Greetings. Welcome to the Broadwind acquisition of MCM conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to Tom Ciccone, CFO. Thank you, Tom. You may begin.
Good morning, and thank you for joining today's call. After the market closed yesterday, we issued a press release announcing Broadwind's acquisition of MCM. In addition to this release, a presentation related to the transaction is currently available in the investor relations section of our corporate website. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factor section of our latest annual and quarterly filings with the SEC.
Additionally, please note that you can find reconciliations of historical non-GAAP financial measures discussed during our call in the press release issued yesterday. With that, I'll turn the call over to Broadwind's President and CEO, Eric Blashford.
Thanks, Tom, and welcome to all of you joining today's presentation. After the market closed yesterday, we issued a press release announcing our acquisition of privately held MCM for a purchase price of $18 million plus an earnout, subject to meeting certain financial performance milestones within 14 months of the transaction close. MCM is an Alabama-based precision manufacturer with a 30-year track record of designing, engineering, and fabricating metal components, the electric utility, and critical infrastructure markets. From its 37,000 sq ft facility in Northport, near Tuscaloosa, MCM supplies mission-critical hardware to some of the nation's leading utilities and their suppliers, with products engineered to meet stringent standards for corrosion resistance, conductivity, and performance under extreme weather conditions in high-power transmission line applications.
Through a vertically integrated offering that includes machining, fabrication, assembly, kitting, and delivery, MCM has established itself as a leading component provider to the domestic electrical transmission and distribution, or T&D sector. MCM is 100% U.S.-based and sources all raw materials through an established domestic supplier network, creating a responsive and reliable supply of products for their customers on demand. MCM's management and its approximately 50 employees all joined Broadwind upon the closing of the acquisition. The acquisition of MCM marks a defining milestone in Broadwind's transformation into a more focused, higher value solutions provider serving the power generation and critical infrastructure markets. Over the past several years, we have sold non-core assets, exited underperforming product lines, and strengthened our balance sheet. We remain focused on building more stable, higher value revenue streams supported by distinct capabilities, lasting competitive advantages, and strong long-term growth opportunities.
Beginning in 2018, we launched a strategic campaign to diversify away from the wind market, which had represented a significant portion of Broadwind's revenue. As recently as 2023, lower margin and often uneven wind-related revenue represented as much as 50% of our total revenue and depended heavily on tax credit support to achieve acceptable profitability. Over the last two years, we left the wind tower market entirely. Today, with the acquisition of MCM, we are taking the next important step in our evolution toward becoming a leading supplier of critical components for the power generation and grid infrastructure markets. Following the wind-down of our legacy wind business, MCM gives Broadwind an attractive platform to rebuild its skilled workforce and rescale domestic manufacturing capability. It also serves the electrical T&D market, which is seeing record investment in grid modernization, expansion, hardening, and resilience.
With approximately 95% of its trailing 12-month revenue generated from T&D component manufacturing, MCM gives Broadwind an immediate and strategic entry point into this attractive growing market. MCM's experienced manufacturing team, technical expertise, longstanding customer relationships, and track record of profitable growth make the business a strong strategic fit for Broadwind and a compelling foundation for the next phase of our growth. Next, allow me to provide a bit more detail on our investment case and why we're excited about the value creation potential of MCM under the Broadwind umbrella. First, MCM gives Broadwind a strategic entry point into fast-growing power generation and critical infrastructure markets. It positions us to benefit from a multi-year wave of investment to upgrade, expand, and strengthen the nation's power grid as rising electricity demand calls for a more reliable and efficient transmission network.
The U.S. transmission network spans more than 600,000 mi, and it needs significant investment to meet growing demand and stay reliable and resilient. Second, MCM adds a higher value revenue stream in our target markets. MCM grew revenue at a compounded annual rate of 25% over the four years ending 2025. For the 12 months ending June 30th, 2026, its adjusted EBITDA margin was approximately 23%, well above Broadwind's. With most of its revenue over that period coming from the domestic T&D market, which shifts our revenue mix toward power and critical infrastructure and directly advances our strategic priorities. Third, the acquisition expands our domestic manufacturing footprint and skilled workforce. MCM adds about 50 skilled non-union employees and a 37,000 sq ft engineering and manufacturing facility in Northport, Alabama. With MCM, our total employee base grows by more than 20%.
