Tecnoglass Announces Record Q1 2021 Results, Shares Trading At All Time Highs As Guidance Remains Positive
Barranquilla, Colombia based Tecnoglass, Inc. (NASDAQ: TGLS) once again reported record breaking financial results earlier this week for the first quarter ended March 31, 2021. The positive report has led to the architectural glass manufacturer’s stock trading at record highs.
Total revenues for the first quarter of 2021 increased 27.0% to $110.9 million, compared to $87.3 million in the prior year quarter. U.S. revenues of $100.8 million, which represented 91% of total revenues, grew 27.9% compared to $78.8 million in the prior year quarter, driven by strong growth in residential activity, recovering commercial construction activity, and market share gains. Colombia revenue, a majority of which is represented by long-term contracts priced in Colombian Pesos but indexed to the U.S. Dollar, was $7.7 million, an increase of 18.4% compared to $6.5 million in the prior year quarter. Changes in foreign currency exchange rates had a negligible impact on Colombia and total revenues in the quarter.
Strong Demand Drove Single-Family Residential Revenues Up 71% Year-Over-Year, with 19% Growth in Commercial Revenues
“I am extremely proud of our outstanding performance so far in 2021 and I have never been more optimistic about the future for Tecnoglass. We delivered record first quarter results across nearly all of our key operating metrics including total revenues, gross profit, operating profit, adjusted EBITDA1 and operating cash flow. This success was largely driven by the continued positive reception of our single-family residential products, allowing for additional market share gains.
Furthermore, our vertically integrated architectural glass platform and prior automation investments continue to deliver significant structural advantages amid tight labor and material availability impacting our industry. We are optimally positioned to efficiently control our supply chain, manufacture products with shorter lead times and best serve customers in what we expect to be a year of significant growth in demand. Moving forward, we remain confident in our ability to maintain our industry leading margins and gain additional share in the quarters ahead,” said José Manuel Daes, Chief Executive Officer of Tecnoglass.
Christian Daes, the Chief Operating Officer of Tecnoglass, also added: “In the first quarter, we were thrilled to see the positive momentum continue in our business as we reported a sharp acceleration of growth. Encouraging trends in housing starts and de-urbanization combined with our efforts to expand our customer relationships are all supporting the growth of our single-family residential revenue, which increased over 70% year-over-year. Additionally, we are pleased to see our large-scale projects resuming activity, in line with improving fundamentals and the ABI index climbing higher into expansion territory for the second consecutive month in March. Looking ahead, our momentum has continued into April and May as new business wins and record levels of backlog leave us well positioned for further value creation.”
First Quarter 2021 Results
Gross profit for the first quarter of 2021 grew 48.4% to $45.1 million, representing a 40.7% gross margin, compared to gross profit of $30.4 million, representing a 34.9% gross margin in the prior year quarter. The 590-basis point improvement in gross margin mainly reflected a higher mix of revenue from manufacturing versus installation activity as Tecnoglass increased its mix of single family residential products and included a full quarter of greater operating efficiencies from prior automation initiatives. Selling, general and administrative expense (“SG&A”) was $19.8 million compared to $17.3 million in the prior year quarter, primarily attributable to higher variable expenses related to ground and marine transportation. As a percent of total revenues, SG&A was 17.8% compared to 19.8% in the prior year quarter, primarily due to higher sales and better operating leverage on personnel, professional fees and other fixed expenses.
Net income was $8.2 million, or $0.17 per diluted share, in the first quarter of 2021 compared to net loss of $18.8 million, or $0.40 loss per diluted share, in the prior year quarter, including an after-tax non-cash foreign exchange transaction cost of $0.05 million in the first quarter of 2021 and a $32.5 million loss in the first quarter of 2020. 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. Additionally, during the quarter, Tecnoglass recorded a one-time $8.6 million call option payment and a $2.5 million non-cash extinguishment of debt charge related to the retirement of its senior notes.
