Tecnoglass Single-Family Residential Revenues Grow 51% In Q4 Of Record-Breaking 2020

During an earnings call earlier today, Barranquilla, Colombia-based glass and aluminum manufacturer Tecnoglass (NASDAQ: TGLS) announced record-breaking results for both the fourth quarter and the full year of 2020. Co-founders José Manuel and Christian Daes participated in the call along with CFO Santiago Giraldo.

Despite the COVID-19 pandemic, Tecnoglass total revenues for the fourth quarter of 2020 increased 1.0% to $102.4 million, compared to $101.4 million in the prior year Q4. US revenues of $87.8 million, representing 86% of total revenues, grew 4.8% compared to $83.8 million in the prior year quarter, primarily driven by strong growth in residential activity. The contribution of US revenue growth to total revenues was partly offset by lower revenue from Colombia, primarily attributable to delayed activity at many customer jobsites due to COVID-19 related factors. Changes in foreign currency exchange rates had an adverse impact of $0.7 million on Colombia and total revenues in the quarter.

Gross profit for the fourth quarter of 2020 grew 25.8% to $36.9 million, representing a 36.1% gross margin, compared to gross profit of $29.3 million, representing a 28.9% gross margin in the prior year quarter. The 710-basis point improvement in gross margin mainly reflected greater operating efficiencies from prior automation initiatives and a higher mix of revenue from manufacturing versus installation activity. Selling, general and administrative expense was $19.4 million compared to $18.6 million in the prior year quarter, primarily attributable to higher variable expenses related to shipping, as well as COVID-19 related expenses. As a percent of total revenues, SG&A was 18.9% compared to 18.3% in the prior year quarter.

Net income was $18.5 million, or $0.39 per diluted share, in the fourth quarter of 2020 compared to net income of $10.9 million, or $0.23 loss per diluted share, in the prior year quarter, including an after-tax non-cash foreign exchange transaction gain of $13.6 million in the fourth quarter 2020 and a $8.9 million gain in the fourth quarter 2019. As previously disclosed, these gains and losses are related to the accounting re-measurement of US Dollar denominated assets and liabilities against the Colombian Peso as functional currency.

Tecnoglass will attend the Raymond James 42nd Annual Institutional Investors Conference, being held virtually on Wednesday, March 3, 2021.

Adjusted net income was $10.3 million, or $0.22 per diluted share, in the fourth quarter of 2020 compared to an adjusted net income of $7.5 million, or $0.16 per diluted share, in the prior year quarter. Adjusted net income, 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 EBITDA, as reconciled in the table below, increased 19.3% to $25.7 million, or 25.1% of total revenues in the fourth quarter of 2020, compared to $21.5 million, or 21.2% of revenues, in the prior year quarter. The improvement was driven by a stronger gross margin. Adjusted EBITDA in the fourth quarter 2020 included $1.6 million in contribution from Tecnoglass’ joint venture with Saint-Gobain, compared to $1.1 million in the prior year quarter.

“2020 was a milestone year for Tecnoglass. Our exceptional results reflect the resilience and dedication of our team as we capitalized on strong residential macro tailwinds and recovering commercial end market conditions to post our second straight quarter of growth in the US Additionally, we delivered on our goal to produce strong returns on our previously implemented automation and capacity investments, contributing to record full year gross profit and Adjusted EBITDA levels, both on a dollar basis and as a percentage of sales. Just as important, our success is translating into a step-change in cash generation, with our operating cash flow representing over 70% of Adjusted EBITDA in 2020. We were thrilled to exit the year with a much stronger and leaner company, underpinned by a significantly improved capital position to further extend our leadership in the architectural glass industry. We will continue to leverage Tecnoglass’ structural competitive advantages to maintain industry leading margins while capturing additional market share in the US We are well situated to achieve another year of stellar financial performance and returns for our shareholders in 2021,” said CEO José Manuel Daes (above right).

Tecnoglass declared a quarterly cash dividend of $0.0275 per share for the fourth quarter of 2020, which was paid on January 29, 2021 to shareholders of record as of the close of business on December 31, 2020.

Total revenues for the full year 2020 were $374.9 million compared to $430.9 million in the prior year with the decrease mainly related to one month less of invoicing in the second half of March and first half of April because of the previously communicated suspension of plant operations, as well as a slower recovery in Latin American markets since the onset of the COVID-19 pandemic. Excluding the impact of unfavorable foreign currency exchange, total revenues were lower by 12.3% compared to the prior year.

