Barranquilla based Tecnoglass (NASDAQ:TGLS) (BVC:TGLSC), Colombia’s leading manufacturer of architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries, last week reported financial results for the fourth quarter and full year ended December 31, 2018.
José Manuel Daes, Co-Founder and Chief Executive Officer of Tecnoglass, commented, “2018 marked a solid year of progress for our company. We achieved record levels of revenues and Adjusted EBITDA while improving our full year gross margin by 90 basis points to 32.4% on greater efficiencies and lower product installation costs. We continue to see healthy construction activity within our markets in the U.S. as we reap the benefits of our expanding geographic footprint. In the U.S. single family residential market, we achieved a four-fold increase in 2018 sales year-over-year, surpassing our expectation and validating our efforts to penetrate that end market primarily through our Elite and Prestige product lines. In January, we were excited to partner with Saint-Gobain to acquire a stake in their expanding float glass production operations in Colombia, which reinforces our vertical integration strategy and secures our long-term float glass supply while driving significant efficiencies over time. Overall, our structural advantages are paying off as evidenced by our 2018 performance and we are enthusiastic about our prospects for additional success and market share gains in 2019 and beyond.”
Christian Daes, Co-Founder and Chief Operating Officer of Tecnoglass, stated, “Building on solid momentum in 2018, we were pleased to end the year with backlog at a record level. Bidding activity remains firm in the U.S., and we are benefitting from expansion in regions where economic fundamentals support long-term demand for our architectural glass systems. We were recently awarded our first project through our Schüco partnership, which is already delivering benefits. We are well positioned to continue growing faster than our end markets at industry leading margins. We look forward to another year of solid growth in sales and Adjusted EBITDA.”
Fourth Quarter 2018 Results
Total revenues for the fourth quarter of 2018 improved 16.1% to $97.9 million compared to $84.3 million in the prior year quarter. Excluding the impact of unfavorable foreign currency, total revenues increased 17.0% compared to the prior year quarter. U.S. revenues increased 27.8% to $81.5 million compared to $63.8 million in the prior year quarter, driven by stronger residential invoicing, continued healthy construction activity, market share gains and slight pricing improvement. Colombia revenue, a majority of which is represented by long-term contracts priced in Colombian Pesos but indexed to the U.S. Dollar, was $12.9 million compared to $18.2 million in the prior year quarter.
Gross profit increased 25.5% to $34.1 million, representing a 34.9% gross margin, compared to $27.2 million, representing a 32.3% gross margin, in the prior year quarter. The 260 basis point improvement in gross margin reflected lower installation costs on service revenue and lower direct labor costs, with essentially stable raw material costs per unit. Operating expenses were $19.8 million compared to $16.5 million in the prior year quarter. As a percent of total revenues, operating expenses were 20.3% compared to 19.6% in the prior year quarter, primarily due to higher ground transportation costs in the U.S. Operating income increased 34.0% to $14.3 million compared to $10.7 million in the prior year quarter.
Fourth Quarter 2018 Highlights
- Total revenues increased 16% to $97.9 million on strong U.S. activity; 7th consecutive record revenue quarter
- Net loss of $4.4 million, or ($0.12) per diluted share, including non-cash foreign currency transactions losses associated with mark to market adjustment of USD denominated assets and liabilities to the Colombian Peso
- Adjusted net income1 increased by 3.5x to $10.2 million, or $0.26 per diluted share
- Adjusted EBITDA1 grew 25% to a fourth quarter record of $21.5 million
- In January 2019, entered into joint venture agreement with Saint-Gobain through the planned purchase of a minority ownership interest in Vidrio Andino, a Colombia-based subsidiary of Saint-Gobain with annualized sales of approximately $100 million
Net loss was $4.4 million, or ($0.12) per diluted share in the fourth quarter of 2018, compared to net income of $1.1 million, or $0.03 per diluted share in the prior year quarter, including non-cash foreign currency transactions losses 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 $10.2 million, or $0.26 per diluted share, compared to adjusted net income of $3.0 million, or $0.08 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 gains or losses and other non-core items and the tax impact of adjustments at statutory rates, to better reflect core financial performance.
Adjusted EBITDA1, as reconciled in the table below, increased 25.2% to $21.5 million, compared to $17.2 million in the prior year quarter, primarily attributable to sales growth and higher gross profit.
Full Year 2018 Results
Total revenues for the full year 2018 increased 18.0% to $371.0 million compared to $314.5 million in the prior year. The foreign currency impact to total revenues was negligible compared to the prior year.
Gross profit was $120.2 million, representing a 32.4% gross margin, compared to $99.2 million, representing a 31.5% gross margin in the prior year. Operating income was $47.2 million compared to $34.4 million in the prior year. Net income was $8.5 million, or a $0.22 per diluted share, compared to net income of $5.5 million, or $0.15 per diluted share in the prior year. Adjusted net income1 was $32.3 million, or $0.85 per diluted share, compared to $11.4 million, or $0.30 per diluted share in the prior year. Adjusted EBITDA improved to $80.8 million, or 21.8% of sales, compared to $62.0 million, or 19.7% of sales, in the prior year.
- Total Revenues Increased 18% to a Record $371.0 million for Full Year 2018; Led by Strong US Growth
- Net Income Grew 48% to $8.5 million for Full Year 2018
- Adjusted Net Income Expanded by 2.8x to a Record $32.3 Million for Full Year 2018
- Adjusted EBITDA Increased 30% to a Record $80.8 Million for Full Year 2018 –
- Backlog Expanded to a Record $515 Million; Up 3.2% Year-over-Year and 1.8% Quarter-over-Quarter
- Introduced Full Year 2019 Outlook for Adjusted EBITDA1 Growth to $86 million to $94 million on Total Revenues of $395 million to $415 million
Tecnoglass ended 2018 with cash and cash equivalents of $33.0 million compared to $40.9 million in the prior year, with the reduction attributable to working capital investments to support growth during the year as well as higher inventory to support expected shipment growth in the first quarter of 2019. During 2018, the Company incurred $13.1 million of cash capital expenditures, compared to $7.0 million in the prior year, with the increase attributable to targeted high-return projects in the fourth quarter of 2018 focused on operational enhancements and efficiency initiatives.
Strategic Joint Venture with Saint-Gobain
In January 2019, as previously announced, the Company entered into a strategic joint venture agreement with Saint-Gobain, through the planned 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 is expected to significantly augment Tecnoglass’ vertical integration strategy by allowing it to acquire an ownership interest in one of the first stages of its production supply chain, secure stable long-term float glass supply, improve purchasing economics for a significant portion of its float glass sourcing, while also reducing waste and transportation costs. The transaction is expected to be completed in the second quarter of 2019.
Tecnoglass declared a regular quarterly dividend of $0.14 per share for the fourth quarter of 2018, which was paid on February 28, 2019 to shareholders of record as of the close of business on January 31, 2019.
Full Year 2019 Outlook
For the full year 2019, the Company expects to see growth in construction end markets and additional market share gains in the U.S. In 2019, the Company anticipates revenues to grow to a range of $395 to $415 million. Tecnoglass expects Adjusted EBITDA in 2019 to be in the range of $86 million to $94 million, representing growth of 11.3% at the midpoint year over year, driven by higher revenues and greater operational efficiencies.
Tecnoglass Inc. is a leading manufacturer of architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries. Tecnoglass is the largest architectural glass transformation company in Latin America and the second largest glass fabricator serving the United States. Headquartered in Barranquilla, Colombia, the Company operates out of a 2.7 million square foot vertically‐integrated, state‐of‐the‐art manufacturing complex that provides easy access to the Americas, the Caribbean, and the Pacific. Tecnoglass supplies over 900 customers in North, Central and South America, with the United States accounting for more than 75% of revenues. Tecnoglass’ tailored, high‐end products are found on some of the world’s most distinctive properties, including the El Dorado Airport (Bogota), 50 United Nations Plaza (New York), Trump Plaza (Panama), Icon Bay (Miami), and Salesforce Tower (San Francisco).