Adjusted net income1 was $16.8 million, or $0.35 per diluted share, in the first quarter of 2021 compared to adjusted net income of $4.5 million, or $0.10 per diluted share, in the prior year quarter. Adjusted net income1, as reconciled in the table below, excludes the impact of non-cash foreign exchange transaction gains or losses and other non-core items, along with the tax impact of adjustments at statutory rates, to better reflect core financial performance.
Record Cash Flow From Operations of $29.0 Million, Marking 4 Straight Quarters of Exceptional Cash Generation and Supporting Further Leverage Reduction to 1.4x Net Debt to Adjusted EBITDA
Adjusted EBITDA1, as reconciled in the table below, increased 64.8% to $33.5 million, or 30.2% of total revenues in the first quarter of 2021, compared to $20.3 million, or 23.3% of total revenues, in the prior year quarter. The improvement was driven by higher sales and a stronger gross margin. Adjusted EBITDA1 in the first quarter 2021 included $0.8 million in contribution from the Company’s joint venture with Saint-Gobain, compared to $1.0 million in the prior year quarter.
The Company declared a quarterly cash dividend of $0.0275 per share for the first quarter of 2021, which was paid on April 30, 2021 to shareholders of record as of the close of business on March 31, 2021.
Balance Sheet & Liquidity
The Company ended the first quarter of 2021 with cash and cash equivalents of $85.2 million compared to $36.8 million in the prior year quarter. Cash provided by operating activities of $29.0 million improved by $28.4 million compared to the prior year quarter, attributable to higher profitability as well as more efficient inventory and working capital management.
In the first quarter of 2021, the Company redeemed in full its $210 million unsecured senior notes, which bore interest at a rate of 8.2%, following the step down in redemption price at the end of January 2021. The $8.6 million call option was fully paid in January alongside with the redemption of the notes. Giving effect to the redemption of the senior notes, annualized savings on cash interest expense are expected to approximate $11 million annually. Interest expense in the first quarter 2021 declined by 38% year-over-year reflecting a partial quarter of lower borrowings costs following the redemption of the senior notes. On a pro forma basis giving effect to the pay down of the unsecured senior notes, the Company had total liquidity of approximately $145.2 million, including cash of $85.2 million and availability under its revolving credit facilities of $60 million.
Backlog Expands to a Record $552 Million, Up 1.1% Year-Over-Year
Subsequent to the end of the first quarter and based on Tecnoglass’ leverage ratio as of March 31, 2021, the interest rate spread on the Company’s $300 million Senior Secured Credit Facility decreased 50 basis points to a spread of 2.50% in April 2021. Given the Company’s continued growth in adjusted EBITDA1 and strong cash generation, debt leverage continues to trend lower and now stands at 1.4x LTM net debt to adjusted EBITDA1.
Full Year 2021 Outlook
Santiago Giraldo, Chief Financial Officer of Tecnoglass, stated, “We are increasing our full year outlook for 2021 total revenues and adjusted EBITDA1 growth to reflect Tecnoglass’ exceptional start to 2021, including strong demand into April and May and solid share gains. We now expect full year 2021 total revenues to grow to a range of $420 million to $435 million, primarily driven by strengthening U.S. demand. In addition, we now anticipate full year adjusted EBITDA1 to grow to a range of $115 million to $125 million, implying growth of approximately 23% at the midpoint, and margin expansion. Our vertically integrated business model is providing us with significant competitive advantages, including the ability to actively manage costs and provide exceptional delivery lead times which should allow us to deliver above market growth in the quarters ahead. As we look to the remainder of the year, we are preparing Tecnoglass to accommodate significant demand beyond our current outlook. We are firmly on track to deliver exceptional results and continue our record of strong cash flow generation for the full year 2021.”
1Adjusted net income (loss) and Adjusted EBITDA in both periods are reconciled in the financial statements that can be viewed here.