MCM brings longstanding customer relationships backed by sole source and preferred supplier positions. Its customer base is entirely complementary to ours, which broadens and diversifies our commercial relationships. MCM stands out for short lead times, day-to-day delivery, and consistently meeting demanding utility-grade specifications. As a result, its top customers have been with MCM for more than 20 years on average. With that, I will turn the call back over to Tom for additional details around the transaction.
Thank you, Eric. On October 30th, Broadwind completed the acquisition of privately held MCM for $18 million in cash at closing. The transaction also includes up to $7 million of additional performance-based consideration tied to the achievement of defined financial milestones over the next 14 months. Beginning in the fourth quarter of 2026, it is anticipated that MCM's results will be reported within a new Grid Infrastructure Solutions segment. The trailing 12 months ended June 30th, 2026, MCM generated approximately $16.5 million of revenue and $3.7 million of adjusted EBITDA, representing an adjusted EBITDA margin of approximately 23%. Over the past five years, MCM has invested in new capacity additions in support of backlog growth, including an expansion of the Northport facility in 2023.
Moving forward into 2027, we expect near-term capital expenditures to be largely related to maintenance-type spend, and we expect that these expenditures will not exceed 5% of revenue. On a pro forma combined basis, for the trailing 12 months ended June 30th, 2026, Broadwind and MCM generated approximately $90 million of revenue and $3.6 million of adjusted EBITDA, representing a blended margin of 4%. After giving effect to the transaction, pro forma net debt to trailing 12-month adjusted EBITDA was approximately 3.7x. Based on MCM's trailing 12-month adjusted EBITDA as of June 30th, 2026, the upfront purchase price represents a multiple of approximately 4.8x. This valuation excludes any performance-based consideration that may become payable upon the achievement of the specified milestones. We expect the transaction to be accretive to Broadwind's adjusted EBITDA margin and earnings per share beginning in the fourth quarter of 2026.
With that overview of the transaction economics and pro forma financial profile, I will turn the call back to Eric for his concluding remarks.
Thanks, Tom. In conclusion, the acquisition of MCM represents an important milestone in Broadwind's strategic transformation. It advances our shift toward higher value, more durable revenue streams, and strengthens our position as a leading domestic supplier to the power generation and critical infrastructure markets. The transaction, we expect to be accretive to both adjusted EBITDA margin and earnings per share, provides a compelling entry point into component manufacturing for the domestic T&D market, while positioning us to rescale our manufacturing capacity and skilled labor force at an attractive valuation multiple. We believe this acquisition provides a strong template for how we intend to approach strategic acquisitions going forward as we pursue high-quality, low-risk bolt-on assets that expand our domestic manufacturing base in a disciplined, ratable fashion, while adding experienced management teams and capabilities to support Broadwind's next phase of growth.
On behalf of the entire Broadwind team, we're excited to welcome the people of MCM to our company. Our shared commitment to product quality, operational excellence, and deep long-term customer relationships gives us confidence that MCM will be a solid long-term strategic fit and a meaningful contributor to shareholder value over time. With that, I'll turn the call back over to the operator to begin our Q&A session.
Thank you. We will now be conducting a question-and-answer session. We ask that you please limit yourself to one question and one follow-up. 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 keys. One moment, please, while we poll for questions. Our first question is from Eric Stine with Craig-Hallum. Please proceed with your question.
Hi, Eric. Hi, Tom. Good morning.
Eric, good morning.
Morning.
Hey, you mentioned that MCM brings all new customers to Broadwind, but I am curious, are these customers that with your business as it stands today before the acquisitions, are these customers that in some cases could be your customers or ones that you have tried to penetrate, but you have had challenges for whatever reason? Also just curious if there are any synergies within the supply chain based on this business.
Yeah, thanks, Eric. This is Eric. This is a different segment than we have been attacking with our power generation. For instance, we are in power generation for utility scale natural gas, utility scale natural gas power generation customers. This is T&D, and I think of transmission as once the power plant is done generating electricity, it goes to a transformer which upscales it, and then the electricity is transmitted over these high-tension, high-power lines near towards where it is used or distribution points. These customers are different than those customers than we would have been pursuing in the other businesses. There is some potential for cross-selling, but it is a different but complementary market.
Got it. Then in terms of the supply chain that I would assume, is it any synergies there to be had, or is it pretty separate?
Oh, you are talking about the suppliers. Yes. There is steel used in all of our businesses, so there is the potential for synergies in terms of our buys being larger, in that, yes, we both use raw steel in Industrial Solutions and in this business. Yes, there are some synergies there on supply chain side.