Single-family residential architectural glass represents a fairly new focus for Tecnoglass

Gross profit increased 2.5% year-over-year to a full year record of $139.3 million, representing a 37.1% gross margin, compared to $135.8 million, representing a 31.5% gross margin in the prior year. Operating income was $66.1 million compared to $58.8 million in the prior year. Net income was $24.2 million, or a $0.52 per diluted share, compared to net income of $24.3 million, or $0.55 per diluted share in the prior year. Adjusted net income was $36.8 million, or $0.79 per diluted share, compared to $30.8 million, or $0.69 per diluted share in the prior year. Adjusted EBITDA for the full year 2020 improved to a record $97.8 million, or 26.1% of sales, compared to $92.4 million, or 21.4% of sales, in the prior year.

Christian Daes, Chief Operating Officer of Tecnoglass (above, left), added, “Fourth quarter results were encouraging and marked a return to growth in total revenues to close out an extraordinary year. Single-family residential revenues expanded more than 50% year-over-year in the quarter and represented nearly 20% of our revenues for the full year 2020. Overall quoting and bidding activity continued to strengthen since mid-year 2020, resulting in defensible backlog position of $545 million. Our strong performance in 2020 was augmented by winning new customers, entering new markets, and maintaining our commitment to innovation through the introduction of new best-in-class products, particularly in residential. As we move into 2021, we remain focused on expanding our addressable market in single-family housing in the US Accomplishments to date reflect our dedication to excellence and we are excited to drive further improvement across our business in the coming quarters.”

Tecnoglass ended 2020 with cash and cash equivalents of $66.9 million compared to $47.9 million in the prior year. Cash provided by operating activities of $71.4 million improved by $45.8 million compared to the prior year, attributable to higher profitability as well as more efficient inventory and working capital management. During 2020 Tecnoglass incurred $19.8 million of capital expenditures, compared to $25.0 million in the prior year, with the decrease due to Tecnoglass’ $20 million investment into high-return projects to expand and automate key operations at several glass and aluminum facilities, which was largely completed in the fourth quarter of 2019.

On November 2, 2020, Tecnoglass announced a new $300 million Senior Secured Credit Facility, consisting of a $250 million delayed draw term loan and a $50 million committed revolving credit facility, with a maturity date in 2025. The new facility has an initial interest rate spread of 3.00%, which will decrease to a spread of 2.50% in April 2021 based on Tecnoglass’ leverage as of the end of the year.

Tecnoglass CFO Santiago Giraldo – Photo credit: Liliana Padierna)

Subsequent to the end of 2020, Tecnoglass redeemed in full its $210 million unsecured senior notes, which bear interest at a rate of 8.2%, following the step down in redemption price at the end of January 2021. The $8.6 million call option was fully paid in January alongside with the redemption of the notes. Following the redemption of the senior notes, annualized savings on cash interest expense are expected to approximate $11 million annually. On a pro forma basis giving effect to the pay down of the unsecured senior notes, Tecnoglass had total liquidity of approximately $126.9 million, including cash of $66.9 million and availability under its revolving credit facilities of $60 million.

“Our positive momentum continued into the first quarter, with single-family residential representing a growing share of our revenues. Based on our current invoicing schedule and underlying market demand, we are introducing our full year 2021 outlook for revenue to grow to a range of $400 million to $415 million. In addition, we anticipate full year Adjusted EBITDA to grow to a range of $100 million to $110 million, implying growth of approximately 7% at the midpoint, driven by higher revenues, partly offset by higher unit costs for raw materials and a more normalized revenue mix. We expect the stronger demand in the US to continue to offset the slower recovery in Latin American markets. Furthermore, we anticipate our track record of strong cash flow generation to continue in the full year 2021,” said Tecnoglass CFO Santiago Giraldo.

Tecnoglass Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)

Tecnoglass Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except share and per share data)
(Unaudited)

Tecnoglass Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Revenues by Region
(Amounts in thousands)
(Unaudited)

Reconciliation of Non-GAAP Performance Measures to GAAP Performance Measures
(In thousands)
(Unaudited)

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
(In thousands, except share and per share data)
(Unaudited)

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: