TGLS - Earnings call transcript Q2 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Tecnoglass, Inc.

Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure your my Investor Rodny now Relations. is to host, introduce Nacier, It you. Thank Mr. begin. Nacier, you may

Rodny Nacier

Thank us presentation for Investors A call you joining be section copy conference quarter may website of call. of XXXX the the at on slide obtained to Tecnoglass this for accompany the Tecnoglass' www.tecnoglass.com. second

Chief On today's Santiago Giraldo, and call for Daes, Slide speakers Officer; José Manuel Chief Financial Operating Officer. Executive Our are: Officer; X. Chris Daes, Chief

of information, the beliefs remind by Tecnoglass' on nature will are José otherwise. turning alter are Slide beginning due as any matters performance, call statements assumptions everyone in is period keep XXXX, expressly indicated statements over its changes uncertainties investors financial Tecnoglass' in results may meaning differ presented business. future future obligation future to the current uncertainty call Securities Further, with the and I'd or that results X. time Before of or Manuel, the to except information in events, forward-looking particular under risks, Securities information, Reform risks The statements of update other implied Private risks. from SEC call I be circumstances. Litigation These no material new to indicative affecting light changes the in mind such regulatory result should that are to in José obligation a in disclaims and business, on historical Manuel, and the growth Tecnoglass or and These to is not call, contingencies whether turn in Tecnoglass' uncertainties during the these expectations any in of are forward-looking operation a expressed within discussed or to this of and number statements, competitive now subject of Actual time discussed and/or over the Tecnoglass' regarding may and acquisitions. economic, filings future to, in Exchange including results. or factors, financial Act like the herein and changes those and from for Commission. to, statements based future

José Daes

everyone call. begin Thank review Chris, on will you, market take for us financial our I discuss participating who followed results, outlook. will you, operating update with of by today's will thank And then a our our backlog, through Rodny. and Santiago, highlights.

are second We with quarter. pleased the during our performance

integrated value have an our Over merit our through the vertical savings geographies, in to us past our initiatives. facilities implemented new and chain years into several model, business of amount expanded actions we invested the captured increasing allowed These cost record solid and which deliver pace achieve continuation consecutive a stronger of the revenues We activity, adjusted year. quarter XXXX start our EBITDA with quarter three of to the for good significant a experienced growth year-over-year. of second a

confident drive to strategy are continue continue the our penetrate our in will that benefits We to results. U.S. to

as the During payment announced. GM&P we a previously transaction completed highly accretive the quarter, in of

detail will this growth. EBITDA integration optimization we to Santiago of which anticipate we largely forward We back XXXX, well also record look some performing delivering including efforts, Into will of further. the driven business of acquisitions, which by adjusted and levels the US be invoicing completed half continue

X. results led in at XX% million, $XX As On we remain such, we the to Slide backlog in committed are shareholders. of U.S. the accelerating Net and to encouraged our the climbed the sales strong attractive construction linen by project by delivering activity to

experienced the in election. activity with in increased attribute will Colombia. associated construction of continue and relatively our activity what on put and hold, of strategy the that in This XX% we gains uncertainty, continue an a sales. close some markets unusual has XX% very our Colombia. penetrate expansion greater productivity quarter with We until presidential than stable drive attractive the May primarily of This these expected way to business will ultimately the We activity. was confident positive should the our U.S. very share years administration our in the and business The of to agree From in is to majority performance the of a U.S, U.S. with upswing market customers market economy be are for reflecting to construction outcome. us. compensated The incoming construction market end in come. relatively growth. in positive believe We Colombian Revenues largest to

year-over-year prior year presented certainly points to for quarter. sales non-recurring disciplined the this XX.X%. this increase cost improvement As highest the month June quarter for helped XX% margin business Adjusted demonstrated of better excluding by $XX.X and basis to of consumer well contributed was an from XXX EBITDA XXXX by The the gross reflecting year. the was items. since rating stronger confidence grew to controls almost margin, Adjusted and EBITDA million,

a the now margins see to over about favarable enviorment to to from of provide but a tariffs, Chris opportunities changes to [ph] in the new of impact trade material additional our additional details turn administration. value we any seen to business. our call XXXX and as generate not aluminium have more the remain on result We excited backlog. I the will pricing We expect

