Finance Colombia: One of the things I wanted to ask you, since we are on the theme of Barranquilla and the community, you guys have an advantage being here because it’s a port city, but like I said, not enough people outside of Colombia know about Barranquilla. I know that when you bring big customers and investors in here, I bet for a lot of them it’s the first time that they’ve ever been to the city.

Chris Daes: And they love it. You know, the first time they come scared.

Finance Colombia: [Laughs].

Chris Daes: And then they come alone…And they go visit Cartagena, and they come to Barranquilla, and they go to Santa Marta, and they love it. Because hey, you know, the coast of Colombia is a beautiful sight, it’s two hours away by plane from Miami for example. It’s close, it’s nice, I mean people are friendly. Obviously, we have problems, like in every city, but Barranquilla deserves better luck than we have had so far. Barranquilla, like you’ve said before, most people don’t talk about it, but having a company in Barranquilla, you export a container from here to Miami, all included, all included, from Tecnoglass’ door to Miami’s door for $1,600 a container.

Finance Colombia: Wow!

Chris Daes: $1600 a container! All included! The land and the freight. I don’t know where you can get it cheaper than that.

Finance Colombia: I know somebody that is getting shipments from Bogota to the US, and they are paying $3200 a pallet!

Chris Daes: That is simply too much, because they are located in the wrong place. That’s why locating the company in Barranquilla is so important, and that’s why Tecnoglass won’t move out of here. I have said that the day I have to move the company, I’d prefer to go.

Finance Colombia: I got you. You know, so just briefly to finish that theme up, when you talk to companies outside of Colombia, let’s say in the US, why should they consider Barranquilla for their base of operations, whether that’s manufacturing, logistics, I know that there are contact centers here, I know that you have bilingual people, I know that you have good universities…

Chris Daes: Here everything is made simple. We are not complicated people. We handle people right, we welcome the people from outside, the guys are good workers, they learn quickly, they are not complainers, they are happy, the help you out, they really love the company where they work, so it’s the perfect environment! Barranquilla is everything to us.

Finance Colombia: Wow. That’s great to know. Now, you guys are almost at your 40^th anniversary, 40^th birthday-

Chris Daes: Almost no, we are 40.

Finance Colombia: 40 years old, wow, wow, congratulations!

Chris Daes: 8^th of March we were 40 years old.

Finance Colombia: Well, happy birthday to Tecnoglass!

Chris Daes: Thank you.

Finance Colombia: And you know, is there anything that you wanted to mention? You guys are moving so quickly, I told Santiago, it’s hard to report on Tecnoglass, because every time there’s a headline, it’s “Tecnoglass breaks new records,” I’m like, I need to, as an editor, come up with better headlines!

Chris Daes: I am sorry to tell you but you are going to keep being harassed by us!

Finance Colombia: [Laughs].

Chris Daes: And by what we do, because there are three or four things that you are going to find out soon that we are working on that will be game changers, like usual. I mean, we always try to make it good, make it right, go forward, and we will continue to work that path.

Finance Colombia: Wonderful, it’s always good to catch up with you, I know that you are a busy man. I feel honored you made time for me, thanks a lot.

“Human rights education is fundamental to addressing respect and promotion of [human rights]. We can’t require people to be committed to initiatives that they are not aware of, or that demand respect for [principles] if they ignore it. Our role today as a company is to sensitize our employees, in all their roles, in order to empower them for the world we live in, to be informed, assertive and responsible actors,” says Chris Daes, COO of Tecnoglass.

The training includes two sessions, an initial one with the presence of the Atlantico Regional Ombudsman, Miguel Linero De Cambil and the National Director of Promotion and Dissemination, Gisella Arias; and the closing will be run by Colombia’s National Defender, Carlos Camargo Assis (a government position).

“This will be the first training of a cycle of activities planned not only to train the companies, but to leave installed capacity so that the same companies have the power to train their employees,” says Carlos Camargo.

Tecnoglass asserted that these voluntary activities reflect its commitment to sustainability immersed in its culture, decisions, processes, products and governance as an integral part of its business and reaffirms the protection of human rights throughout its value chain for all stakeholders.

Photos courtesy Tecnoglass

With its hurricane resistant and energy efficient high-technology glass products, Tecnoglass and its subsidiary ES Windows dominates the South Florida market but is just now starting to expand in earnest throughout the rest of the United States. Finance Colombia executive editor Loren Moss sat down with Tecnoglass Chief Operating Officer and co-founder (along with his brother José Manuel) Christian Daes to talk about how the company’s solid foundations underpin its high-growth outlook and recent activity.

Finance Colombia: I’m here with Chris Daes, the COO and cofounder of Tecnoglass. We are here in sunny Barranquilla, it’s always sunny here. I saw it only rain once, and boy did it rain! [Laughs].

Chris Daes: [Laughs] When it rains, it pours.

Finance Colombia: Well, it’s great to be here again at Tecnoglass operational headquarters, the factory site basically, and you guys are coming off of a great year, so first, congratulations. I already talked to (CFO) Santiago about that. So let’s talk a little bit about…I know that you just came off of a great quarter too, that was announced last week, so the good news just keeps coming. So I think that you guys obviously have been doing a good job here. I’ve seen you grow from…the first time I was here you had less than 4,000 employees, I think you’re now about 10,000, that’s amazing. And so, tell me a little bit. We won’t go too deep into the numbers, but just tell me a little bit about, let’s recap the great first quarter that you had and the strong start to the year.

Chris Daes: Well, it’s becoming usual that every quarter we give good news: that we grew, that we are doing better, that our margins are improving, that our backlog is growing, so I sometimes think that I’m living in a dream, and I wouldn’t like to wake up. The truth is the company is doing so good, we’re trying to keep it that way, we’re working hard to make sure that it continues to be moving that way. Quarter two is looking great too. So here we are, looking for opportunities, looking for new markets, looking for new geographies. Sales went up 60% in quarter one compared to quarter one last year, EBITDA almost doubled, profit almost doubled, and we think the rest of the year is going to be very similar to quarter one, only better, and we really believe that 2024 is gonna be the best year for the company ever. It’s looking that way, we get in a lot of new orders, construction is booming, still, you know, we’re getting, I don’t know if the market is slowing down or not but we are growing, maybe we are eating too much of the pie.

Which, either way is good news, and we are moving into new geographies to make sure we can continue the train.

Finance Colombia: You know let’s talk a little bit about that, because you guys already have a great strong base in Florida, as most of your sales go into the United States, but you guys now are expanding. I know that you attended a major trade show a few months ago, you guys are opening showrooms across the country, you know I was in the Bahamas, and I was at my cousin’s restaurant, which is on one of the remote islands, and I met a guy, and I said, you know, “what do you do?” And he said “I’m a Tecnoglass dealer (Palm Beach Glass Specialties)” and I said “really?!”, you know, so you guys really are growing. But tell me a little bit about the expanded footprint in this new… I guess not retail, like to the consumer, but showrooms and a new presence across the country.

Chris Daes: Well it’s a lot easier, I mean it makes a lot more sense to open new geographies, because then we take the stress off of Florida, we don’t need to, you know, worry too much about Florida. Even though, like I was saying yesterday in a phone call with some stockholders that were interviewing me, I said, “we don’t want Florida to be 50% of the pie, but we grow outside of Florida, and Florida keeps growing stronger than the outside too!” So even though we try to move away from Florida, Florida has a hold of us and won’t let us go. But anyways, we opened in South Carolina a show room, in Texas, Arizona, Manhattan, in California, and in so many places where they want our windows. And we’re coming with new products, for example what happened with the garage door; we developed a new garage door and it’s already selling two and a half to three million dollars a month. So it’s unbelievable what the company is doing, what our research and development team is doing, the production guys, the selling side is, I mean, we have no complaints, so it’s like a perfect story.

Finance Colombia: That’s great, you know I talked to Santiago a little bit about the backlog increasing, and there’s two ways that happens, you can either get more sales, or not have enough capacity. Now, I know you are getting more sales, but you guys are also taking steps to increase your capacity, your output, your production capacity here in Barranquilla, right?

Tecnoglass has its primary manufacturing facilities in Barranquilla, Colombia with convenient port access.

Chris Daes: We have increased the capacity so much that now we can produce 20% or 30% more not working on Sundays. Before we used to invoice 30% less and have to work on Sundays, that’s how much the capacity has increased. And we are adding more, now in September and October we’ll add another big percentage of capacity that will make us be, you know, we can [our delivery times] to three weeks to be there in the States, this is gonna be unbelievable, what we are going to be able to do. We want to have our customer’s satisfaction at the maximum level possible, customers are happy, services are getting there soon, reports are coming soon, the replacements are coming soon, I mean, like I said before, this is a dream come true.

Finance Colombia: You know it’s great, and I’d love to—now is not the time, but I know you guys have a tremendous story going back to how you and your brother first started. You know, even making solar stoves, and that’s a story that I’d love to tell with you one day, even before that, even the story—your family’s story and everything like that, we won’t go into that here. But really, when you say it’s a dream come true, it’s amazing, because I know, knowing a little bit about your story and the Tecnoglass story I know that’s true on so many levels, and I want to get into kind of, some of the things that you’re going to give back. But before we do that, I want to talk a little bit about…you know I’ve been down on the floors, you guys have automation in place, you guys have state of the art facilities, all coupled with the robotics, and the computerized measurements and quality controls and things like that. So I do want to talk a little bit about: do you need to expand the output capacity here in Barranquilla to meet current demands, are you concerned about the—there’s not really a slowdown right now in the US but the growth is slowed, it’s still growing, are there any concerns about the economy right now, and how that fits into your prognosis?

Chris Daes: I like to read a lot, and one of the things I read lately from somebody in the US, was that they were in another business, and they were expanding and he got a question saying, “why do you expand if the economy might slow down?” And he says, “maybe we’ll miss it now, and with it too much today, but in a year and a half, this comes around, turns around, then we’ll be ready when the economy booms again.” We are ready for the next high, because economy always keeps; you know, slows down, goes down, and then goes up again then slows down and  goes up again. If you look at the chart from the Dow Jones for example, the last 50 years, it’s always going up.

A Tecnoglass employee working within the company’s factory in Barranquilla, Colombia (Photo credit: Liliana Padierna)

Finance Colombia: Yeah.

Chris Daes: You see it slows down, but it always comes back to normal and continues to grow. So we have nothing to worry about, we are doing it not with debt but we are doing it with the cash flow, the company doesn’t owe too much money, I think net debt is 30 or 40 million dollars. This couldn’t be better, we couldn’t be doing any better, we are not afraid of having too much capacity because, you know, we can rationalize later and wait for the good moment again, but even though we have built so much capacity, we are still sold out! I mean, we are not working on Sundays but we have enough on our hands, I mean, right now we couldn’t [do anything else] but sell glass and aluminum, I mean, we are waiting for more machines to do more windows, we are waiting for more machines to do more laminated glass and insulated glass…Simply, we are taking the right steps, and there is a lot of news that you will hear within the next few months that is going to make a lot of sense of why we are doing this.

Finance Colombia: Wow, that’s great, and I’m excited to hear that, knowing what can be coming. Now, you know, you guys always have had a great record of giving back. We are here in Barranquilla, and I think that Barranquilla does not get enough credit. In Colombia, Bogota gets a lot of attention, Medellin gets a lot of attention, but Barranquilla, I mean, you’ve got a great public-private partnership as far as the relationship between the private sector, not just Tecnoglass but other companies in the area working, there’s a lot of civic engagement that I see when I come in here, and you can feel it. Now, we talked to some people, and I think this is really important.

Outside we can see the “Ventana al Mundo”, which is a monument sculpture that you guys gave to the city, but more important than that, we talked to, I talked to various people, I talked to some people that are receiving scholarships from Tecnoglass, we talked to a lady who has been working here for 15 years and you guys went out and looked at her house to see what it needed and fixed up her house. Now I know that you’ve been shy about talking about this, but when it comes to ESG (Environmental, Social, Governance), investors want to know, so maybe if you could talk a little bit about the philosophy. I know you don’t like to brag, I know that you don’t do things to go “oh look how great we are, look at us!” I know that’s not how you do things, but I think that it’s important that stakeholders, that customers, that investors, understand the commitment that Tecnoglass has made to Barranquilla, to the Atlantic coast, and to Colombia.

‘Miami’s Icon Brickell development is a Tecnoglass installation

Chris Daes: We definitely love to help, I mean it’s in our system, in our blood. We see every opportunity to make Barranquilla better, beautiful, exciting, I mean, we don’t have enough hands to do all the things that we would like to do for Barranquilla. We are building a third monument that is going be close to here, to the plant, in Puerto Colombia, the city next door, like five, six kilometers away from here, 3 miles, and is gonna be the most beautiful of the three sisters.

Finance Colombia: Okay.

Chris Daes: “La Ventana al Mundo” (Window to The World), “La Ventana de Campeones” (Window of Champions) and “La Ventana de Sueños” (Window of Dreams). And we are going to build a school for poor people here in La Playa.

Finance Colombia: Okay.

Chris Daes: We are going to  invest 2 to 3 million dollars. We have 500 people going to the university, we pay for their scholarship, we fix 10 houses of employees every month. We invest money in them, and we have many other things that we do for people here, because we would like—I mean, our dream is, for the people at least, for the people that work with us, to make them the happiest that we could, and for the city of Barranquilla that they could be proud that Tecnoglass one day was here. We don’t want to be rich and: what did we leave? Nothing. We: “oh, we came out in the list of the richest guys,” no no no, like I say always, I don’t wanna be rich, I wanna be ‘sabroso’ (savory).

Finance Colombia: [Laughs].

Chris Daes: I wanna be you know, desired, that we were good people, that we helped the city, that we were always constantly thinking of the wellbeing of everybody around us, because that’s within our DNA.

Finance Colombia: Yeah. You know I was going to ask you to tell me a little bit about the prognosis for the coming year but you’ve actually already done a very good job about that. But one of the things I wanted to ask you, since we are on the theme of Barranquilla and the community, you guys have an advantage being here because it’s a port city, but like I said, not enough people outside of Colombia know about Barranquilla. I know that when you bring big customers and investors in here, I bet for a lot of them it’s the first time that they’ve ever been to the city.

Chris Daes: And they love it. You know, the first time they come scared.

Finance Colombia: [Laughs].

Chris Daes: And then they come alone…And they go visit Cartagena, and they come to Barranquilla, and they go to Santa Marta, and they love it. Because hey, you know, the coast of Colombia is a beautiful sight, it’s two hours away by plane from Miami for example. It’s close, it’s nice, I mean people are friendly. Obviously, we have problems, like in every city, but Barranquilla deserves better luck than we have had so far. Barranquilla, like you’ve said before, most people don’t talk about it, but having a company in Barranquilla, you export a container from here to Miami, all included, all included, from Tecnoglass’ door to Miami’s door for $1,600 a container.

Finance Colombia: Wow!

Chris Daes: $1600 a container! All included! The land and the freight. I don’t know where you can get it cheaper than that.

Finance Colombia: I know somebody that is getting shipments from Bogota to the US, and they are paying $3200 a pallet!

Chris Daes: That is simply too much, because they are located in the wrong place. That’s why locating the company in Barranquilla is so important, and that’s why Tecnoglass won’t move out of here. I have said that the day I have to move the company, I’d prefer to go.

Finance Colombia: I got you. You know, so just briefly to finish that theme up, when you talk to companies outside of Colombia, let’s say in the US, why should they consider Barranquilla for their base of operations, whether that’s manufacturing, logistics, I know that there are contact centers here, I know that you have bilingual people, I know that you have good universities…

Chris Daes: Here everything is made simple. We are not complicated people. We handle people right, we welcome the people from outside, the guys are good workers, they learn quickly, they are not complainers, they are happy, the help you out, they really love the company where they work, so it’s the perfect environment! Barranquilla is everything to us.

Finance Colombia: Wow. That’s great to know. Now, you guys are almost at your 40^th anniversary, 40^th birthday-

Chris Daes: Almost no, we are 40.

Finance Colombia: 40 years old, wow, wow, congratulations!

Chris Daes: 8^th of March we were 40 years old.

Finance Colombia: Well, happy birthday to Tecnoglass!

Chris Daes: Thank you.

Finance Colombia: And you know, is there anything that you wanted to mention? You guys are moving so quickly, I told Santiago, it’s hard to report on Tecnoglass, because every time there’s a headline, it’s “Tecnoglass breaks new records,” I’m like, I need to, as an editor, come up with better headlines!

Chris Daes: I am sorry to tell you but you are going to keep being harassed by us!

Finance Colombia: [Laughs].

Chris Daes: And by what we do, because there are three or four things that you are going to find out soon that we are working on that will be game changers, like usual. I mean, we always try to make it good, make it right, go forward, and we will continue to work that path.

Finance Colombia: Wonderful, it’s always good to catch up with you, I know that you are a busy man. I feel honored you made time for me, thanks a lot.

Tecnoglass says that with the formulation and implementation of its carbon neutrality strategy, it is taking action on its commitment to fight climate change, and continues with a robust plan for renewable energy, energy efficiency, improvement of its production chain and structuring of greenhouse gas offset projects on its path of becoming a certified carbon neutral company.

In order to assess its carbon footprint, the company engaged outside consultants to measure its emissions from 2016 through the end of 2021 and invested in carbon credits to reach neutrality through that period. Tecnoglass is currently assessing the 2022 impact and expects to invest further to achieve 2022 carbon neutrality by the third quarter of 2023.

In line with the sustainability strategy and decarbonization plan, in 2017 Tecnoglass started a solar panel project with approximately 15,000 panels, which has been reducing the effect of over 10,000 tons of CO₂ emissions per year since inception. This year, consolidating that vision, Tecnoglass inaugurated a cogeneration project with two gas engines with the capacity to produce 70.3 GWh/year of electrical energy, expected to reduce approximately an incremental 5,500 tons of CO₂ emissions per year.

FTSE Russell has already conducted an analysis that estimated over 75% of the company’s revenues are already considered “Green Revenues,” which are defined as those that “are derived from products, goods and services that have a positive environmental utility: that help prevent, restore and/or adapt to issues deriving from climate change, natural resource limitations and environmental degradation.” Additionally, from a holistic ESG perspective, Tecnoglass completed a Corporate Sustainability Assessment Report carried out by S&P Global Ratings, which placed Tecnoglass within the top 15-20% of the Building Products S&P Global ESG Score.

“To be a carbon neutral company has been one of our major goals for several years. We have taken several actions over the last decade to increase our energy efficiency through the use of solar panels and natural gas co-generation. Through this proactive investment we have positioned Tecnoglass to be a carbon neutral company well ahead of regional and global timetables and mandates,” said Christian Daes, COO of Tecnoglass.

Daes went on to add, “While our production process is very clean and sustainable, our end products are the ones making a much more significant contribution to the environment and the consequences of global warming. Tecnoglass continues to expand its presence throughout the US, proving low emissivity glass and windows as well as impact resistant glass, windows and doors to mitigate and reduce the damages created by stronger and more frequent weather storms resulting from climate change.”

The low emissivity glass manufactured by Tecnoglass has been tested to provide up to 36% in energy savings for homes and buildings when compared to regular glass according to the Pacific Northwest National Laboratory. Furthermore, the Architecture 2030 Organization estimates that buildings in general account for approximately 40% of annual global CO₂ emissions. As such, Tecnoglass is not only contributing to the environment by migrating into a carbon neutral production process, but by also contributing with high-end products designed to greatly reduce global emissions.

“Every day more and more organizations join in the commitment to work for the conservation of the environment and natural resources. With this in mind, the Tecnoglass group reiterates its commitment in the fight against climate change, contributing to the United Nations Sustainable Development Goals, and the Colombian government’s objective of reducing 51% of GHG emissions by 2030 and carbon neutral economy by 2050,” said the company in a statement.

The results are driven by organic growth in the company’s traditional base of multifamily and commercial building products (up 55%), along with its relatively new business in the US single-family residential market, (up 40%). The gross margin of 53.2% is also a new record.

José Manuel Daes, Chief Executive Officer of Tecnoglass, said in a statement: “Our strong momentum continued into 2023 with record first quarter results. We generated year-over-year growth in all of our key operating metrics, resulting in record first quarter revenues, gross profit, Adjusted EBITDA, operating cash flow and free cash flow. This performance further builds upon our established track record of achieving strong financial performance and returns for shareholders, derived from a multi-year effort to fortify our architectural glass platform through sound investments in strategic automation and capacity enhancements. Our continued expanding backlog resulted in a third straight quarter of approximately 60% year-over-year growth in multifamily/commercial revenues. We were also particularly pleased with the continued rapid growth of our single-family residential products. The shorter cash cycle in our single-family residential business, along with our prudent working capital management, also helped us generate our 13th consecutive quarter of strong cash flow. Achieving these results amid a challenging macro-economic backdrop further validates our growth strategy and our structural competitive advantages. Overall, I am proud of the efforts of all of our team members and as we look to the balance of the year, we believe we have all of the tools in place to execute against our multi-faceted growth strategy to further cement our position as an industry leader in the architectural glass market.”

Record cash flow from operations hit $43.1 Million USD and Free Cash Flow reached $27.5 million. The company says it is continuing with its facility investments that should increase operational capacity to meet demand. Earlier this year, Tecnoglass announced new product lines, and in an interview with Finance Colombia, indicated that it continues to research areas of innovation and growth.

“We are thrilled to report an excellent start to the year as demand for our single-family residential and multifamily/commercial products remains strong. We are encouraged by the solid levels of quoting and bidding activity in our markets, with the accelerating growth in our backlog to a record $776 million at quarter-end, reflecting an increasing number of projects in our commercial pipeline with visibility well into 2024. We are encouraged to see the Architectural Billings Index (ABI), which forecasts business conditions for the mid-to-high-rise end-market, return to expansionary levels in March, which further validates what we are seeing in our main markets. On all sides of our business, our ability to timely deliver best-in-class products is driving significant revenue growth and market share gains. We remain focused on consistently improving within our vertically-integrated operations as we continue to produce innovative new products and geographic diversification,” said COO and co-founder Christian Daes.

Tecnoglass ended the first quarter of 2023 with total liquidity of approximately $300 million, including cash and cash equivalents of $128.5 million and availability under its committed revolving credit facilities of $170 million. Given the company’s continued growth in Adjusted EBITDA and strong cash generation, debt leverage continues to trend lower and now stands at 0.1 times net debt to LTM Adjusted EBITDA, compared to 0.6 times in the prior year quarter.

Santiago Giraldo, Chief Financial Officer of Tecnoglass, stated, “We are increasing our full year 2023 outlook to reflect our strong start to 2023 and positive sales momentum into the second quarter, reflected by record invoicing months in March and April. We now expect full year 2023 revenues to grow organically to a range of $810 million to $850 million (approximately 16% growth at the midpoint of the range) and for Adjusted EBITDA to increase to a range of $315 million to $335 million. This implies Adjusted EBITDA growth of approximately 23% at the midpoint driven by stronger than originally anticipated gross margins. The structural advantages provided by our vertically integrated business model, as well as the investments we have made in our production capabilities, put Tecnoglass firmly on track to meet the strong demand anticipated in our updated outlook for the full year 2023.”

The company declared a quarterly cash dividend of $0.09 per share for the first quarter of 2023, representing a 20% increase from the previous dividend, which was paid on April 28, 2023 to shareholders of record as of the close of business on March 31, 2023.

To parse out the company’s success, and hopefully get a glimpse of what is to come for the company and its stakeholders, Loren Moss, Finance Colombia’s executive editor, traveled to the sprawling manufacturing complex of the company, near the waterfront where the Magdalena river exits into the Caribbean sea.

There, he had an in-depth conversation with Santiago Giraldo, the CFO of Tecnoglass, who has shepherded the company’s finances and investor relations through its growth from a micro-cap to a small-cap, to now, a mid-cap international company with global ambitions.

Finance Colombia: So, I’m here with Santiago Giraldo the CFO of Tecnoglass; great, to be back here and see you again. I know it’s been a busy year. I don’t want to come up here and interrupt you when you guys are busy growing and breaking records; continuing to break records. It’s amazing what you guys have done. Your results came out just last week for 2022 and it’s kind of it’s hard for me to write headlines as a journalist, because it’s like: Tecnoglass, breaks records…Tecnoglass breaks records…It is like a broken record itself because I keep saying the same thing over and over again, but that’s a good problem to have! So, give me a quick recap on 2022. I mean, you guys—I know a couple of years ago, you really entered in a strong way, the residential market, that was not something that Tecnoglass was originally built on. But that’s been a big motor for your growth. Maybe if you can unpack that little bit?

Santiago Giraldo: Absolutely, it was a record year and well beyond expectations, internal budget and everything that we had thought. And there were several factors that contributed there. You mentioned the residential segment, we basically have grown that from just $10 million dollars in 2017 to over $300 million in 2022. It’s been accelerated growth. We’re taking market share from others but also it helps that places like Florida and Texas in the southeast, tax-friendly states are seeing a lot of influx of people moving down there. So the activity behind the demographic shift that we’re seeing is playing a huge part into what we’re doing. So there’s just other secular trends, there’s demographic trends but there’s also other things that are playing a part. There’s tax incentives provided by the government for people to invest in impact resistant windows. There have been insurance incentives. For insurance companies, providing incentives to people that replace their windows to make sure that they are impact resistant as well.

Tecnoglass has a 3 million square foot headquarters and production facility in Colombia’s Atlantic port city of Barranquilla

So there’s been a combination of things that have helped us grow and take market share from others, we are situated in a different scenario if you will, as far as what’s taking place in the world with inflation, headwinds with supply chain disruptions, we labor constraints. As you can see here in Barranquilla, we pretty much do everything in-house, we are fully vertically integrated. And we haven’t had the same dynamics as far as labor constraints. As you know here in Colombia the unemployment rate runs above 12% and we have very little turnover. So all of those factors plus the fact that we have our good product with good quality and fast delivery times really lined up. It’s as if all the stars lined up for us and what you saw were the results as of 2022, where we were able to grow 44 percent. So there’s just not one factor that I could speak of, I mean, there are different things that basically played a huge part into what happened.

Finance Colombia: You know, it’s interesting because we saw interest, we see interest rates around the world, kind of rising. There’s been a lot of loose money policies with governments to fight the COVID pandemic. And now, we’re seeing the aftereffects of that. And the US government, of course, has raised their rates and we see as a result mortgage rates are going up. I would imagine that has—Have you seen any kind of damper effect on that because obviously mortgages rates…construction is very dependent upon them?

Santiago Giraldo: Yeah, it’s a headwind but if you look within our sales, roughly 67 to 70 percent of what we do is repair and remodeling. So we’re not relying on home builders, we’re not relying on new housing starts.  For that business to grow—I mean there’s obviously some correlation but when you think about it, repair and remodeling is more countercyclical in nature. In other words, if you’re at your house and you see that mortgage rates went up to 7%, you’re not going to go buy a new house and lock yourself up for 30 years into that rate. You’re more likely going to reinvest in your own home, knowing that prices are still high and then mortgage rates are much higher than what they were a year ago. So that plays into what we do because if you’re staying in your home and you’re carrying out some of those remodelings that you pushed out for years, that includes windows.

“…we basically have grown that from just $10 million dollars in 2017 to over $300 million in 2022.

So 70 percent of our windows or of our business is related to repair and remodeling. So that places us apart. The other thing is that we’re still rather small. If you think about it, we don’t need the market to grow or the industry to grow for us to grow, right? I mean if you think about our largest competitor in the state of Florida that they sell about $100 million. Here we are, you know, just getting north of $300 million which is rapid growth but we’re still nowhere close to the larger players in the state and in the country.

So there are still market share opportunities for us to take from these guys because those guys are constrained by labor are constrained by headwinds on inflation. There’s still supply chain disruptions. So we have an opportunity to continue gaining that market share. Despite the fact that as you mentioned, there are some challenges mainly on the new home construction side, which is still not the primary source of our income.

Finance Colombia:  Got it. And also, I mean, to mention the relative size of Tecnoglass, even though it’s one of the biggest companies in Colombia, I think the last time I saw the statistics you still had less than one percent market shares in the United States or something like that. So there’s so much room to grow and like you said, you don’t need—the market doesn’t have to grow for Tecnoglass to grow, you’re not even distributed in all 50 states yet.

Santiago Giraldo: That’s right. I mean that the industry as a whole is about $32 billion per year between manufacturing and installation. We ended up here s$770 million more or less. So we’re talking about, call it two percent, right? Obviously not everything is addressable because a lot of it is commoditized; its kind of like your typical big box store type project which we don’t supply. Everything that we do is built to suit, high value-added components. So that is not necessarily addressable, but by our calculation, at least $20 billion of that is addressable and another $700 million. We are still a small portion of the business like you mentioned, we are pressing throughout the US on the commercial side. We’ve been doing business throughout the US pretty much for the last 25 years, right? Obviously much stronger in the state of Florida and the southeast. So, there’s opportunities to grow the commercial side, but where the upside comes from is that we still haven’t tapped into anything outside of Florida on the residential side.

 “It’s as if all the stars lined up for us and what you saw were the results as of 2022, where we were able to grow 44%”

So, that $300 million that I mentioned on that segment is strictly Florida. So what we’re doing about that is opening up showrooms throughout the US so we can leverage our cost efficient platform to manufacture in Colombia and ship everywhere else in the US, and we have a showroom that is currently open in Manhattan, New York. We have a showroom that is currently open in Charleston, South Carolina. We’re about to sign a lease in California in Los Angeles to service that market, and the idea would be to open up showrooms in Texas, Arizona, and Nevada in the rest of 2023 and into 24. Right now, we have zero revenues in those states, anything that we get from there is outside, right? So you’re going from nothing to something. And we have the same competitive advantages that we have in Florida. They also play the same way in different parts of the US. Transportation is not an issue, right? We know that there is a trade imbalance between the US and Colombia. There are a lot more containers coming in than there are going out. So going into New York and even going to California through the Panama Canal is still efficient so we can penetrate those markets just the same as we have done in Florida. So that’s what we want to do.

Finance Colombia:  You mention something interesting and you talk about the trade imbalance between Colombia and the United States. I know that there’s a trade imbalance with some other countries as well, but right now, it’s recovered a little bit, but the peso last year took quite a dump. Especially, I think a lot of it was around election-related uncertainty that’s kind of, you know, built into the pricing now, but how much—in a lot of countries you know, the travel sector we follow closely and they’ve really taken a hit because of that, but I would imagine that it’s been helpful as a company that manufactures in Colombia because of labor and because of other costs, how much of a factor has the peso dollar relationship been in last year’s results?

Santiago Giraldo: That’s maybe the one aspect that we didn’t touch when I said earlier the stars lined up, obviously you don’t want your strategy to be predicated on what happens with the FX rates. But for us, when you’re selling 95 percent more or less, in US dollars and your cost and expenses are roughly 35-40 percent in the Colombian Peso, then anytime that the currency is devaluated and is weak, it’s a tailwind to the business, right? To the piece, a Tailwind to the P&L. So for us, what happened here over a year with the devaluation of the peso, I don’t think as a country we want to see that, obviously because of inflation and different dynamics of what’s taking place right now. But if you look at Tecnoglass, on a standalone basis it is hugely positive for the company and for P&L. We think that the currency is going to continue to be weak for the time being I think. As you mentioned some of it is related to what happened with the elections and some investors’ fears around that, I think that up until last week. I think that that was kind of coming down and the peso was revaluated again.

Above photo: Tecnoglass products make up the facade of distinctive architecture such as Fordham University (photo courtesy of Tecnoglass)

But aside from that, I think worldwide what you’re seeing from monetary policy, especially with the Fed continuing to raise rates and apparently, they’re not done yet, that’s keeping a lot of emerging market currencies low, and that’s going to be the case for the foreseeable future. So, that’s playing a part, it is definitely helping out and in is also helping  to be able to kind of price competitively if you need to, because you know that you have that extra cushion to do that. It hasn’t come to that.

I mean we expected prices to calm down a bit because input prices have come down since the peaks of the pandemic. Aluminum was at $4,000 dollars per ton, now it is at $2,400. So those sort of things would lead you to believe…I believe that pricing is going to come down. That hasn’t happened yet. I think our competitors are still seeing a lot of inflation. Wage inflation continues to be prevalent. So we’ll see what happens with that. But so far, you know, we continue to be able to hold pricing and selling in dollars, is just a huge plus.

Finance Colombia: That’s great. Now I’m talking to you here in your new showroom, we are at your headquarters, your operational headquarters in Barranquilla, and I didn’t see this before the last time I was here. And it’s really nice because I thought I had…I mean, I’m no architect or glass expert, but I thought I had a good idea of your product line, but really, I see it’s even more expansive than I thought. And this is a great idea to be able to show it and you make sure that you have these showrooms. Now, you’re building them throughout the United States. I know that the product is very efficient when it comes to solar energy, but in all the new showrooms you mentioned, don’t forget about the Midwest as you guys grow, I’m a Midwesterner! But still, you know, as you build out this this infrastructure to be able to showcase the products and things like that, you also mentioned 44 percent growth. Now you own your own factories, you own your facilities down here, but tell me about what kind of Investments, tell me about the capital Investments that you’re making to be able to keep up and to stay ahead of demand. So that you want your backlog to grow because you get new orders, but you don’t want your backlog to grow because you’ve exceeded capacity.

Santiago Giraldo: Yes. And I think that’s been the biggest challenge when people ask: what keeps you up at night? I think (COO & co-founder) Christian has been up at night the last two years because of the need to address that growth. Because to be honest with you, not only have we benefited from all the factors that we just discussed, but there’s such a shortage of windows as with anything else right now. Obviously,  the lead times have become longer, there’s such a shortage of windows, we have been getting kind of a proactive approach, but some of these potential clients that we wanted to go after, that are looking for us to be their providers. But when you have that and you have the demand in place, but you have to be able to make sure that you are able to address that demand.

And the only thing that you can do is basically invest in capex, to grow your footprint, to grow your operational capacity. And through the last two years, we have invested almost $125 million in growth capex to be able to get the factory where it is today, with the investments that we are completing right now. We are going to have operational capacity to get to $950 million, that’s going to be by April or May of this year, and we’ve been investing in land, investing in warehouse space.

We have been investing in automation. I mean, automation is a huge benefit whereas some of our lines were not automated. Now, we have four out of ten, eleven lines that are fully automated and that brings benefits from an operational capacity perspective but also It allows us to redeploy some headcount to other areas. It reduces material waste. So is what we’re doing right now and we’re having to assess what that’s going to look like essentially on a month-to-month basis because $950 million in operational capacity sounds like a lot, but if for whatever reason we are able to grow in a similar fashion as we did last year, we will be tapping against that capacity already.

So, we have to be very vigilant. The good thing is that mainly on the commercial side, you get a lot of leeway and you get some visibility as to what things are going to look like because anything that you booked into the backlog, today tells you what the activity is going to look like 12, 18 months out. So if we can continue growing, the pipeline grows in the backlog. We know that we’re going to have our hands full down the road. And we need to invest in capacity today, and that’s the main concern, because that brings a lot of challenges, right? You’re stressing the factory, you’re becoming more complex and logistically you’re travelling to many different—more places and that creates some challenges of its own. But hey, as you said earlier, it’s a good problem to have.

Finance Colombia: Now last year, we celebrated, your jump, if you will, from NASDAQ to the New York Stock Exchange. That’s an interesting move, because NASDAQ NYSE, of course, is the granddaddy of the exchanges at least in North America, opening I think in the late 1700s, it is in many ways the most prestigious of the exchanges. NASDAQ also has matured, it used to be kind of…well there used to be like three exchanges back in the old days, you remember. But still, that was an interesting move because companies don’t necessarily need to make that move. But you guys felt the need to do that. Maybe if you can, if you can recap what was behind that decision and then it was kind of a mid-year thing. How it’s been for you so far?

“We’re not making decisions for the next quarter, or the quarter after. I mean, I think we’re making sound decisions in line with our strategy, to make sure that this company is something much larger, bigger, better in 10 years to come, not necessarily what’s happening next quarter.”

Santiago Giraldo: You mean NYSE who was the granddaddy, you said NASDAQ just to just to clarify.

Finance Colombia: Yeah, I got confused!

Santiago Giraldo: So we made the move there to get more exposure right? I mean it’s obviously a broader audience. We also wanted to get more liquidity in the stock. if you look at what’s happening with liquidity we’re trading over $10 million dollars per day, 250,000 shares more or less on a daily basis, so we wanted to get that platform to be able to get to new faces, be able to be able to tap into in into new investors. You also get what’s called a market maker, which for us is the Citadel, which makes sure that there’s always going to be kind of a buying order a selling order and that helps with liquidity so it’s been good. It’s been a good relationship; obviously nothing but good things to say about NASDAQ. We started there 10 years ago, and they provided a great platform as well. They’re obviously very—kind of tech focused and I think they’re the best at it, but we felt that this was a good fit for Tecnoglass at a good point in time when the company continues to mature and become larger. Now today we can be considered a mid-cap company. Yeah you know, starting out from a micro-cap to a small-cap, now today we’re technically a mid-cap company and we can potentially get onto new investors’ radars, so we wanted to do all of that.

Finance Colombia: That’s great, you know, I got confused because in my mind I was thinking back to…I’m old enough to remember the American Stock Exchange because there was the ASE and NYSE and then NASDAQ came in, and ASE then merged with NYSE. So it’s kind of an old timer’s thing! But anyway, speaking of new markets: So tell me I mean Tecnoglass continues to expand throughout the United States, you’ve gone from residential—or from commercial into, expanding into residential—still, keeping commercial strong, but talking about new markets: what kind of new products; whether that’s new lines of business, or new types of products or even any new geographies outside of the United States…I don’t want to kind of lead the question. Just help me understand how you’re expanding. Not just in growth, in terms of vertical silos, but horizontally in terms of the breadth of your product lineup.

Santiago Giraldo: Yeah. This is a day-to-day occurrence. Last year we…earlier last year we basically developed a product for home builders called Multimax, which is essentially a product that is not targeted to a couple of million dollar home but maybe a Tract home that could be $300-400,000 dollars; very high quality, but not the same kind of value-added components that you will require for some of these larger homes, right?, So that’s been very well received, we’re already selling to seven or eight different home builders that have nationwide reach within the US, so that’s been very well received.

And we continue, we continuously invest in research and development, to make sure that we are developing products for new geographies; we mentioned earlier that we’re opening up showrooms throughout the US. Well, if you think about it, not all of those geographies require impact-resistant glass and windows,

When you’re talking about Miami it’s not the same thing as talking about selling a home in Los Angeles or selling a home in Arizona. All of those places require different products that are more specific to the conditions of those places. So for instance if you look to go into Arizona, where there’s extreme heat at some points of the year you’re going to look more for insulated glass that has some energy efficient qualities. So, there’s always product developing and you know we’re working on new technology for glass that is going to serve as solar panels for instance.

We’re working with different providers that have that technology so we can license that product and make sure that when the product becomes economically viable for mass production, kind of like the Tesla effect, that we are there. We want to make sure that we are present in that because that’s going to be a huge development. We’re working on other things that we should be announcing within the next couple of months, but it’s an ongoing process. You want to make sure that you’re up on top of what’s happening, and you’re not lagging behind.

Finance Colombia: You know, I hope to get back up here soon and talk to Christian, the co-founder and CEO of the company. You know, you guys have solar panels on everything, and I hope to talk about…Tecnoglass has a very significant social mission here, especially on the coast, here in Barranquilla which is like the industrial capital in many ways, of all of Colombia, but especially here on the coast, and there’s so much to talk about! Some of the things you’re doing here in the community as well, I hope to talk to Christian soon about that.

Is there anything that maybe you wanted to mention that I forgot to ask you? I mean there’s so much good news to cover, and it’s just good to be back up here and it’s exciting. You know, every time I get my on my phone I get my alerts and the stocks I follow, and no matter what other bad news is happening, I can count on some good news coming from TGLS.

Santiago Giraldo: I hope that continues to be the trend. I mean it’s kind of like, investors and all stakeholders tend to have short memories, right? Short term memory, so it’s like yeah you might come out with great news as we just did, but we’re already looking as to what we’re doing for the next quarter, the next year and the next decade.

That’s the good thing about Christian and (CEO) Jose. I think they’re looking for this company to be something much bigger in five, ten years out. We’re not making decisions for the next quarter, or the quarter after. I mean, I think we’re making sound decisions in line with our strategy, to make sure that this company is something much larger, bigger, better in 10 years to come, not necessarily what’s happening next quarter and how we’re going to report results.

I think that if you do that and you stick to your strategy, those things are going to come. The quarter to quarter results are going to come, so we’ll see. I mean, more to come. We continue to be bullish about the future; short-term and long-term, despite all the uncertainties in the world. Obviously from a macro perspective, there’s a lot of challenges, but we feel that we’re well positioned, we feel that we have structural advantages that will carry us through and we’re well positioned to withstand a down cycle if that was to come, so hopefully the news will continue to come. And next time you see an alert, despite what’s happening in the world you’ll get a smile on your face.

Finance Colombia: You know, you try to be as balanced as possible but it’s really always exciting to come up here, and talk to you guys, because not just what you can see in the financial results, but what you can see in the community and what you can see in the different things make it really…it’s literally fun to cover Tecnoglass, and it’s great to see the good things that you’re doing for investors, for the consumers of your product, and for the community here in Barranquilla.

Santiago Giraldo:  Yeah and hopefully, do follow up with Christian, because there’s so much, so many things to tell about ESG, about what we’re doing for the community. I’m obviously not going to steal his thunder and let him talk through all of that. But it’s been nice that not only is the company doing well, but the company gives back to the community. Now we are almost 10,000 employees, you know last time we talked I think we were maybe 6,000, so we’re generating a lot of employment, good employment for the local communities, and I think that’s going to continue so far as we can continue growing. You know it’s not the point that the company is doing well, you also want to see your environment and stakeholders doing well.

Finance Colombia: Absolutely. Well, Santiago Giraldo, the CFO of Tecnoglass, always a good “parcero,” (Colombian slang for a great friend) it’s great to talk to you in in Barranquilla and continue the success that you’re having and as I’m sure you will.

Santiago Giraldo: Thank you so much and come back anytime

Tecnoglass has international headquarters in Barranquilla, Colombia, and facilities in Miami, Florida

Total revenues for the full year 2022 increased 44.2% to a record $716.6 million compared to $496.8 million in the prior year. Changes in foreign currency exchange rates had a negligible impact on total revenues in the year.

Gross profit increased 72.5% year-over-year to a full year record of $349.5 million, representing a 48.8% gross margin, compared to $202.6 million, representing a 40.8% gross margin, in the prior year. Operating income for the full year 2022 was $226.4 million compared to $117.0 million in the prior year. Net income for the full year 2022 was $156.4 million, or a $3.28 per diluted share, compared to net income of $68.4 million, or $1.44 per diluted share, in the prior year. Adjusted net income¹ for the full year 2022 was $158.5 million, or $3.32 per diluted share, compared to $82.7 million, or $1.74 per diluted share, in the prior year. Adjusted EBITDA¹ for the full year 2022 improved to a record $265.7 million, or 37.1% of sales, compared to $150.3 million, or 30.2% of sales, in the prior year.

To view the Tecnoglass Q4 investor presentation, click here.

Investing in technology

During 2022, the company initiated enhancements at its glass and aluminum facilities to increase production capacity and automate operations. The company was successful in increasing installed production capacity to an amount equivalent to over $800 million of annual sales at the end of 2022, which is expected to be followed by a further expansion of installed production capacity to an amount equivalent to approximately $950 million of annual sales by the end of the second quarter of 2023.

Optimism for 2023

Tecnoglass CFO Santiago Giraldo explained: “Based on our current invoicing schedule and strong demand for our architectural glass products, we are pleased to introduce our full year 2023 outlook for revenues to grow organically to a range of $790 million to $830 million (approximately 13% at the mid-point of guidance) and for adjusted EBITDA to increase to a range of $300 million to $320 million. This implies adjusted EBITDA growth of approximately 17% at the midpoint. We believe the investments we have made in our production capabilities and structural advantages stemming from our vertically integrated platform will continue to help us drive above market growth and exceptional profit performance, allowing for continued strong cash flow generation in the full year 2023. Based on the board’s confidence in our projected performance and expected cashflow, we will continue to actively pursue effective ways to generate value for shareholders through growth investments, return of capital to shareholders and other value-enhancing actions.”

Strong Fourth Quarter Finish

Total revenues for the fourth quarter of 2022 increased 60.2% to $211.1 million compared to $131.8 million in the prior year quarter, driven by an increase in the company’s commercial activity, strong growth in single-family residential activity and market share gains. Single-family residential revenues increased approximately 59% year-over-year, representing 40.3% of total revenues for the fourth quarter, helped by market share gains and the continued positive demographic dynamics in our main markets. Changes in foreign currency exchange rates had an adverse impact of $0.6 million on both Colombia revenues and total revenues in the quarter.

