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, today reported financial results for the third quarter ended September 30, 2019. The glass & aluminum manufacturer also announced that it will present at the Baird 2019 Global Industrial Conference in Chicago, IL, tomorrow, Thursday, November 7, 2019.
Third Quarter 2019 Highlights
- Total revenues increased 12% to $108.5 million, with the U.S. representing 86% of revenues
- Net loss of $1.3 million, or ($0.03) per diluted share, including non-cash FX losses during the period
- Adjusted net income of $8.3 million, or $0.18 per diluted share
- Adjusted EBITDA1 increased 5% to $24.0 million
- Backlog expanded to a record $532 million; up 5% year-over-year and 1.1% quarter-over-quarter
- Completed aluminum production capacity expansion; remaining high-return automation projects on track to be completed by the end of 2019
- Declares regular quarterly dividend of $0.14 per share
- Raises full year 2019 outlook for total revenues and adjusted EBITDA1, representing year-over-year growth of 17% and 18% at mid-points of new respective ranges
José Manuel Daes, Chief Executive Officer of Tecnoglass, commented, “We delivered another quarter of record revenues and further cemented our position as a U.S. focused growth company, representing 86% our business. We achieved our 20th straight quarter of double-digit growth in the U.S., including residential sales up nearly 60% year-over-year. Colombia revenues up 21% year-over-year excluding FX was encouraging and better than expected. Through our expanding reputation for excellence and our extensive portfolio of innovative products, we are forming many new customer relationships and winning bids across a broader geographic footprint. With our record backlog, we are better positioned than ever to continue driving meaningful share gains, particularly in the U.S. We look forward to deliver another full year of double-digit growth in revenue and Adjusted EBITDA. Beyond 2019, our strong line up of projects paired with our highly efficient, low-cost operations gives us confidence in our ability to generate attractive returns for shareholders for years to come.”
Christian Daes, Chief Operating Officer of Tecnoglass, stated, “Our strategic footprint, first-class product designs and commitment to operational excellence continue to produce industry-leading margins in our business. Our targeted automation initiatives at our production facilities are already in the testing stage and on track to be operational by year end, providing for additional efficiencies within our vertically-integrated operation, mainly on labor and waste reduction. On the product side, the success of our residential offerings continues to surpass our expectations, representing 17% of our trailing-twelve-month U.S. revenues. We are pleased with the trajectory of our business and look forward to executing on our multi-year project pipeline while carefully pursuing additional opportunities to grow our Company.”
Third Quarter 2019 Results
Total revenues for the third quarter of 2019 improved 11.8% to $108.5 million compared to $97.0 million in the prior year quarter. Excluding the impact of unfavorable foreign currency, total revenues increased 13.6% compared to the prior year quarter. U.S. revenues increased 12.9% to $92.8 million compared to $82.2 million in the prior year quarter, driven by stronger residential invoicing, healthy commercial construction activity growth, and market share gains. Colombia revenues of $13.0 million increased 7.4% as reported and 21.2% excluding foreign currency, compared to the prior year quarter, primarily attributable to stronger project activity.
Gross profit increased 3.0% to $35.7 million, representing a 33.0% gross margin compared to gross profit of $34.7 million, representing a 35.8% gross margin in the prior year quarter. The lower gross margin was mainly attributable to an exceptionally favorable mix of higher margin manufacturing revenues during the prior year quarter. The third quarter 2019 had a more balanced mix of manufacturing and service revenue, producing a gross margin consistent with the Company’s normalized level in the low-to-mid 30% range.
Operating expenses were $20.2 million compared to $19.4 million in the prior year quarter. As a percent of total revenues, operating expenses were 18.6% compared to 20.0% in the prior year quarter, primarily reflecting higher sales and lower costs for labor and freight. Excluding one-time items, operating expenses would have been 18.2% as a percent of total revenues compared to 19.7% in the prior year quarter. Operating income increased to $15.6 million compared to $15.3 million in the prior year quarter.
Net loss was $1.3 million, or $0.03 per diluted share in the third quarter of 2019 compared to net income of $6.2 million, or a $0.15 loss per diluted share in the prior year quarter, including non-cash foreign currency transaction 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 was $8.3 million, or $0.18 per diluted share compared to adjusted net income of $9.3 million, or $0.23 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 5% to $24.0 million, or 22.1% of sales compared to $22.8 million, or 23.5% of sales, in the prior year quarter. Adjusted EBITDA in the third quarter 2019 included $1.2 million in contribution from the Company’s joint venture with Saint-Gobain.
In July 2019 the Company completed its previously announced aluminum production capacity expansion in response to strong customer demand for aluminum products. The Company’s other high-return investments to automate key operations at several glass and aluminum facilities are already in the testing phase and on track to be operational by the end of 2019. As of September 30, 2019, the Company has deployed approximately 80% of its total anticipated $20 million capital investment on growth and efficiency initiatives.
The Company declared a regular quarterly dividend of $0.14 per share for the third quarter of 2019, which will be paid on December 20, 2019 to shareholders of record as of the close of business on November 29, 2019.
The dividend will be paid in cash or ordinary shares, to be chosen at the option of holders of ordinary shares during an election period beginning December 2, 2019 and lasting until 5:00 P.M. Eastern Time on December 13, 2019. The value of the ordinary shares to be used to calculate the number of shares to be issued with respect to that portion of the dividend payable in ordinary shares shall be the average of the closing price of the Company’s ordinary shares on NASDAQ during the period from December 2, 2019 through December 13, 2019. If no choice is made during this election period, the dividend for this election period will be paid in ordinary shares of the Company.
Full Year 2019 Outlook
For the full year 2019, the Company has increased its outlook for revenues to grow to a range of $430 to $440 million, based on its solid first nine-month performance, a favorable growth environment in its construction end markets and additional anticipated market share gains in the U.S. The Company has also raised its Adjusted EBITDA outlook to a range of $93 million to $97 million, representing growth of 17.6% at the midpoint year-over-year, driven by higher revenues.
1Adjusted net income and Adjusted EBITDA in both periods are reconciled in the table below.
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
The Company believes that total revenues with foreign currency held neutral non-GAAP performance measures, which management uses in managing and evaluating the Company’s business, may provide users of the Company’s financial information with additional meaningful bases for comparing the Company’s 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, the Company’s 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 the Company’s results because it excludes certain items that are not directly related to the Company’s 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: