial estimates of the impact, based on what we know today, is that the first quarter revenue will be down by approximately $45 million, and adjusted EBITDA will be impacted by approximately $15 million. For the full year, we expect to make up most, if not all the revenue, and although the ultimate impact on adjusted EBITDA could be as much as $10 million, we're working with our customers and suppliers to mitigate this as much as possible. Therefore, we are not adjusting our 2020 guidance. Bryan will share more details on the financial impact in a bit. The overall wind market demand and the impact of COVID-19 on the global wind market supply chain will continue to create some challenges for us during 2020.
However, our global supply team continues to do an excellent job of securing critical raw materials through alternative suppliers and/or locations, and the execution of our strategy of regional localization and long-term supply agreements to ensure a consistent supply of the key raw materials. With respect to the supply chain in China, most of our key suppliers are back up and producing, and logistics challenges have begun to abate. As of today, we don't anticipate any material issues in China or our other locations as a result of COVID-19. Moving on to Q4 performance. We completed the initial startup of lines in our facility in Yangzhou, China in 2019, and we believe that we are well-positioned entering 2020 to execute operationally, drive improved profitability, and fill out the rest of the facility's capacity with new lines.
We will have two lines in startup during the first half of the year to meet the increased demand from one of our customers, and notwithstanding the impact of COVID-19, based on what we know today, we believe we will make up most, if not all, of the volume we lost during the first quarter while our plants were temporarily shut down. We also worked through our startup challenges, including a two-week strike in Matamoros, Mexico during 2019, and we enter 2020 with a more stable labor situation. We recently finalized the 2020 wage negotiations with our union five weeks early without any disruption to our operations or work stoppages. Although we will have a few transitions in this facility during 2020, we believe we are well-positioned to significantly improve the overall operating results for this location in 2020 while meeting or exceeding the blade demands of our customers.
Construction of our new facility near Chennai, India is nearly complete, and it is on time and under budget. The initial mold is in place, and we are in the startup phase as we speak. We've built a very strong management team and team of associates, more than 25% of whom have previous blade manufacturing experience, with the balance having strong automotive and industrial experience. We are confident that this will be one of our best-executed startups, and we're looking forward to adding additional lines to this facility soon. With the addition of our Yangzhou, Matamoros, and Chennai plants, we have added nearly 2.4 million sq ft and 9 GW of manufacturing capacity over the last 18 months. Turning to slide seven. We now have a total potential contract value of up to approximately $5.2 billion through 2023, and the minimum guaranteed volume under our supply agreements is $2.8 billion.
The potential and minimum contract values do not include the two lines in China that will be operating under a short-term contract in 2020, nor does this include the impact from most of the anticipated new larger blade models that we will produce after the 2020 transitions. Moving on to slide eight. As our global capacity is nearing our targeted level of 18 GW, our primary focus has now turned to operational excellence to drive safety, quality, throughput, and cost reductions to accelerate margin expansion and free cash flow. Our operating imperatives include turning speed into a competitive advantage, cutting transition times in half, and significantly reducing startup times. Advancing our composites technology to enable operational improvement and over time, better recyclability of blades. Partnering even more deeply with our customers on tooling, blade design for manufacturability, and service.
Reaching a better balance with our customers on transition economics, which will provide the incentive to make transitions more efficient and cost-effective for us and our customers. Continuing to leverage our global and regional scale to drive down raw material costs, expand material capacity, and in turn maximize our opportunity for continuity of supply of critical raw materials. Continuing to build, develop, and retain our team to enable world-class execution. Finally, continuing to drive our ESG vision because it's not only the right thing to do, but it will drive business performance. We are excited to be publishing our first ESG report this March, and you will see for the first time that we are a long way down the ESG path and have operationalized most of what you will see some time ago, but just haven't reported it publicly until now.
We remain confident and committed to our overall business model and strategy. The fundamentals of our business remain strong. Wind markets around the globe continue to grow at an attractive pace. The trend of wind blade outsourcing is continuing, and our customers and potential customers are demanding increasing quantities of blades to serve many fast-growing emerging markets and a very strong U.S. market. Along with our customers, we will continue to invest in existing line transitions and new line startups. Our mature operations continue to perform at or above our expectations, which gives us confidence in our ability to generate the profit levels we expect. With that, let me turn the call over to Bryan.
Thanks, Bill. Please refer to slides 10 through 12. Net sales for the three months ended December 31st, 2019 increased by $132 million, or 45.5%, to $422.1 million, compared to $290.1 million in the same period in 2018. Net sales of wind blades increased by 54.3% to $397.8 million for the three months ended December 31st, 2019, as compared to $257.8 million in the same period in 2018. The increase was primarily driven by a 41% increase in the number of wind blades produced year-over-year, largely as a result of increased production at our new plants in Mexico, China, along with the increased production in Turkey. The impact of the currency movement on the consolidated net sales for the quarter was a net decrease of 0.8% as compared to 2018.
Gross profit for the quarter totaled $30.8 million, an increase of $18.2 million over the same period of 2018, and our gross profit margin increased to 7.3%. Our general and administrative expenses for the quarter were $12.1 million or 2.9% of net sales as compared to $11.6 million in the same period of 2018 or 4% of net sales. Before share-based compensation, G&A as a percentage of net sales was 2.6% and 3.7% in Q4 of 2019 and 2018 respectively. Our provision for income taxes for the quarter was $8.4 million as compared to a provision of $3.3 million for the same period in 2018. The change was primarily due to GILTI associated with the jurisdictional earnings mix in the quarter as compared to the same period in 2018.
The net loss for the quarter was $0.9 million as compared to net loss of $8.8 million in the same period in 2018. This decrease was primarily due to the operating results discussed above. Diluted loss per share was $0.02 for the quarter compared to a loss per share of $0.26 in the same period in 2018. Adjusted EBITDA increased to $31.8 million compared to $9.8 million during the same period in 2018. Our adjusted EBITDA margin for the quarter was 7.5%, up from 3.4% in the fourth quarter of 2018. The increase in margin percentage of 410 basis points was primarily driven by the decrease of startup and transition activities. For the full year of 2019, net sales for the year increased by $406.9 million or 39.5% to $1.44 billion compared to $1.03 billion in 2018.
Net sales of wind blades increased by 42.4% to $1.3 billion in 2019 from $0.9 billion in 2018. The increase was primarily driven by 31% more wind blades produced in 2019 as compared to 2018, and an increase in average selling prices due to the mix of wind blade models produced during 2019 compared to 2018. Gross profit for the year totaled $77.8 million, up from $72.8 million in the same period of 2018, and our gross profit margin decreased to 5.4% from 7.1%. The decrease in the gross margin percentage was primarily driven by the extended challenges at our Newton, Iowa transportation facility. Significant underutilization of labor in Matamoros, Mexico, due to the strike, partially offset by a decrease in startup and transition costs.
Our general and administrative expenses for 2019 totaled $39.9 million or 2.8% of net sales compared to $43.5 million or 4.2% of net sales for 2018. The decrease as a percentage of net sales was primarily driven by lower incentive compensation and a reduction in the performance assumptions related to certain of our share-based compensation plans. Our provision for income taxes was $23.1 million for the year ending December 31st, 2019 as compared to a benefit of three million for the same period in 2018. The increase in taxes was primarily due to changes in valuation allowances and, to a lesser extent, the impact of GILTI based on the earnings mix by jurisdiction in the year ended December 31st, 2019, as compared to the same period in 2018. Net loss for the year was $15.7 million as compared to net income of $5.3 million in the same period in 2018.
The above decrease was primarily due to the reasons set forth above. The net loss per share was $0.45 for 2019 compared to diluted income per share of $0.15 for 2018. Adjusted EBITDA increased to $81.9 million or a margin of 5.7% in 2019 from $68.2 million and a margin of 6.6% in 2018. The decrease of 90 basis points was primarily driven by our $13 million increase in investment and transportation business in 2019 as compared to 2018, and the underutilization in Matamoros and Mexico noted above. Moving to slide 12. We ended the year with $70.3 million of cash in cash equivalents, total debt outstanding of $142.1 million, and net debt of $71.8 million, compared to net debt of $51.3 million as of September 30th, 2019.
For the quarter, we had a net use of cash from operating activities of $5.7 million while spending $15.3 million on CapEx, resulting in negative free cash flow for the quarter of $21 million. For the year, we had negative free cash flow of $17.3 million after spending $74.4 million on CapEx. Our balance sheet remains strong, and we continue to demonstrate the ability to fund our growth primarily with cash generated from our operations and the availability we have under our line of credit facility. The announcement that we have exercised the accordion feature on our revolver gives us the optionality for working capital and future CapEx. Please turn to slide 14. As Bill noted earlier, we continue to monitor the impact of COVID-19 on our operations.
Based on what we know today, COVID-19 will negatively impact Q1 revenue by approximately $45 million and adjusted EBITDA by approximately $15 million. For the year, we expect to recover approximately 95% of the revenue, and adjusted EBITDA could be impacted by up to $10 million. Due to the impact of the COVID-19, we believe Q1 adjusted EBITDA will be slightly negative. For the full year of 2020, we are maintaining our previously provided guidance. We expect 2020 net sales of between $1.55 billion-$1.65 billion, adjusted EBITDA of between $100 million-$125 million, utilization of between 80%-85%, wind blade set capacity of 4,380, average sales price per blade of between $140,000-$145,000, non-blade sales of between $75 million-$100 million. Capital expenditures to be between $80 million-$90 million. Approximately 50% of the CapEx purchases will be incurred in Q1.
Start-up costs of between $17 million and $20 million. Due to the impact of the COVID-19 and the cash outflow associated with CapEx, we expect negative free cash flow of $30 million in Q1. For the year, we still expect to be free cash flow positive. With that, I will turn it back over to Steve to wrap up, and then we will take your questions. Steve?
Thanks, Bryan. Our overall mission remains unchanged, establishing 18 GW of global wind blade capacity over the next few years to drive $2 billion of annual wind revenue, along with $500 million of annual transportation revenue and achieve double-digit adjusted EBITDA levels. With an estimated 75-GW global combined onshore and offshore wind market, we expect to have approximately 20% global market share. We plan to continue to drive for more speed during transitions, leverage our global scale for operating and buying efficiencies to continue to drive down costs, all while maintaining a strong and conservative balance sheet. I want to thank all of our dedicated TPI associates for their commitment to our mission to decarbonize and electrify. We remain very confident in our multi-year game plan, we'll stay that course. Thank you again for your time today. With that, operator, please open the line for questions.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from Eric Stine with Craig-Hallum. Please go ahead.
Hi, everyone.
Hey, Eric.
Hey, just wondering if you can talk a little bit about the confidence you have in making up the revenue and EBITDA that you've called out for COVID-19. I'm just curious. It sounds like in part it's because your operations are slowly getting back up and running, but curious how it kind of breaks down between that and your confidence in other locations being able to make up for those lost volumes.
Yeah, Eric. This is Bill, and then I'll turn it over to Bryan. The answer to your question is our plants are all open again. We're in the process of ramping them up. We're a little ahead of schedule, which is good.
Taking utmost care of our associates to make sure that they're protected, and we're following the proper recommended health procedures and what have you. With all that said, supply chain is opening back up as well. Most of them, if not all, are back in production. Like us, they're ramping up through as we're bringing employees back from their hometowns and getting them through the quarantine. Yeah, we're ramping back up and we're not only confident in the balance of the year, and I'll let Bryan comment on the revenue EBITDA, but we do have the opportunity, as I mentioned, with our other plants to overdrive a bit of capacity there to make up any shortfall we may ultimately have. Bryan, if you want to comment.
Yeah. As we work closely with the teams, we feel good as they work with the customers to utilize all of our other plants and the current platform that we have on the revenue side. We feel confident we'll make that up. On the net income and adjusted EBITDA side, we see basically we're able to utilize and find upside at other sites or other areas as we talked about before with our cost-out initiatives and other directions. That's why we're able to keep our guidance the same.
Okay. Maybe just a good segue. I know, thinking back to early 2019 in Mexico, and the disruption there and hoping to make that up, and there were certain raw materials that got in the way of that. Maybe just talk a little bit about some of the initiatives and success you're having in the bill of materials, localizing supply, and those sorts of things.
Yeah. We're continuing to work not only on the localization but just on making sure, number one, we are better coordinated with our customers and what their needs and demands are for the full year, and then going out and securing that capacity. There's a number of different initiatives on the supply chain that we've taken. Our supply chain team has done a great job of securing the volume of capacity we need for 2020, as well as working with our customers on that collaboration. There are still some challenges. Core remains to be a bit of a challenge from a supply standpoint. We feel confident that we've got what we need for 2020, and don't really see any other major issues.
Just to be clear on the COVID-19 stuff, we are very confident in where we are at today, given what we know in China and in our plants around the globe. As the virus potentially spreads, the impact that may have on shipping or borders being closed in other locations, we can't predict what that may or may not do w e're pretty confident in the supply chain and in what we've got in place for 2020 and beyond.
Yep. Okay. Maybe just last thing from me, just to clarify. Did you say Q1 to expect negative adjusted EBITDA?
Yes, that's correct. Slightly negative.
You did.
Yes.
Okay. Thanks a lot.
Thanks, Eric.
Thanks, Eric.
Our next question comes from Paul Coster with JPMorgan. Please go ahead.
