Tecnoglass Reports Record 8th Consecutive Revenue Quarter, 23% Increase to $107.2 million USD For Q1 2019
|Tecnoglass, Inc. (NASDAQ: TGLS) Colombia’s leading manufacturer of architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries, Thursday reported financial results for the first quarter ended March 31, 2019.
First Quarter 2019 Highlights
José Manuel Daes, Chief Executive Officer of Tecnoglass, commented, “Our strong momentum continued into 2019, producing record first quarter levels of revenues, adjusted EBITDA and backlog. U.S. revenues grew 46% year-over year and represented 86% of first quarter revenues, which underscores the multi-year effort to expand our customer reach and geographic presence in this attractive market. We continued to experience favorable commercial construction trends and market share gains, along with rapid penetration into the U.S. single-family residential market. Strong U.S. performance more than offset softer results in our Latin American regions, where construction activity remains muted. Our installation business grew significantly in the first quarter, in part due to approximately $5 to $7 million of revenues pulled forward from the second quarter. The lower year-over-year gross margin related to the mix of business in the period was more than offset by operating expenses growing by only 5.4% year-over-year, reflecting tight cost controls and strong operating leverage. As we look to the balance of 2019, we are on path for another year of record performance and look forward to deliver on our reaffirmed full year outlook.”
Christian Daes, Chief Operating Officer of Tecnoglass, stated, “We continued experiencing solid bidding activity throughout the quarter resulting in a record backlog level of $518 million. We are pleased to see project wins in diverse geographies, in line with our U.S. diversification strategy that also includes our Schüco partnership which continues to yield positive results. Our joint venture agreement with Saint-Gobain closed in early May, providing us with expanded access to float glass supply and attractive synergy opportunities over time. Additionally, we expect to complete the expansion of our aluminum extrusion facilities in the third quarter 2019 which will allow us to serve incremental demand. Our initiatives to automate certain processes and optimize production lines at our facilities should be operational by the end of 2019. With all these operational enhancements underway, we are poised to further augment our structural advantages while we continue to gain market share and deliver industry leading margins.”
First Quarter 2019 Results
Total revenues for the first quarter of 2019 improved 23.0% to $107.2 million compared to $87.2 million in the prior year quarter. Excluding the impact of unfavorable foreign currency, total revenues increased 24.4% compared to the prior year quarter. U.S. revenues increased 46.1% to $92.1 million compared to $63.0 million in the prior year quarter, driven by stronger residential invoicing, healthy commercial construction activity, market share gains and slight pricing improvement. In addition, a portion of the increase was tied to the installation of products in certain projects pulled forward into the first quarter of 2019. Colombia revenue, a majority of which is represented by long-term contracts priced in Colombian Pesos but indexed to the U.S. Dollar, was $13.0 million compared to $21.8 million in the prior year quarter, primarily attributable to slower construction activity.
Gross profit increased 19.2% to $31.9 million, representing a 29.8% gross margin, compared to $26.7 million, representing a 30.7% gross margin, in the prior year quarter. The 90 basis point difference in gross margin mainly reflected a higher mix of service revenue in connection with projects invoiced ahead of schedule, partly offset by lower labor and energy costs per unit, and lower depreciation and amortization. Operating expenses were $17.7 million compared to $16.8 million in the prior year quarter. As a percent of total revenues, operating expenses were 16.5% compared to 19.2% in the prior year quarter, primarily due to higher sales and lower ground and marine transportation costs. Excluding one-time items, operating expenses would have been 15.8% as a percent of total revenues compared to 18.1% in the prior year quarter. Operating income increased 42.5% to $14.2 million compared to $10.0 million in the prior year quarter.
Net income was $7.3 million, or $0.18 per diluted share in the first quarter of 2019, compared to net income of $10.6 million, or $0.28 per diluted share in the prior year quarter, including non-cash foreign currency transaction gains in both periods related to the re-measurement of USD denominated assets and liabilities against the Colombian Peso as functional currency. Adjusted net income1 improved to $5.9 million, or $0.15 per diluted share, compared to adjusted net income of $5.5 million, or $0.15 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.
Adjusted EBITDA1, as reconciled in the table below, increased 15.7% to $21.1 million, compared to $18.2 million in the prior year quarter, primarily attributable to sales growth and higher operating income.
