Barranquilla-based architectural glass and aluminum manufacturer Tecnoglass (NYSE: TGLS) is continuing its years-long tear of strong results, announcing record quarterly total revenues for the third quarter ending September 30, of $201.8 Million, compared to $131.7 million the same quarter last year. This entirely organic growth was fueled by strong gains in market share, especially growth in the single-family residential segment, which now makes up 42.5% of revenues.
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.