TGLS - Earnings call transcript Q1 2019

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Operator

Greetings. Welcome to Tecnoglass Inc.'s First Quarter 2019 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] Please note this conference is being recorded. conference Rodny the Investor turn now over Nacier, to Relations. I'd you. Thank

begin. You may

Rodny Nacier

accompany obtained us Thank the of A to call. you Tecnoglass the call for presentation first for joining website. Tecnoglass' quarter section the on Investors XXXX conference slide the of maybe copy

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

Jose Manuel Daes

the Thank XXXX, XX% exciting continue everyone, first to marking on revenues. you, to momentum to our on representing record by into straight had million, quarter. in by to our U.S., attractive built quarter, This region. backlog. and you, revenue of increased start thank million, and for produce today's revenue stronger geographic in This call. effort we $XXX.X progress strong $XX.X to an multi-year allowing was revenues, the We've this quarter presence levels first of XX% grew Rodny, and reach Total adjusted EBITDA driven expand record eight our revenues performance where us XX% customer participating

revenue, construction XX% has along rapid to commercial offset favorable a year, of we and U.S. experience penetration the favorable represented U.S. the softer of in year-over-year. significantly was the of construction installation result in million quarter first second due to activity part American muted. sales with $X remains A services approximately increase trends, Over residential more than strong U.S. forward our quarter revenues performance market. share from portion pricing with Latin where single-family growing into A gains to regions, pull the environment past the continue million $X market

cost operating strong operating very reflecting expenses tight business to controls these the margins. and levels. were X.X% We year-over-year, of growth pleased gross While, limit to mix impacted favorably in

glass future. us alliance have growth results, business a to had for in that In is Schüco us to strategic updates form the addition Recently well allowing development strong several accelerate exciting we float with Saint-Gobain. float expect in awarded we supply beginning the a integration very put generate see in middle May, announced This complete facilities secure synergies to XXXX. market us the in previously our step was our Recently projects served increase we to ultimate of transaction and the our with vertical benefits venture In America and the number positive significant strategy, company, this reach glass to enhance on closed glass past later a to the on a U.S. position which expect in for from joint and aluminum to and of production, enhancement capacity years And operations. year, our we to come.

attractive We record initiative we and our plans add a high-return were to in result. lean in very to ordinary initiatives against we which believe expect to In place, we track with pleased expanded generate to way, we our post well under making execute low of our backlog. are this efficient. are driving this extra cost to our excited as capacity enhancement entire implementing dedication, returns, we more situated With closing, team's successful

are are to Our business, increasing our to no core partnerships, operations strong, address and capacity ventures benefit investments further expected demand.

operation. While our a Furthermore, we enhancing and future also have leading in glass profile drive awareness to sheet, solid broadening invest additional elevating value our corporate balance opportunity. architectural growth of and local

confident construction to We gaining And margin in leading activity. are continue in share industry U.S. strength our business. commercial expert of the and residential

provide year balance look for turn backlog. we the forward on outlook. over are I above the to we look and of details another delivering our now to record performance, additional Chris, or XXXX, reaffirm call will As year to to of full now

Chris Daes

and to Manuel the on good everyone Jose you, line. Thank morning

million, the wins backlog with end the And $XXX, XXXX the the the year-over-year. This our quarter record to at was slide $XXX of Moving compared and a X, bidding we primarily to ended of throughout quarter. million activity. to up project first backlog X.X% due on solid the

our project are line to in growth diverse geographies in U.S. strategy. the pleased, with see wins, We especially

is yield results, pipeline us strong, into positive complementing our project XXXX. Additionally, continues allowing Schüco strengthen our visibility that to our partnership to

single-family Our surpass ongoing our represents performance growth in fastest market our opportunity. in to And the continues the expectations. U.S. currently residential

to backlog. comprising an currently, to our portion single-family continues recently added As a talent the before team project the to business, U.S. economic business. of our architectural The our the shorter penetrate projects regions sales York, glass several our demand are our and represent portfolio efforts support reminder, New increasing business, on our many of of U.S. typically Texas. of wins states XX% backlog. representing and for And expand of market to This cycle, and our where fundamentals, approximately Massachusetts mix ongoing in long-term reflects

continue backlog. which We U.S. projects. less a our construction quarter geographies including to represents see of activity, U.S. within penetrated nearly markets, healthy In our our currently

aluminum in project should our augmenting production our on U.S., leading We lines, position the aluminum Overall, better our advance initiatives to facilities This quarter on incremental even first and in be should positioned expect bidding advantages. a we to us of to the to quarter throughout for extrusion automate Furthermore, footprint, level. expansion many we at demand optimize to attractive structural competitive of facilities, are complete have especially diversified our allow a backlog processes record third our products. certain market, XXXX. serve while across we new our further

innovation We under element execute to disclose growth performance service margin to on products have has our I excellent to now profile expansion. we high as the high financial successful markets. productivity the strong on turn build the will culture industry-leading been remaining our A R&D of a results and and for throughout global raise continue track Santiago to pipeline, occasions of our focused of return key of to source capacity customers. ability call projects, innovative while record meaningful our partnerships to our over company upon our

Santiago Giraldo

first and in and to pleased the were We presence Christian, with on in you, we financial an to line. performance diversified very our our the good Thank strengthen on our with relationships XXXX, new broaden continue highlights quarter across increasingly customer morning everyone markets Beginning slide our footprint. number. of

high hotels residential including addition segment. our in our new are into and growing business and We buildings, office rises project reach expanding single-family types to markets multi-family,

first As revenues significant a drove EBITDA records. new to result, increases adjusted we quarter and in

up CapEx of geared with investments million and working opportunistic reflects support efficiency the improve manufacturing capital sales inventories while toward increase associated and to with receivables invoice are cash to operations. operating CapEx and of Our robust work of pipeline growth, on of basis quarter build approximating day a year-over-year business. flow maintenance beyond, first This being primarily $X.X account balance With spent portion year our strong a during the outstanding a being sales includes strong return projects the quarter. nominal a million initiatives, this retainage investments. remainder within aluminum demand the $X address in on installation frame high on to We first our performance

of investments we total As capital half million. of of approximately anticipated March deploy $XX XX, have approximately the

X.X through the resources. fund the remaining rates debt existing $XX.X cash expect net moving of with approximately position of cash offering end growth capital of strength net These In in a of March, supports X.X $XX to shares. times, at from portion sheet million and forward. ratio follow-on public of the quarter on times XXXX. and initiatives ended strong down leverage hand proceeds We operational we enhancements balance the our million a We with

at of first revenues the our Looking of million quarter. number We X. $XXX.X straight revenue, which slide XX% were the up on record Xth drivers reported quarter for the to

Continued the in drove strong first performance strength in the U.S. the sales. quarter

business continued residential in increasing Furthermore, U.S. XX% end in market to of in revenues. our market. represented the lines overall in U.S. million, deeper U.S. the by of single-family total primarily activity, environment. XXXX, reflecting construction all a grew first pricing the our of share $XX.X strength XX.X% quarter gains, With year-over-year nearly penetration At favorable the the of

of Looking to year EBITDA at produced margin from slide drivers the EBITDA XX. an the increased Adjusted of $XX.X XX.X% quarter, which on million EBITDA number prior adjusted adjusted XX.X%.

energy and a in quarter was of points of First was depreciation transportation labor affecting quarter. XX.X% and amortization to and quarter have of the sales first costs. and the per by costs. to our in these on material mainly in sales Notably increases XX.X% SG&A Higher labor offset peers material attributable cost U.S.-based were raw in XX.X% not the compared unit lower revenue year the drivers decrease impact mix XXX the basis higher primary reported a year-over-year. ground partially had This lower margin cost constraints lower to prior service costs gross was marine still and points XX manufacturing basis our difference

sales. to operating a record operation lean shown very SG&A as be Our continues by generated leverage quarterly the on

slide Moving high we to venture our on XXXX, XX. In number investments previously Saint-Gobain. strategic with announced joint return completed our May

their minority complete on Saint-Gobain's enhanced Vidrio subsidiary our position purchased process. participants. long production reinforces January, strategy XXXX. venture This control the to this supply, in which approximately of serve customers, construction in should customers by second industry Through Permitting plant reminder and purchasing of suppliers, float were a better profile processes excited existing Barranquilla investment a and are over term. we our global sales already over million. state-of-the-art Andino We based in Colombia has vertically other more ability $XXX joint architects nearby our integration we this to annualized and have which with quarter elevates As drive the way secured the glass economics, improve margins start our of having fourth to

XXXX. facilities the are last our year plan our year, as with to X.X processes, completed of completed production. of by been Additionally, expected initiatives are to XX%. of we to since enhancements lines of mentioned, approximately to expected increase our capacity automation this certain enhancements aluminum glass glass making ongoing the end on times implementation the to support manufacturing we capacity full fourth while which the by automate in expansion third aluminum various be is our in The These improvement installed have of efficiency expected within and is automated further aluminum be our quarter quarter

vehicle Looking business. be The approximately growth. to market In continues the our largest of slide U.S. in of represented XX. presence XXXX, and the evolution the company's number on market our at of evident our U.S. the most XX% U.S.

key in which and Both In platform have expect vertically market rapidly single-family install the of have have enhance LTM entered years in we XXXX our distribution scale strengthened This of gave our ESWindows country. penetrate that ability the from to just GM&P along our GM&P represent to believe our in and our addition markets sales. in the with key continue up back acquisition integrated markets. XXXX the which to and products XXXX. national business in advantages and less XXXX, ongoing XX% revenues that been the marked the average. represented over rapid control transactions, last As products by effectively than structural we evolution first further the attractive our XXXX, to markets will in several over faster U.S. quarter to our than across XX% U.S. of projects. the initiatives XXXX, our us of We more includes These directly U.S. X% collective of of U.S. grow six our ESWindows

new driven to enhanced approach. and range take to quality that relationships execution structural very $XX our upside high-value U.S., We In competitive, customers, demand. be a of in With also we a differences the maintaining capture expect share while by in projects with of broad proven still the market a in of share added largely allows our fraction glass and both our single-family exposure billion we to the industry. only architectural see significant approximately and rising represent residential, U.S. aluminum commercial to business first a

XXXX on Moving outlook to number our slide XX.

stronger anticipate full in continue year top and We growth line bottom to XXXX.

types, helped majority $XXX project revenue by a full of revenues growth expansion, the growing we year, single-family from U.S. new with be market, remain innovative the to range of to geographic products, to residential. For million, confident expected and in partially million $XXX the

to continue compared of on the the million $XX higher anticipated growth XXXX. adjusted to sales back half outlook revenues, growth to revenues $XX EBITDA in favorable mix the year-over-year expect we of operations. percentage to year expect in first these timing operating outlook XXXX This of to on higher We compared the and on to based full assumes of be the higher to reiterated in in half and manufacturing sales leverage Based invoicing be from mix range the anticipated million. continue

our results the joint EBITDA which second the Additionally, Andino Vidrio of will share the incorporates outlook adjusted XXXX. of contributing from to quarter begin our in venture

the in we approximately quarter, saw the note from to quarter. of $X also mentioned first that million $X million pull-forward as will second we revenue We

our As million to million in we we $X revenue our This shareholders. of remain which In related the us offsetting so invoicing year benefit second should closing, revenue strong an business, for is to impact significant another to a the timing on in our result, we in some discuss of service to saw see first purely quarter, of earlier. unlock quarter. allow well-positioned will growth $X revenue value

of Our low new moving portfolio in attractive demand return integrated us right in vertically recent investments, the high extensive profile operations, are products, and our all cost leverage partnerships, direction.

