Colombian glass and aluminum products manufacturer Tecnoglass (NASDAQ: TGLS) reported third quarter results for the period ending September 30, 2021. The reports continued the company’s run of impressive results, boosted by its expansion in the United States and entry into the Single Family Residential construction market with its offering of high-end energy efficient plate glass, hurricane-rated windows and doors.
Total revenues for the third quarter of 2021 increased 26.2% to $130.4 million, compared to $103.3 million in the prior year quarter. US revenues of $123.2 million, which represented 94.5% of total revenues, grew 28.8% compared to $95.7 million in the prior year’s quarter, driven by strong growth in single family residential activity and market share gains. Latin American revenue, a majority of which is represented by long-term contracts priced in Colombian Pesos but indexed to the US Dollar, decreased slightly to $7.2 million, compared to $7.6 million in the prior year quarter. Changes in foreign currency exchange rates had a negligible impact on Colombia and total revenues in the quarter.
Tecnoglass is being awarded the Syndicated Loan Deal of the Year Award at next month’s Bonds & Loans Latin America & Caribbean Awards at the Ritz Carlton in Miami.
Adjusted EBITDA increased 36.1% to $38.7 million, or 29.7% of total revenues in the third quarter of 2021, compared to $28.5 million, or 27.5% of total revenues in the prior year quarter. The improvement was driven by higher sales, a stronger gross margin and operating leverage on SG&A. Adjusted EBITDA in the third quarter 2021 included $800,000 in contribution from the company’s joint venture with Saint-Gobain, compared to $0.7 million in the prior year quarter.
“I could not be more proud of our exceptional third quarter performance that marked our 4th consecutive quarter of year-over-year revenue growth and another period of record quarterly revenues and adjusted EBITDA. In addition, continued momentum in our U.S. single-family residential business combined with careful working capital management collectively helped generate our 7th straight quarter of robust cash flow, allowing us to pay down debt while further investing in automation capabilities and capacity enhancements to address expected growth,” said CEO José Manuel Daes (above, right).
“As a result of our vertically integrated platform and strategic geographic positioning, we continue to enjoy a healthy competitive advantage that has mostly insulated Tecnoglass thus far from widespread supply chain disruptions and inflationary pressures affecting our industry. Our structural advantages have allowed us to achieve additional share gains as new and existing customers value our shorter lead times, continuity of product availability and unrelenting commitment to exceptional service. We expect to continue executing our highly profitable growth strategy and generating cash flow to deliver additional value for our shareholders.”
Net income was $20.9 million, or $0.44 per diluted share in the third quarter of 2021 compared to net income of $8.3 million, or $0.18 per diluted share in the prior year quarter, including an after-tax non-cash foreign exchange transaction gain of $200,000 in the third quarter of 2021 and a $3.1 million loss in the third quarter of 2020. 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.
Adjusted net income was $21.6 million, or $0.45 per diluted share, in the third quarter of 2021 compared to adjusted net income of $12.7 million, or $0.28 per diluted share in the prior year quarter. Tecnoglass declared a quarterly cash dividend of $0.0275 per share for the third quarter of 2021, which was paid on October 29, 2021.
Gross profit for the third quarter of 2021 grew 28.7% to $51.6 million, representing a 39.6% gross margin, compared to gross profit of $40.1 million, representing a 38.8% gross margin in the prior year quarter. The 80 basis point improvement in gross margin mainly reflected greater operating efficiencies and a higher mix of revenue from manufacturing versus installation activity as Tecnoglass increased its mix of single family residential products. Selling, general and administrative expenses (SG&A) were $21.5 million compared to $19.9 million in the prior year quarter, primarily attributable to higher variable expenses related to ground and marine transportation as well as commission expenses. As a percent of total revenues, SG&A improved to 16.5% compared to 19.3% in the prior year quarter, primarily due to higher sales and better operating leverage on personnel, professional fees, and other fixed expenses.
Christian Daes (above, left), Chief Operating Officer of Tecnoglass, commented on the results: “Our proven track record of innovation, strategic footprint expansion, and returns-oriented investments in our operations have distinguished Tecnoglass as a dominant player in the architectural glass market with industry-leading margins. During the third quarter, we were pleased to begin invoicing best-in-class products from our new Multimax product line targeting production homebuilders as well as legacy and new dealers, which further augments our positioning in the U.S. single-family residential market.”
Given its strong cashflow generation, the company voluntarily prepaid $30 million under its Syndicated Term Loan facility during the quarter.
“Additionally, we are encouraged to report a record backlog at quarter end which reflects an increasing number of commercial projects in our pipeline through 2022. As we move forward, we are very pleased with our project pipeline and are excited by the strong momentum in our single-family residential business where we continue to see an immense opportunity for growth and additional share gains. Our strong geographical positioning, innovative product portfolio, and unique vertically integrated model give us confidence in the trajectory of our business.”
Tecnoglass ended the third quarter of 2021 with total liquidity of approximately $150 million, including cash and cash equivalents of $86.5 million and availability under its committed revolving credit facilities of $65 million. Cash provided by operating activities of $32.6 million improved by $6.4 million compared to the prior year quarter, attributable to higher profitability as well as more efficient inventory and working capital management. Given the company’s continued growth in adjusted EBITDA and strong cash generation, debt leverage continues to trend lower and now stands at 0.9 times LTM net debt to adjusted EBITDA, compared to 1.9 times in the prior year quarter. Given its strong cashflow generation, the company voluntarily prepaid $30 million under its Syndicated Term Loan facility during the quarter.
Santiago Giraldo, Chief Financial Officer of Tecnoglass, explained: “Based on our strong third quarter performance and expectations for a favorable growth environment across our end markets through year-end, we are increasing our full year 2021 growth outlook for revenues and adjusted EBITDA. We now expect 2021 revenues to grow to a range of $485 million to $495 million. We now anticipate full year adjusted EBITDA to increase to a range of $140 million to $145 million, implying year-over-year growth of approximately 46% at the midpoint. We continue to expect that robust demand for our products and services in the US will be the primary driver of these anticipated record full year 2021 results.”