Chris Daes

to good Thank on you, morning José. the everyone line. And

Slide backlog Moving to X. our

trailing at Furthermore, our second $XXX to the some yet increased has by not the have The QX of XX stood month end one. the that which in being record projects to X% quarter. the We attracted year-over-year. pipeline compared million at the than wins backlog represents quarter end backlog at consecutive closed clearly have more continue fully of of four very end Backlog the project We times additional quarter invoicing. X.X the $XXX replacing a strong million of revenue. we quarters

XX% to and expand feel backlog. project of largest efforts are ongoing mix Latin reflect and continues new market throughout we in composition about good activity So market revenues. of good very and represent the overall our divisibility afforded to our by we steady U.S. pipeline the the bidding of in seeing of almost foreign These America U.S. backlog levels good U.S. our business The our region and the and comprising our the

have continue to conditions largely U.S. accretive of and in potential experience a our Tecnoglass. client a inclusion market previously Florida is a to our markets. number origination our projects where In number participation increasing in retail the in We the South Florida, top strong growing been South in we saw construction the we stronger our We by exceptionally scale and which was additions on markets. base, favarable of further penetration position, major by

space condo to the open win geographical sourcing two the the were more project other regions wins the of months only able where number seeing architectural mentioned, we to market, systems we are South from we the largest but despite activity in areas As within In have end in a state. glass in and to market moving of come into Florida U.S. midrise the Wall the and past projects trends. more and the more and high lead not diverse the to Curtain structural of also rest continue the

election the and markets continue by a streams currently to overall election we in which have macro we from process, our attracting very presence presidential extended not time. expect where to dominant focus impacted view we In We which and slowdown significant outcome on environment, favorable polarized demand historically was do second over construction should on economic as and as Colombia, That our us economy caused an improving an Florida. had diversifying revenue said, was in quarter in whole. capitalize activity will allow a

of quality backlog disciplined engaging the our business actively Although we are a in expand our to manner.

forward a several the and providing look Beyond business, stronger additional imports. opportunities operating a business to climate recently integration following our Colombian strong prolong to pricing the elected of determined complete environment catalysts, President favorable aluminium on in efficiencies. enacted the tariffs including we recently book U.S., The for GM&P

and business to additional are continue poised we are for We success. excited confident that expanding our

cutting product to portfolio, results the industry over Santiago our in turn edge the and glass architectural unique have markets. call operations. will to growing the discuss reputation integrated and We now I vertically financial the

Santiago Giraldo

EBITDA sales, the with EBITDA income. recorded line. deliver the financial of Adjusted in to base. of and confident growth another and Beginning morning quarter to quarter margins margin Thank increased adjusted reduce prior record you, the We avenues highlights our And including XX% our up to XX.X%, on additional efficiencies source everybody and an to adjusted driving improved remain across net $XX.X of Chris. revenue. number Slide the We cost continue basis metrics year-over-year adjusted generate good higher straight prior on to million XX year quarter, X. to all results XXX sales nearly from quarter. margins will on We points our from our improve year incremental ability

capital operational working continue performance flow a which quarter remain a from the accretive their to balance benefit leverage enhancements year at inventory supports approximately ended a our prior five pleased install structure, the X.X This future ample strong as times were and which leverage debt buildup the million X.X% year. timing we quarters. net cash net of first has to management position investments improving We while spend the in conservative highly to sheet improved have improved cash $XX strength GM&P following to forward. profile We with of payment of the to low of and on initiatives to fairly over the compared of the capacity growth. address especially of payment created and last complete with stable sales, quarter. been slightly compared growth earlier moving prior adjusted CapEx EBITDA Our

previously to attribute additional for portion a U.S. were of and the the activity. from slide from U.S. the additional Columbia mentioned. also primarily XX.X% primarily presidential drivers construction GM&P revenue reflecting flat acquisition. growth we the months with which number and of year-over-year, approximately strong balanced increased revenues experienced at on by million two of revenues second to growth $XX.X Colombia the residential we coming X. a Looking by quarter, revenue U.S. commercial as extended election in Year-to-date, more the driven

slide of the number adjusted on at drivers Looking XX. EBITDA

higher higher SG&A commission basis price. associated primarily due mainly volume sales. excluding adjusted to items year-over-year non-recurring basis to degree experienced a SG&A a sales dollar items. largely onetime of costs $XX.X of XX.X% For XXX transportation on $X.X as a We million, profit the EBITDA reported of excluding increased XX% quarter, increased to improvement and a points of expanded result and in and lesser to gross million,