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

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

Operator

Dougherty first Our question Jeremy you. is with proceed. Company. Thank Please from [Operator Instructions] Hamblin &

Jeremy Hamblin

quarter. the significant the wanted of on and gross I congrats you saw and you with sounded but morning like results. us Good year? the various and could and It strong Santiago, gross give kind you have you a was margin that to your the of as sense expansion higher expectations the start the margin for of had the the in most move aluminum capacity we year, that puts a timing with impact, much mix service throughout revenues probably cadence around this takes later

Santiago Giraldo

Sure. Hi Jeremy.

basically margins are up We for looking sequentially. to gross pick

we of and higher we a mix capacity pick related margin gross up more is even manufacturing in to had the the a aluminum and we on previous out guided revenues, to to gross which going pull is you and of front up is which trend essentially over kind calls are time what As service exceeding to as what QX going low to. had was we XXs said the able margin revenue to discussed

timing a just is issue revenue. this So, on service

Jeremy Hamblin

that And XX% you're range? kind for year, still of the thinking in

Santiago Giraldo

yes, Yes, for a us. that target will be

Jeremy Hamblin

which business. then of some investors ask struggled about to Colombian for Okay, in and been patients your from terms I switching thinking think you've patient that great. And gears business has and

little give about sense I some traction we're see in don't whether Manuel Jose to You've it you Christian a thinking we starting see to be if here. know there. of want should or continued bit How to languish XXXX? that

Jose Manuel Daes

they very starting but, to put are mean last is of People said, here. is looks year, pickup hold. projects Jeremy, going small the election portion being gone but now better believe now. be I Hello that our XXXX to that to Jose with government as a the going That XXXX the seems it's flat the year, stabilizing. be because I is last on business

maybe going U.S. end be to throughout to nice next So backlog to pickup overall. going have year. We in XX% also the really next it’s is not the strong demand, year see on for XX% much We we that the

So optimistic. we're very

Jeremy Hamblin

the to point the of And in phenomenal seeing out Thanks. great. of moving what markets across a Okay of move outside I U.S. capturing obviously newer U.S. getting competitors, your price? marketplace and Florida seeing contract then, they competitive that's that to to What market had from Northeast obviously Midwest. --you you get more geographies? geographies you wins the in these the are a have here sense key the Are the seeing on as into Texas in you're competitive in response region and response whether dominant run you clearly or share. wanted aggressive in other type

Jose Manuel Daes

always in Jeremy, the because normal. the second a penetrate supplier not to the you to discount to they their have is everything back some used job gets trying to But or client with usual turns order provider markets, first give new when with acquainted after you, easy.

great done have Northeast in Texas. and in the We also performances

are to going going So that we have the the to we deliver, clients product because up, margins are that are responsible. believe good a that comfortable and go we now are

Jeremy Hamblin

Okay, then you've in business to that to great. areas And wanted come I other expand. seen residential back your

of do residential little I here might business, call. your You quarter, missed and did color the gave in QX on and this But, XXXX? to how in bit on that a of what you QX terms in side of have this it last of compare did

Jose Manuel Daes

much told ourselves is wanted don't totally too mess. still then it's make to different a a animal and a and learning you but residential, like the we is outgrow increasing I are and sell We curve,

XX% XX% around year, which $XX to is nice, first a is the million I $XX softest which them to so of all, growing really million to going with be this believe with quarter, around around that. $XX are happy we're We in the million

Jeremy Hamblin

Yeah. pretty That be strong growth. would

million $X flowing that you've item the QX, just to million should Last around flowing QX clearly line? $X clarify to been want should still in to here through is you're in I on forward. of QX, and the be back in XXXX? implying Santiago, the Okay. terms but be seeing -- commentary growth going sales pull How we growth sequential we expecting should think not sequential in expect what growth we year-over-year

Santiago Giraldo

the and expecting QX. going Jeremy, expected forward along for had the obviously visibility hand. good million QX what have $X QX we yes, it's on Yes, we decrease being be the we're in based QX to be we lines pull good have and quarters traction same to originally tend in said, to that QX and That of

strong forward, know that year-over-year, to don't sequential perspective, going to a year-over-year certainly still pull to but given QX. strong able growth So from grow I definitely that QX from growth be we're