Yeah. Thanks for taking my questions, Steve, and Bill, and team. You've talked about supply and your own workforce. Can you talk a little bit about your OEMs, and what the nature of the dialogue is with them, and to what extent you think they've got a handle around COVID-19? Because obviously, that would be a factor outside of your control that might weigh on 2Q and beyond.
Yeah. Paul, Steve, thanks. Paul, we can't really comment on specifics around our customers. I think in general, and what you know is there's a lot of demand in calendar 2020 in the North American market and in other markets. There's going to be a lot of scrambling industry-wide to serve as much of that demand as we all can. Beyond that, in terms of their specifics, we're not really in a position to speak for them. As Bill said, we're comfortable with what we control and our pieces of this, and that's what we can affect.
Okay. In terms of the catch-up that presumably happens almost immediately in the second quarter, can you just talk us through what that actually means? Are you going to be sort of working 24/7 for a period, or how are you going to get more from your available capacity?
Yeah, Paul, we work 24/7 all the time.
It's not quite as simple as that. With that said, it's different schedules on scheduled holidays. Those change. We work the production plan to try to meet the needs of our customers. Some of it, quite frankly, is in conjunction with our customers. We might push out some of the changes that we were anticipating later in the year, push them into 2021 so we can maximize the volume for them in 2020. It's a combination of different things. Unfortunately, it won't happen just in Q2 just because of the nature of our manufacturing process. It'll happen throughout the year. We do see the opportunity to make up most, if not all, of the volume that we were talking about. In some of our sites, we'll go beyond what our original expectations were. That's why we're confident in making up the volume.
Paul, just to add real quick, if I could. You've seen us continue to drive cycle times down, even though blades are getting larger. We're continuing to do that. Whenever we do that, we create additional capacity kind of quarter by quarter as we go through the year. As Bill used the word overdrive, and that's part of a way for you all to think about it, that we're creating more capacity and we're probably going to be using more of that capacity.
Through reductions in cycle time to help with the makeup throughout the year.
Got it. My last question really is on the sort of expedited costs here. I imagine that everyone's going to want to play catch up really fast, and that means more trucks, right? More storage area for a period. Can you just comment upon those variables and whether or not you see any gating factors there?
Yeah, I think from our supplier standpoint, there will be some expediting costs. Again, as you guys know, we have shared cost agreements with our customers, so some of that will get passed on others, maybe not as much. But as far as from our customers' standpoint, I think that that's more of a discussion for them as it relates to the transportation of the blades, et cetera, from our plants to their locations.
Got it. Thank you.
Yep. Thanks, Paul.
Thanks, Paul.
Our next question comes from Pavel Molchanov with Raymond James. Please go ahead.
Thanks for taking the question. Just one more on the Q1 guidance. A year ago, we had the Senvion and the Matamoros disruption. Now it's the virus. Do you expect revenue to be up or down compared to Q1 of 2019?
This is Bryan. We still expect revenue to be up from Q1 of 2019 based on the other plants in Matamoros and Yangzhou all performing better this year.
Understood. Okay. Can you tell me what the mix of blade versus non-blade was in Q4 and whether any of the 2020 guidance is still going to be the same in terms of the mix from what you talked about at the Analyst Day?
Yeah. As far as the split, we don't disclose that on a quarterly basis. We'll have the revenue split on our financial when we release our K. It'll be available on Monday. As far as the change in guidance on revenue, and basically blade and non-blade revenue, that has not changed since we provided guidance.
Okay. Thank you very much.
Thanks, Pavel.
Once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Jeff Osborne with Cowen and Company. Please go ahead.
Good afternoon, guys. A couple questions on my end. I think you mentioned that the pipeline was strong, but I didn't hear the figure of the number of lines in the pipeline. Is that something you could share with us?
Jeff. As we talked about last year, we're transitioning from number of lines to gigawatts of what the pipeline is. The pipeline remains strong. It hasn't changed significantly as far as numbers from what we talked about in the past. We're moving away from the line discussion and talking more about GW of capacity, GW under contract, and utilization. It does remain strong, and we're still actively working a number of pretty interesting opportunities.
Jeff, it's Steve, just to add to it. If you think about big picture here, and I know we've repeated these numbers a few times, but we have basically finishing out Chennai. We'll have 18 GW of floor space under roof. We have four more lines in China, four more lines in India yet to sell in order to turn that into 18 GW under contract, call it. 15 under contract, 18 under rooftop, if you will, eight more lines there to fill. As we've said, we do expect over the next couple of years to slow the top-line growth on a % basis to really it's time to harvest, right, and turn that into free cash flow.
There's more than adequate pipeline, to Bill's point, to fill out the eight lines and then just be really smart about how and where and when those additions get made. You could see with tariffs in China from last year and now with COVID-19, you can imagine there's a bit of a delay around exactly how quickly some of the line conversions in China might be made. As we've said before, there are both onshore and offshore lines in the pipeline. Moving to the gigawatt utilization is a big-picture move. It doesn't change, just as Bill said, it doesn't change the overall demand profile for us to accomplish what we've told you.
That's helpful. Maybe just to follow up on the offshore discussion. I was always under the impression that you would maybe elect to put the offshore in Matamoros. Is that facility fully occupied, or is there any potential to have offshore there relative to China where you have the four lines?
Yeah, the current Matamoros facility is fully occupied. You could imagine, and I think we've shared before, that for us to think about the best sites for offshore blade production are likely to be locations where we already exist or nearby, where we've got immediate water access, where we can ship blades all over the world. Low-cost hubs could be Mexico, could be India, certainly could be Yangzhou, China. We have existing space on the water in Yangzhou. We would have to build space in the other locations in order to be world-class and cost competitive.
As we said in our prepared remarks, the real issue on offshore, there's a lot of interest in offshore, there's a lot of growth opportunity, there's a lot in the press, but getting that market to a point where it's big enough to really pull on a dedicated model like ours, that's what we're still working on. We've got to get the critical mass volumes up a little bit. Then to your point, operate off one of our world-class hubs, one or more of our world-class hubs to serve that market.
Got it. That's helpful. I just had two other quick lines of questioning. One, the coronivirus, you mentioned the $45 and the $15 of EBITDA. If I heard you right, you thought you could get 95% of the revenue back, but potentially only $5 of the EBITDA? You said you could still lose $10. I'm just trying to understand the decremental margins or the lack of the shared pain gain approach with that process, or maybe I misheard the statistics you were trying to give.
No, you heard it correct. We gave the guidance, the impact on Q1 would be $15 million adjusted EBITDA, and then for the year up to $10 million. Again, we're working closely with our customers. Some of that has to do with additional costs that we've incurred in Q1 to keep the labor force going, and then some other costs for PP&E and other things as you move throughout the year, just because of the safety of our associates at these facilities.
Got it. That's helpful, Bryan. The last one I had is just, I know it's early, but you highlight both at the Analyst Day and in today's deck that you want to use speed to your advantage. Is there any early indications, either through the Senvion R&D team or other initiatives that increased cycle time is actually playing out, and you're able to drive down that cost?
Yeah. We've got some transitions going on right now in the first quarter. As Adrian and Ramesh laid out at the Investor Day with the different phases of a transition, we're already tracking well ahead of what our baselines have been. I think we're well on the way to the goal of 50% reduction this year, if not better. The answer is early indications are that the planning we've put in place and the new kind of approach to the transitions is going to bear fruit.
It's good to hear, Bill. Thank you.
You bet.
Thanks, Jeff.
Thanks, Jeff.
Again, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Ethan Ellison with Morgan Stanley. Please go ahead.
Hey, guys. Two quick ones from me. If I'm not mistaken, I think there are nine manufacturing lines with GE with contracts that are expiring in 2020. Could you just talk or walk through the process of extending these contracts or backfilling them somehow?
Yeah, Ethan, thanks. It's Steve. We do need to extend those contracts, and that's obviously an important objective for this year. As you know, I think out of Iowa and Mexico, those lines are serving primarily the U.S. market. Mexico serves perhaps 10% of the volume goes to Mexico. Vast majority comes to the U.S. The U.S. market is strong. The competitiveness of particularly of Mexico serving the U.S. market is extremely strong. We're quite confident in being able to get that done. You're right, it's an important objective for us in this timeframe.
Okay, perfect. Maybe just to follow up on the transition activity and the ramp times that were trending better than you had expected or planned for. In the past, you've talked about this taking about six months. Just to clarify, if we're seeing 50% improvement, are we expecting to see transitions take about three months by the end of the year?
Yeah. By the end of the year, maybe. Again, this is a process. Like I said, early results are looking very good. Yeah, it depends on the nature of the transition, Ethan. It can be three months, it can be six months, but I would expect both of those, the low end and the high end to come back down a bit from that. The answer is yes, we expect to see good results by the end of the year and throughout the year.
Great. Thanks, all.
Thank you.
Thanks, Ethan.
Thank you. I would now like to turn the floor over to management for closing comments.
Thanks all for joining our call today and for your continued interest in TPIC. We look forward to continuing to update you as we make progress. Thanks so much.
This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.