included to connection the into reduced the accordingly, Additionally, million with the while connection acquisition purchase improved The to combination increased the the XX.X% effects previously have some the of our integration the one-time cost integration in expenses exposure Reported of in SG&A in in our quarter supply improvement On margin with business Tecnoglass. the approximately which a most the and charge the are adjusted overall XXXX that of XXX was portions reduction pesos in On manner strength incremental in of transition a year-over-year. our in through chain provision represented seller's business awarded basis on chain and GM&P Colombian which a of excluding in on hedged fluctuations, based amount controls. of announced This to linked and expense margin of an gross prior second seller currency integration in operating experienced of of now pleased have by as million supply does several in final projects some shares The gross original is point resulted in dollar. Tecnoglass. nonrecurring XX.X% inefficiencies approximately to basis, now sales quarter. note have offset U.S. a Gross the onetime and acquisition, which a of year resulting unfavorable seen to on million was performance other with GM&P by purchase an impact an charge. $X.X prior expense on to the the stable price of appreciation we retroactively to price higher certain profit completed related whole value to $X.X impact higher gross peso implicit basis, sales. margin, costs were essentially Columbian agreement Since was an the million. XXXX, Tecnoglass X.X% SG&A optimization we adjusted $X.X signed the such costs changes the GM&P we $X.X adjusted by to acquisition caused and comparable GM&P

services. expected we efficiencies improve profitability developers additional of support raw positioned contractors our and we remain well forward and and focused and across profitability, U.S. Overall, moving believe Given construction costs a to economics, inflationary serve productivity growth. disciplined efficiency facing to material we to our strong in as we variety products a enhance further purchasing initiatives platform while are on

XX. to number believe of ongoing our stability, recovery. on update pointing entered a activity We to an Colombian in market slide Turning leading have period with Colombia indicators

we of presidential years. climate recent most election, expand the the One expect over is of the Colombia's a several which business to positive pro catalysts next outcome

Colombia XXXX. new These what with following both encouraging other Colombia the Indices immediately normal an rates and rate low month As points, reached their sign, for Confidence each the readings since and June business GDP of Consumer election, growth a XXXX. readings data the for upbeat year-over-year healthy are as and consistent including a projected highest Confidence is interest

over as the the of also XXXX. increasing is upturn stretching take bidding anticipate recovery XXXX, we since developers of activity a advantage unlikely. in deeper next levels In Colombia While Therefore, turn, at year the firm into years. our a is remains in backlog macroeconomics gradual several sharp mid long favorable XXXX

on slide XX. construction Looking number at market U.S. the

construction growth Billings seeing business Index we from our demand. south where strong The levels benefit continues remain good the the are activity and commercial conditions presence. forecasts northeast as overall, to particularly in have We Architecture U.S. of to in largest

ABI We as are the monitoring exposure. a our our diverging positive trends view composition that but ratings based the current upon West in backlog we for carefully

view and Tecnoglass, shifts environmental catalyst new our increasing energy new which regulations, our are emphasize long-term rapid coding markets into in innovations within technology urban we Expansion as advancements product business. strategy. the buildings, centers efficient to for need and additional demographic for Additionally, continue catalysts growth we for to

XX. year outlook weighted be unchanged. outlook year-to-date, $XXX revenues of revenue our growth, the million. We range Based to grow our on to is progress our reiterate full Moving to mix our $XXX towards the for number for a to our U.S. outlook million XXXX slide to on still of expected With

anticipated GM&P the we anniversary early growth in calls, the to higher the growth of to have XXXX. compared As first to half on XXXX back said the of in invoicing we the based half our prior and in timing compared be expect in year-over-year on XXXX acquisition

XX us continue to full should year range manufacturing in to revenues an of adjusted Favorable leverage with improved expect controls the of sales operating allow million. cost operations, margins. to drive mix tighter for million We along to EBITDA be on higher and $XX higher

payments expect the to mainly cash taking generate flow operations full year there continue seasonal factors consideration half the year. related We first into certain to the positive from that for tax to are during of

leading our We in are extremely for confident improving further We your growth continued in our ability margins. objectives, thank you Tecnoglass. while to industry our achieve support

questions. We will be happy to answer your questions. Operator, please open the line for

Operator

Thank Jeremy & you. the your of first question proceed Instructions] Please Our from [Operator Dougherty with Company. line Hamblin with comes question.