Jeremy Hamblin

misunderstood. maybe I'm sorry, I

of You're similar expecting QX XX% be to up rate, in range? like growth in terms the

Santiago Giraldo

no. had to we and the from Like to you or Q on. kind million QX going No, of, not the is a a going the no, from fastest versus strongest $X Q we comparison. no. to growth off benefited No, the said, because on that's level million no, perspective $X basis which, pull-forward percentage be that No, think this

high-single midpoint have you'll So to come digits that kind baking, to a closer more to from double get percentage the perspective, growth to digits low to And of a normalized get to it's to guidance, year-over-year. to end. to be going of

Jeremy Hamblin

for Understood. Good taking guys. questions. Thanks All luck, right. the

Santiago Giraldo

Thanks, Jeremy. right. All

Operator

proceed. & from with question Julio next is Sidoti Our Please Company. Romero

Julio Romero

Good Hi. morning.

Jose Manuel Daes

Julio. morning, Good

Julio Romero

to and wanted processes. the glass ask enhancements I the aluminum to about

end capacity of through? I once? talk increased step should you it flow when and XQ, that If to can function Or be about there? a expect know that sort capacity you up to we is at Does by open could but of all mentioned there progress the there capacity

Chris Daes

Daes. is this Christian Julio,

aluminum XX July we track. expect We be are running by expansion and of do on

press begin week. fact of the we'll matter installing next a new As

aluminum the see, quicker. there. to supposed do be good the track. still could The be on what done, that's additional will we bring third which we're be capacity we capacity, on project glass So going today, by October XX. to quarter only side, is Once And results it already, will profits the believe our on for much not finalized can but we twice is also in

be by cut will lead customers to will be -- response the a So the times weak.

to a because to able and times people sell So turnaround a transportation be the sell to them our customers expect lead real that of really we we now, this have. to that -- be lot cannot times the on we for of

Julio Romero

Okay. does rate And furnace that with what go-forward extrusion do capacity, additional the basis? the glass with Understood run increased an the and needs, and to CapEx your line on maybe annualized it.

Chris Daes

$X to we No, the do sorting the for and mean, probably -- we -- cut are customers. increase CapEx, million are on time to this but going expenses everything glass atomized million and all a the done quickness no, I will doing to cut that is we example, the for we're on some aluminum the After year, reliability no. that investing, able $X on CapEx, quite in of give serious storage bring maintenance we're and to be the going that and that be also

and So investing impact we more definitely without CapEx work here. that to have will expect to able be any an

Julio Romero

into back Thanks much. hop very I'll queue. helpful. Okay,

Chris Daes

you. Thank

Operator

Please & Wojs from Tim is Our next with Company. Robert Baird W. proceed. question

Tim Wojs

everybody. Hey, Good job. morning. Nice

Chris Daes

Good morning.

Tim Wojs

talk you've I from just the you growth could you're that I been you growth. assume, underlying given about might had, saw quoting And a install, the guess, backlog better little know some have what just what I bit than a reported. would if seeing pull-forward the perspective in a and U.S. maybe, bit, decent you little pretty backlog

perspective? quoting market, would So helpful from in just, you're think, what kind of, seeing the be I a

Jose Manuel Daes

are the and in of we're Beach pipeline. quoting Jose mean, is Tampa, large are the really that lot, lot a I no Palm Florida, Tim. a even Orlando projects year. Jacksonville, This seeing Sarasota, in movement was Broward example, movement for on Yes, last Miami-Dade, in counties year the Daes, quoting This we quite in

we of to selling Boston up sales in for finished to we to successfully years now months. stage those next couple lot we new increase expect buildings happy jobs And have some since for a the York and expect New people the in come. us the beautiful and are of are we So add

Tim Wojs

Okay.