“Our record fourth quarter results reflect an exceptional finish to another year of above market performance led by the focused execution of our dedicated team members and the resiliency of our vertically integrated business model. We continue to benefit substantially from our previously implemented high return automation and capacity enhancements, which contributed to record gross profit and Adjusted EBITDA for the quarter and full year. Additionally, our prudent working capital management and market share gains in our shorter cash cycle single-family residential business helped generate our 12^th consecutive quarter of robust cash flow. Our strong capital position has given us the flexibility to invest in further structural enhancements, increase our cash dividend, and improve our leverage profile with net debt to Adjusted EBITDA now at a record low 0.2x for full year 2022. As we look to 2023 and beyond, we remain confident in our ability to strengthen our existing customer relationships and expand our market share through geographical diversification, innovation, quality and stable lead times to produce another year of strong financial performance and returns for our shareholders,” said CEO and co-founder José Manuel Daes.

Gross profit for the fourth quarter of 2022 nearly doubled to $110.2 million, representing a 52.2% gross margin, compared to gross profit of $56.6 million, representing a 42.9% gross margin in the prior year quarter. The 930 basis-point improvement in gross margin mainly reflected operating leverage on higher sales, favorable pricing dynamics, greater operating efficiencies related to automation and a favorable FX trend given the recent depreciation of the Colombian peso. Selling, general and administrative expense (“SG&A”) was $33.4 million for the fourth quarter of 2022 compared to $23.7 million in the prior year quarter, with the majority of the increase attributable to higher shipping expenses as a result of a higher sales volume, higher shipping rates and a higher mix of sales going into the more fragmented single-family residential market. As a percent of total revenues, SG&A was 15.8% for the fourth quarter of 2022 compared to 18.0% in the prior year quarter with operating leverage more than offsetting higher transportation costs.

COO Christian Daes added: “Building on our solid momentum throughout 2022, we were pleased to produce record results for the fourth quarter and full year. This was largely attributable to our multi-year efforts to deepen our presence in the highly profitable single-family residential end markets in combination with capitalizing on rebounding commercial activity. Overall quoting and bidding activity in our markets remains strong and our record backlog position of $725 million puts us on solid footing with visibility on projects in our multifamily and commercial project pipeline into 2024. As we look forward, we remain committed to gaining additional share and expanding our geographic presence in single-family residential by advancing our product innovation, opening additional show rooms and doing our part to keep our customers on schedule with their projects. We believe these factors, along with our strong industry relationships and structural competitive advantages through our vertically integrated platform, collectively position us well to create additional shareholder value in 2023 and years ahead.”

Net income was $55.1 million, or $1.16 per diluted share, in the fourth quarter of 2022 compared to net income of $19.8 million, or $0.42 per diluted share, in the prior year quarter, including a non-cash foreign exchange transaction gain of $2.9 million in the fourth quarter of 2022 and a $4.6 million loss in the fourth quarter of 2021. As previously disclosed, these non-cash gains and losses are related to the accounting re-measurement of U.S. Dollar denominated assets and liabilities against the Colombian Peso as functional currency.

More cash, less debt

Tecnoglass ended 2022 with total liquidity of approximately $270 million, including cash and cash equivalents of $103.7 million and availability under its committed revolving credit facilities of $170 million. Given the company’s continued growth in Adjusted EBITDA and strong cash generation, debt leverage continues to trend lower and now stands at 0.2 times net debt to LTM Adjusted EBITDA, compared to 0.8 times in the prior year.

The company declared a quarterly cash dividend of $0.075 per share for the fourth quarter of 2022, which was paid on January 31, 2023 to shareholders of record as of the close of business on December 31, 2022.

Investor Conference Call

This morning, March 2, 2023 at 10am (NY & Bogotá time), Tecnoglass will host a webinar and conference call to review the company’s results. The conference call will be broadcast live over the Internet. Additionally, a slide presentation will accompany the conference call. To listen to the call and view the slides, please visit the Investor Relations section of Tecnoglass’ website at www.tecnoglass.com. Please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those unable to access the webcast, the conference call will be accessible by dialing 1-877-269-7751 (domestic) or 1-201-389-0908 (international). Upon dialing in, please request to join the Tecnoglass Fourth Quarter 2022 Earnings Conference Call.

If you are unable to listen live, a replay of the webcast will be archived on the website. You may also access the conference call playback by dialing 1-844-512-2921 (Domestic) or 1-412-317-6671 (International) and entering passcode: 13735775.        

Gross profit for the third quarter of 2022 nearly doubled to $105.3 million, representing a 52.2% gross margin, compared to gross profit of $51.5 million, representing a 39.2% gross margin in the prior year quarter. The 1,300 basis point improvement in gross margin mainly reflected operating leverage on higher sales, favorable pricing dynamics, greater operating efficiencies related to automation and a favorable FX trend given the recent strengthening of the US Dollar. Being a company with Colombian operations, the precipitous fall in the peso creates significant cost advantages for exporters like Tecnoglass.

Selling, general and administrative expense (“SG&A”) was $35.2 million compared to $21.7 million in the prior year quarter, with the majority of the increase attributable to higher shipping expenses as a result of a higher sales volume and higher shipping rates. Additionally, the company incurred a one-time settlement expense related to a project contracted in 2016 that is now fully resolved. As a percent of total revenues, SG&A was 17.4% compared to 16.5% in the prior year quarter. Excluding the settlement, SG&A as a percent of total revenues improved by 180 basis points compared to the prior year quarter.

“The structural enhancements in our business, our diversified revenue mix, and our prudent working capital management have helped us generate 11 straight quarters of exceptional cash flow. Based on the Board’s confidence in our strategy and cash generation, we are pleased to announce today the authorization of a new $50 million share repurchase program as an additional avenue to build value in our Company. As we move forward, we believe our structural advantages and highly profitable growth strategy will allow us to continue generating exceptional cash flow as we look to deliver value for our shareholders,” said CEO José Manuel Daes.

Net income was $46.9 million, or $0.98 per diluted share, in the third quarter of 2022 compared to net income of $20.7 million, or $0.43 per diluted share, in the prior year quarter, including a non-cash foreign exchange transaction loss of $0.5 million in the third quarter of 2022 and a $0.2 million gain in the third quarter of 2021. These non-cash gains and losses are primarily related to the accounting re-measurement of U.S. Dollar denominated assets and liabilities against the Colombian Peso as functional currency.

Adjusted EBITDA more than doubled to $78.5 million, or 38.9% of total revenues, in the third quarter of 2022, compared to $38.5 million, or 29.2% of total revenues, in the prior year quarter. The improvement was driven by higher sales and a stronger gross margin. Adjusted EBITDA included a $0.9 million contribution from the  joint venture with Saint-Gobain, compared to $0.8 million in the prior year quarter.

Tecnoglass ended the third quarter of 2022 with total liquidity of approximately $255 million, including cash and cash equivalents of $84 million and availability under its committed revolving credit facilities of $170 million. Given the continued growth in adjusted EBITDA and strong cash generation, debt leverage continues to trend lower and now stands at 0.4 times net debt to LTM adjusted EBITDA, compared to 0.9 times in the prior year quarter.

“We are extremely pleased with our ability to produce another quarter of record results and above market growth. Our results reflect our ability to capitalize on strengthening commercial activity in attractive high growth markets in addition to capturing solid demand and share gains through the expansion of our single-family residential business. Our track record of successfully delivering high profile projects and maintaining superb lead times for our customers has earned us an increasing number of opportunities across the U.S., demonstrated by our expanding backlog of multifamily and commercial projects, up 21.1% year-over-year. We are also thrilled with the continued momentum across our business into the fourth quarter, which is reflected in our increased full year 2022 growth outlook. With our innovative product portfolio, strong industry relationships and structural competitive advantages, we believe we are on the path to continue growing faster than our end markets into 2023 and beyond,” said Chief Operating Officer Christian Daes.

During 2022, Tecnoglass initiated enhancements at its glass and aluminum facilities to increase production capacity and automate operations. Based on the timing of capital investments, it maintains its expectation to increase installed production capacity to an amount equivalent to over $800 million of annual sales by the end of 2022, followed by a further expansion of installed production capacity to an amount equivalent to approximately $950 million of annual sales by the end of the second quarter of 2023.

Also today, the Tecnoglass board of directors authorized Tecnoglass to buy back up to $50 million of its common share, at its own discretion, and in compliance with the “safe harbor” provisions of Rule 10b-18 under the Exchange Act. The program does not obligate Tecnoglass to acquire any particular amount of its common stock, has no set expiration date and may be suspended or discontinued at any time subject to applicable securities laws.

“Based on our exceptional third quarter performance and expectations for continued growth for our products through year-end, we are increasing our full year 2022 growth outlook for revenues and adjusted EBITDA¹. We now expect 2022 revenues to grow to a range of $680 million to $700 million and for adjusted EBITDA to increase to a range of $240 million to $255 million. This implies adjusted EBITDA growth of approximately 67% at the midpoint. We expect to further build upon our strong track record of strategic execution and leverage our vertically integrated business model, which positions us to drive another year of record results and cash flow in the full year 2022,” said CFO Santiago Giraldo.

The Parque 93 building, Bogotá

Fourth quarter total revenues increased 28.0% year-over-year to $131.8 million USD, with 142% growth in single-family residential revenues, while net income reached $19.8 million, or $0.41 per diluted shares. Adjusted net income was a record $24 million, or $0.50 per diluted share. The company said that gross margin improved 710 basis points YoY to 42.9%.

Fourth quarter EBITDA increased 65.7% YoY to a record $42.2 million, or $32% of revenues. Cash flow from operations was $23.8 million, and the cash dividend increased 136% to $0.065 per share. The Colombian company also announced an amendment to its senior secured revolving credit facility, expanding borrowing capacity from $50 million to $150 million, reducing its cost of capital and extending debt maturities to 2026.

The order backlog for Tecnoglass includes 20 of the 22 tallest skyscrapers currently under construction or planning to break ground in South Florida.

For the full year, single family residential revenues increased by 151% YoY, representing 36% of total revenues for the year. The line of business is relatively new for Tecnoglass, which built its reputation on large commercial and high-rise multifamily residential projects. Total revenues are up 32% YoY to a record $496.8 million for 2021.

Gross margin is also a record 40.8%, up 380 basis points, and full year net income is $68.4 million, or $1.43 per diluted share. Adjusted net income is $82.7 million, or $1.75 per diluted share. Cash flow from operations is also a record $117.3 million.

“We can make glass that protects from the weather, while letting you have a great view. People like that you can now be in harmony with the surroundings.” – José M. Daes. Above: Suburban Miami’s beachfront Regalia condo tower, featuring Tecnoglass materials.

The company’s backlog of orders expands 7.2% to a record $584.6 million, including supplying energy efficient windows to 20 of the 22 tallest buildings currently under permitting or construction in South Florida.

“We are thrilled to report another quarter and year of record results for Tecnoglass. Strong fourth quarter performance reflects the combined benefit of our focused execution, prior investments in automation and capacity enhancements, and our ability to capitalize on strong residential demand. We continue to produce outstanding results in our shorter cash cycle single-family residential business, which in addition to our prudent working capital management, helped us generate our 8th straight quarter of exceptional cash flow. As we move into 2022, our strong capital position and structural advantages leave us well situated to further extend our leadership in the architectural glass industry and drive improved returns for our all our stakeholders for this year and beyond,” said CEO José Manuel Daes.

For the full year 2021, cash provided by operating activities of $117.3 million improved by $45.5 million compared to the prior year, attributable to higher profitability, more efficient inventory and working capital management, and interest expense savings. The company used a portion of its cash flow to voluntarily prepay $30 million under its Syndicated Term Loan facility during the year. The company ended 2021 with total liquidity of approximately $250 million, including cash and cash equivalents of $85.0 million and availability under its committed revolving credit facilities of $163 million. Given the company’s continued growth in adjusted EBITDA and strong cash generation, debt leverage continues to trend lower and now stands at 0.8 times LTM net debt to adjusted EBITDA, compared to 1.6 times in the prior year.

Headline photo: Tecnoglass COO Christian Daes & Colombian President Ivan Duque

Christian Daes, Chief Operating Officer of Tecnoglass, added, “We are extremely pleased with our 2021 accomplishments and the momentum in our business that has continued into 2022. Our success reflects rapid advances in our single-family residential revenues, which expanded 151% year-over-year and represented more than a third of our full year revenues. As we continue to win new customers in the single-family residential market, we are also poised for success in our high rise and commercial work, with Tecnoglass already contracted to supply architectural glass to 20 of the 22 tallest towers under construction in South Florida, and other geographies also showing positive trends. Looking ahead, we remain dedicated to leveraging our vertically integrated structure and innovative product development to create additional shareholder value.”

Santiago Giraldo, Chief Financial Officer of Tecnoglass, stated, “We are pleased to introduce our full year 2022 outlook for revenues to grow to a range of $575 million to $600 million and for adjusted EBITDA to increase to a range of $170 million to $190 million. This implies adjusted EBITDA growth of approximately 20% at the midpoint. We believe our structural advantages, partial insulation from some inflationary pressures and faster lead times will continue to drive our record of strong cash flow generation in the full year 2022.”

Short Seller Claims Shown False

Tecnoglass includes a joint venture with Saint Gobain and subsidiaries ES Windows and Energia Solar.

As previously announced on December 17, 2021 a Special Committee of the Board of Directors engaged Covington & Burling LLP who in turn engaged a leading Big 4 accounting firm to make an assessment on the allegations made against the Company and its Directors on December 9, 2021. Although the review is still being finalized, as of today, the assessment from these firms, which included a forensic evaluation and e-discovery process, has indicated no evidence of fraud associated with related party transactions or accounting irregularities.

“We are honored to be invited to ring the Opening Bell at NASDAQ,” commented Mr. José Manuel Daes. “Our successful record of high return investments has helped to cement Tecnoglass as a global leader in architectural windows and glass innovation and best-in-class service to our customers. Our accomplishments would not be possible without the hard work and dedication of our team members and the incredible support from all of our partners and stakeholders. We will be dedicating this day to our outstanding team as we celebrate our many accomplishments as a public company.”

A live stream of the Nasdaq Opening Bell ceremony will be available beginning at 9:00 a.m. EST at: https://livestream.com/accounts/27896496/events/9779532

Where am I supposed to cash this?

The Tecnoglass /  ES Windows Foundation has rewarded several Colombian Olympians returning from this year’s Tokyo Olympics.

After Colombian Olympian Yuberjen Martinez returned to Colombia after a controversial (some say outrageous) decision by a judge that left the boxer without a medal, The Tecnoglass / E.S. Windows foundation, the nonprofit, charitable affiliate of Tecnoglass rewarded the athlete with a check for $50 million Colombian pesos, a sum the boxer said he would be sharing with his fellow teammates.

But when the representative, amplified copy of the check was presented, Yuberjen appeared baffled by the giant piece of cardboard, asking “where am I supposed to cash this?” After a laugh, Tecnoglass President Christian Daes quickly presented him with the actual check.

El man se me cabrio. @yuberjenherney1 donde cambio este cheque mirando el pedazo de cartulina. Casi me da una muñequera como la que le pego al japonés. pic.twitter.com/4VShb9eHHC

— Christian Daes (@ChrisDaes) August 12, 2021