Unidentified Analyst

Hi. actually job question. quarter. Nice my on is Jeremy. for the David taking Thanks This on

José Daes

are David. good you? yourself? Thanks, How Pretty

Unidentified Analyst

Good, thanks.

questions a couple we had So of just today.

gross you non-recurring thinking about better of back First, I this what year? how Can should through kind the $X.X be of margins can wanted just acquisition about ask again expense to happened of we then we us walk of for can it? And half here a million. give sense so you the us understand

Santiago Giraldo

Sure.

related specific couple or that we projects purchase the any been in to - acquisition of projects they of to to any overrunning inefficiencies price. agreement already executing the GM&P compensated related be this acquisition, a had costs over prior would the under agreed booked had already So had the that was that

in had structure. purchasing Those supply in that and materials. is closed happened have inefficiencies So are under had projects they basically of they the some ongoing all subcontracting basically projects new schemes the some of of party third been some what our chain the that other two

look stable question the that at So second have gross is at margin. And low type something the to if history really acquisition that the we non-recurring. been since XXs see you as on margins, your

up and the as be on bit little projected of that We what of year on second leverage pick expect the to case possibly the higher a half have revenues. we

XXs looking all, deal in integrated margins. the with would mentioned we Tecnoglass, all that gross have at acquisition So be we since low beginning - we the into type

Unidentified Analyst

it then sounds election. of and given you And the like were in Colombia some seems more next kind like it on then to what happened QX positive also forward. a great. wanted around moving And touch Okay, disruption, bit just

just So forward moving QX, of specifically in saw kind thinking could in about in be half of kind your we Colombia, growth about you should you the this back what talk year? of how outlook rates and

Santiago Giraldo

Yes.

QX was So strong. very essentially the

look second overall the during you lot - If at were call it worried the kind Since was President. was year-over-year, we presidential becoming experienced a outcome growth elections and the growth the June to and substantial And the a people And the is what quarter once a leftist these in in of outcome. with people first now we said that lot was that obviously what cost then and and that and during in candidate party coincidental. then actually to And was then Colombia. that said commercial right I is happen sense polls winning of going the during hold for better of coincidental closer until the actually the getting on up leftist in pro the is closer there possibility or is in the was ended what strong index since was actually getting May sentiment candidates get done, residential activity business a got got it we're both highest understanding put XXXX. seeing very as favorable. on the really been to a sentiment, specifically confidence But a – then election with of

far lower that's with about as going the We're corporate as that new that president positive. how being a basis on has taxes, the of hundred as as up. talks cautious year we think preliminary he see to more fast remaining a so macroeconomic he we to But So next to come more policies. the in the his indicated pick intends days

I pent think a lot there's up certainly activity. of

So we being with kind stable the to just in flow coming into rest new thinking what for any QX timing as what the going - really outside, probably regime what we're upside the as on revenues saw of to you of that marketplace. opposed administration as is the know, is far the optimistic over as year overly an to of new

Unidentified Analyst

Appreciate guys. good Thanks question, and Great. right. All taking luck. the

Santiago Giraldo

thanks. All right,

Operator

of proceed Our next line FBR. Rygiel the from comes Riley Please with question. B question with your Alex

Alex Rygiel

Thanks. Nice quarter, gentlemen.

José Daes

you? Hi, are Alex. How

Alex Rygiel

miss trying duplication a questions. mix to is you apologize mix think the multifamily, there's get Very address maybe sort in with the associated kind months associated your U.S. the didn't is could think those what so here then But first here. good. residential you more And I get I any kind during – two of and Couple outlook of moment in office over understanding or call your next of if I that the multifamily that's few hear what about backlog in here, talk the markets? I'm one end XX today? to of of about with

José Daes

is lived is So intra-quarter. components, well in really actually and very no basically segment the that's performing expectations. That short backlog, there residential above and very really

projections, on on part see you your rentals others from of second geographical of a is multifamily commercial. what Out or perspective? seen tell commercial I two would base So there execution rest composition the the you've XX% our and probably which, will probably meant essentially backflow XX% I and what U.S. we the as work. of tell is and the And portion that you question you

Alex Rygiel

market on view I the versus think, to the over XX market months? office XX course your kind multifamily of I the the was particular looking next for of

José Daes

Okay.

end in shifting large cooled Florida. but is Florida a the we couple other So the in past view into office more market, of said win markets off. we mid-size space, for did within the high We pockets specifically the are projects, as general condo that

know we see on the Miami of if a cool market. So you specifically, you talk from did end little condo bit off about high - the

with work other in within also However, types the replace Wall the an=d and U.S. the focus Curtain on places right out Northeast now is focus on to other outside

Alex Rygiel

and to if yourself And relates and it competition then tariffs? raw you address could any rising the the material to impact your costs as

Chris Daes

after beginning going the so of very the And at and being the the any a convenient. up to able see at the aluminum in best new customers Well, was there are second that's been Chris, a why half in of all by we the to and paid year. been been impact yet up oil the have dollars, is the And and have due now complaints is prices come into of because tariff shortage ended optimistic end have without for to there's tariffs we This it the pull we few that cost, year.

Alex Rygiel

where strategy should is your growth sort turning of additional building in that M&A acquisitions book XXXX. opportunities, to do fit about in or something more we And targets future Are of that you into up so XXXX? think

Chris Daes

completed of the execute integration Alex, have is I to growth what No, organic in know, that hand for think just for being. looking our we're and GM&P, and we to backlog time given you continue the

to opportunities listening going but to in execute continue and of obviously hand. So just to backlog the as we horizon. basically We mindful the nothing be valuations, arise on want are

Alex Rygiel

Excellent. Thank very much. you

Chris Daes

Thank Alex. you,

Operator

comes question Please question. with of line the Company. next Romero with Our Julio proceed Sidoti your from

Julio Romero

Good morning, everyone.

Chris Daes

Julio. How you? Morning, are

Julio Romero

Morning.

was with the much priced, that So how mix? that in to start in quarter. how first regards of growth was revenue maybe just a was how much of volume the much us give you wanted Can XX% to breakout out and

Chris Daes

know, baked seen Basically we yet. volume, or inflation a substantial not price in have you

the So what just is volume, the in of work. growing year-over-year are U.S. result incremental seeing you basically XX% about

Julio Romero

mentioned expectations. you performing was And the residential it. Got above

You you the the know, the of year, million residential full target side? do $XX year way quarters that million we’re of how on about two $XX through feel

Chris Daes

to going getting products toward off residential target about perceived year the the higher certainly launched cautious well being that of start half there. very seeing while second feel good about And we year last the being still are end and to about up the higher for original that new the think Julio. and confident very to we of feel end Colombia the year that I towards were We we're we compensate, end of is target more

Julio Romero

I integrated across about wanted piggyback you mean, Can on competitive rising I question certainly, to last perspective competitors the it freight maybe And earlier costs. as given maybe from site your input one one seeing can industry. Alex's have labor quantify maybe might also result? one you're you about rising when in site, gains – Understood. a you and have be and versus can what specifically, market site the talk try a you freight been comes of that to the just kind incremental you seeing vertically talk to

Chris Daes

Hi. This is José tariff Daes. Listen, raw the of not source tariffs and materials. most we the the because product increasing in the Colombia salaries a have have our into and been good previous for us but buy we the does coming states, products

X% all So and foothold from our in. increase market, of but as next U.S. we and markets penetrate the maybe we gaining to a good and prices increasing sign, haven’t as that increased not keep new wanted we’ll a because we've changing competitors year see a XX to little in to we bit, seen their much as competition

Julio Romero

here on is Understood. but one flow, And still quarter. maybe then my cash year-over-year, slightly the in the negative just last improvement an definitely

free forward, CapEx Just the the we year? expect requirements your lower positive given half back flow in should of going cash

Santiago Giraldo

All half of first There's effect a taxes in get paid year. here, the seasonal the Julio..

actually of obviously effect. a from in is related to a you'll is amount see flow higher second down have They the you operating are but we sales. in activity buildup on see to So DSL higher do half a of trended as of the perspective What mainly seasonal cash year. inventory relation

with we being going guided trending affect should or being CapEx cash as X also have very that as so. it little of year see there. to second And foreseeing the you at given of $XX $X.X line what months mentioned, if flow million mute are for seasonal million in you know, we’re bit said, are have just That that up, which right year positive. I approximately a the on remain usage about We and we follow into basically the

Julio Romero

the helpful. for of the And That's good year. luck back questions. half my Thanks in taking

Santiago Giraldo

you. care. Take Thank

Operator

the the queue. questions management further in comments. hand to I'd to for no back are There like closing call

José Daes

Thank you, everybody the taking for call.

expected the Thank second continued As much XXXX. growth and we we in said results better you. into half

Operator

Thank this Ladies today's you teleconference. participation. conclude does your and gentlemen, for

time. a lines disconnect this at may And have day. You your wonderful

Tecnoglass (TGLS) 8 Aug 182018 Q2 Earnings call transcript