Okay. Just quick follow-up. Obviously, a pretty impressive growth rate for this company over the last four to five years. Just curious, is that a growth rate still relatively small? Is that a growth rate that you think you can accelerate or that this business, with a little investment behind it, a bigger company behind it, you can grow that faster?
Yeah, definitely. As part of the diligence, I have spoken to the major customers, and they are both saying they are encouraged and excited to see growth at MCM because they have got demand that they want to pass to our business. Yes, we do expect them to grow with our support.
Okay, thank you.
Thanks, Eric.
Our next question is from Justin Clare with Roth Capital Partners. Please proceed with your question.
Hey, good morning. Congrats on the acquisition here. Wanted to just follow up on the growth outlook here. I guess first, 25% CAGR over the last four years ending 2025. Wondering if you could share year-to-date in 2026, either through the second quarter or the third quarter, what the growth rate was for MCM, and then just what orders and backlog might indicate for the outlook into 2027.
Well, this business continues to grow. I do not know that I can comment about the 25% growth so far this year, but I know it has seen growth. Its orders are definitely up. Its backlog is about six months at this point in time and growing. As I said, I have spoken to both customers, and they are expecting demand because transmission in this country, which is why Grid Infrastructure Solutions was so interesting to us, is because we all know that this country needs to have its grid updated. That is where these customers play, and that is where they are looking for MCM with some growth supported by Broadwind to grow. Again, backlog is about six months now and growing. Their orders have been very strong, especially in the last quarter.
Okay, perfect. Thanks. Then maybe just on margins. I think in the trailing 12 months, it was about a 23% adjusted EBITDA margin. Wonder if you could speak to kind of what structurally supports that level of profitability. Is it specialized manufacturing capabilities or certain customer qualifications that provide a level of pricing power? Then just curious, was there anything unusual in terms of product mix or pricing in that trailing 12-month timeframe, or is that a level of EBITDA margins that could be sustainable going forward here?
Well, we tend to be conservative, as you know, Justin. So, in our models, we're modeling high teens. The reason they're able to maintain these margins is because there's a lot of complexity in the grid. They maintain, as an example, 600 different SKUs for these couple main customers. One of them is 400 alone. Why is that, you might ask? It's because the grid is 60 or 70 years old, and it's different in all parts of the country. So, when they supply these yokes and fasteners and the equipment that holds these high-tension wires to these towers around the country, they've got to be able to respond to the exact specifications that were at that grid at that time, because it has to be replicated in order to maintain the wind resistance and whatnot in that particular location.
So, because of that diversification of products and the responsiveness, they're able to maintain a respectable margin.
Got it. Okay. Thank you.
The only thing I will add, Justin, to that, a little add to the answer is, sometimes, for example, if there's a natural disaster, there is a real immediate need for them to kind of turn over their manufacturing to emergency. That tends to generate some additional profitability. So that's where we can get maybe an extra two or three points because of the responsiveness we have to be able to provide to our customers so they can provide it to their utility customers.
Our next question is from Amit Dayal with H.C. Wainwright. Please proceed with your question.
Thank you. Good morning, guys, and congrats on the transaction. Just on the growth side again, do we need to add capacity or invest in sort of expanding the product line, et cetera, to maintain that 20%-25% level growth? Or this becomes a little bit more of a stable business with stable EBITDA margins going forward?
So yeah, right as the transaction was closing, some capital was put into the business, which will be installed here in the next month or so. That adds necessary capacity to continue the growth path. Beyond that, we don't see heavy capital investment certainly over the next year or so. But again, in talking to the customers, they're both excited to have MCM be part of the Broadwind family because they know that we can provide growth capital if necessary for them to continue to grow as their customers are growing.
Understood. This may be a little early, Eric, but are you continuing to target other acquisitions, like similar type deals, et cetera?
Yeah, I think this is a good example of what we're targeting. As I've been saying publicly, we're looking for $10 million-$15 million- $20 million acquisitions that would be bolt-on, but very, very particular in terms of margin, in terms of market, in terms of the profitability, in terms of the people. So we're still looking. We need to take some time to bring this part of our family, but then certainly within next year or the year after that, we continue to expect to grow through M&A going forward. That is our plan.
Thank you. That's all I ask. Appreciate it.
We have reached the end of the question- and- answer session. I would like to turn the floor back over to Eric Blashford for closing comments.
Well, thank you very much for listening. We are very excited about this acquisition. We have met the people, spent a lot of time at MCM. We are excited for their growth and excited for them to be part of the Broadwind family. Stay tuned for more good news from Broadwind going forward. Appreciate your time.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.