In March 2019, Tecnoglass completed a follow-on public offering of 5,551,423 ordinary shares, raising net proceeds to Tecnoglass of approximately $36.1 million. At March 31, 2019, Tecnoglass had cash and cash equivalents of $61.7 million. Tecnoglass’ basic and diluted common shares outstanding at March 31, 2019 were 43,631,653 shares and 44,902,619 shares, respectively.
In May 2019, Tecnoglass entered into a new 5-year $30 million facility, with a portion of available borrowings used to repay existing short-term working capital facilities. The new facility will extend the average maturity of Tecnoglass’ debt, reduce its weighted average cost of funding and provide added financial flexibility to execute strategic initiatives.
Strategic Joint Venture and High-Return Initiatives
In May 2019, Tecnoglass completed its previously announced strategic joint venture with Saint-Gobain, through the purchase of a minority ownership interest in Vidrio Andino, a Colombia-based float glass manufacturing subsidiary of Saint-Gobain with annualized sales of approximately $100 million. The joint venture positions Tecnoglass to significantly augment its vertical integration strategy by providing an ownership interest in one of the first stages of its production supply chain, securing stable long-term float glass supply and improving purchasing economics for a significant portion of its float glass sourcing, while also reducing waste and transportation costs. The $34 million cash portion of the transaction was funded with cash on hand.
Separately, Tecnoglass continues to make progress on recently announced enhancements to increase production capacity at its aluminum facility and automate key operations at several glass and aluminum facilities. Tecnoglass anticipates that these high-return investments will speed up production in response to strong customer demand, especially for aluminum products. Tecnoglass is on track to complete its aluminum capacity expansion by the beginning of the third quarter and the full implementation of its automation initiatives by the end of 2019. As of March 31, 2019, Tecnoglass has deployed approximately $9 million out of the total anticipated capital investment of approximately $20 million, and intends to fund the remaining portion with cash on hand and existing debt capital resources.
Tecnoglass declared a regular quarterly dividend of $0.14 per share, or $0.56 per share on an annualized basis, for the first quarter of 2019, which will be paid on May 26, 2019 to shareholders of record as of the close of business on April 30, 2019.
Full Year 2019 Outlook
For the full year 2019, Tecnoglass reiterated its outlook for growth in construction end markets and additional market share gains in the U.S. In 2019, Tecnoglass continues to anticipate revenues to grow to a range of $395 to $415 million. Tecnoglass continues to expect Adjusted EBITDA in 2019 to be in the range of $85 million to $94 million, representing growth of 11% at the midpoint year over year, driven by higher revenues and greater operational efficiencies.
Tecnoglass Inc. and Subsidiaries
Tecnoglass Inc. and Subsidiaries
Tecnoglass Inc. and Subsidiaries
Revenues by Region
Reconciliation of Non-GAAP Performance Measures to GAAP Performance Measures
Tecnoglass believes that total revenues with foreign currency held neutral non-GAAP performance measures, which management uses in managing and evaluating Tecnoglass’ business, may provide users of Tecnoglass’ financial information with additional meaningful bases for comparing Tecnoglass’ current results and results in a prior period, as these measures reflect factors that are unique to one period relative to the comparable period. However, these non‑GAAP performance measures should be viewed in addition to, and not as an alternative for, Tecnoglass’ reported results under accounting principles generally accepted in the United States.
Currency impacts on total revenues for the current quarter have been derived by translating current quarter revenues at the prevailing average foreign currency rates during the prior year quarter, as applicable.
Reconciliation of Adjusted EBITDA and Adjusted net (loss) income to net (loss) income
Adjusted EBITDA and adjusted net (loss) income are not measures of financial performance under generally accepted accounting principles (“GAAP”). Management believes Adjusted EBITDA and adjusted net (loss) income, in addition to operating profit, net (loss) income and other GAAP measures, is useful to investors to evaluate Tecnoglass’ results because it excludes certain items that are not directly related to Tecnoglass’ core operating performance. Investors should recognize that Adjusted EBITDA and adjusted net (loss) income might not be comparable to similarly-titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.
Reconciliations of the non-GAAP measures used in this press release are included in the tables attached to this press release, to the extent available without unreasonable effort. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures.
A reconciliation of Adjusted net (loss) income and Adjusted EBITDA to the most directly comparable GAAP measure in accordance with SEC Regulation G follows, with amounts in thousands:
Source: Tecnoglass Inc.