What happened

Shares of windmill blade maker TPI Composites (TPIC) tumbled 12.5% through 11:15 a.m. ET Thursday after the company reported a much bigger-than-expected quarterly loss despite beating expectations for sales.

Heading into the first quarter of 2023, analysts had forecast that TPI would lose $0.38 per share on sales of $378.4 million. TPI exceeded the sales expectation, with revenue coming in at $404.1 million, but missed badly on earnings, losing $0.88 per share.  

So what

TPI grew its sales nearly 18% in Q1, as compared to Q1 2022. The company's core business selling wind blades fared even better, growing 20.5%. However, TPI's questionable foray into building composite bus bodies for the automotive industry appears to be flagging. Sales there slid more than 20% year over year.  

Cost of goods sold rose roughly in line with sales growth, suggesting TPI isn't getting a whole lot of scale advantage from growing its business. Meanwhile, higher taxes and unfavorable foreign exchange rates worsened the company's losses. And even as TPI kept its debt levels largely under control, the cost of servicing its debt added to costs in this era of higher interest rates.

Now what

This could be a concern going forward, as TPI noted it took out $132.5 million in new debt in the form of 5.25% green convertible senior notes in Q1. Although management called the capital raise "opportunistic," and aimed at growing production capacity further, the fact that TPI continues to burn cash such that it has to raise debt at all is a concern -- especially given that increased scale doesn't appear to be yielding increased efficiency for the business.

According to the company's abbreviated cash flow statement, operating cash flow remains decidedly negative, with $83.9 million burned in the quarter (actually a bit worse than last year). And management nearly doubled its forecast for capital spending this year (now $40 million to $45 million), which will accelerate cash consumption even further.

All in all, this seems a disappointing story about a company that should be flying high on a tailwind from the green energy push -- but isn't.