I is been, a pricing like seeing what recovery know the of Florida So quantify mean a is? seeing and in kind to it good on the guess in pretty to question sounds it I kind second in like QX. just way it's contribution you're again pricing I How you're modest pricing. contribution QX sounds activity. Any of been growth in backlog

Jose Daes

the Sometimes you have to normalize Well supplier. depends discount a reliability because and we for then glass, when to little the of to order grow the getting in price everything the the bit will -- again. or a charge the XX%, X%. it the is the we increase even margin quality deliveries maybe can and you're convince price to our client clients of job or your But XX% do you years gross new be second timing We the you the you to and X% can by change come stabilize people you what after believe after then X% first is increase going give in prices

Santiago Giraldo

a on been they that a have know. what on contracts you Just have as mainly backlog times for signed is lead these because you and volume Tim follow-up see are as while long

is there be see more than else. you're of lot going to So a increase whole going whole related volume, related to pricing anything not lot volume to a of

Tim Wojs

lower as your -- a SG&A think was think of of kind remainder How the when what's than then for for percentage And kind about the any that of XXXX? just we in Okay. a and so of about year leverage sort what we of expectation had modeled. we sales should lot

Santiago Giraldo

past whole don't the the lot in stable which rest over no transportation come believe the cost control which have you reason a from to we order to had go year the indicated that commissions of the what obviously of we than was SG&A nominal be those variable higher which there SG&A guys level a saw basis maintain our But leverage is transportation able is costs. will QX. operating certain that substantially on in of outside in for There exactly for we've to a target on Well variable expected and mainly is side. what to are SG&A

we So do shouldn't SG&A. we reason to continue be is to There no expect sales on gaining on leverage able added why that.

Tim Wojs

the and year good of start Good great. the luck rest on it. to Okay,

Operator

Our with James. next from is Instructions] question Joshua [Operator Wilson Raymond

Joshua Wilson

make sales really the wanted eventually on we a about impact from Could for on gross we're forward, can sure the to back what gross I of get clear sense what margin. quarter you margin so was pull talk the the might be? snap

Santiago Giraldo

Yes. we've normalized The is gross profit the as low past XXs. discussed in

forward. on normalized we once get mix been it the So the is business earlier, bake can revenue in back of for levels of as we to probably there as normalizes the XXX year, basically you basis pulled mix was and historically. points that And the discussed time our has thought that over

Josh Wilson

And what is seeing Got there? the it. and what on assuming trends are cost you your guidance

Santiago Giraldo

on I'm what? sorry guidance the

Josh Wilson

for in baked costs? What's

Santiago Giraldo

I'm not following. I'm sorry.

Josh Wilson

transportation either or In terms of inflation materials? in raw

Santiago Giraldo

costs baking we significant that. No. transportation upside inflation on materials; not on or We're not raw expecting in are

As land marine not on that we have any mentioned increase we really saw The inflation transportation. seen transportation. before, last on aluminum or we thing have year only was

So we're just costs. baked in that The earlier are on optimize the doing full year in But not some things inflation stable provided any on to that. had cost in for year that we front. baking somewhat guidance the we those

Josh Wilson

hear Did the the American are full sales assumes sales your right more flat I -- guidance me. clarifying year? question Latin One that year-on-year for for

Santiago Giraldo

correct. That's Yes.

Josh Wilson

had first so quarter? is the And what the decline timing in we of back snap the offset to the

Santiago Giraldo

many I growth, sequentially mean and pickup what ups LatAm not expecting to Sequential we’re for and is downs.

we have what that level better in are in are in we back than projected be to quarters on going no order So jobs that stable and particular QX based as the to on have what come the XXXX to is for baked same basically Colombia LatAm.

Josh Wilson

Got it. quarter. Good the luck next with

Santiago Giraldo

Josh. Thanks,

Operator

Jose Officer We Chief have remarks. reached will over call I question-and-answer to of session. the Daes, now for Executive Manuel end turn our the closing

Jose Manuel Daes

in you. call. the participating keep and Thank and for be better We will everyone there cash Thank today's flow. margins hope you, growing to business

Operator

today's Thank you. concludes conference. This

may You and participation. your this lines for time your disconnect at thank you

Tecnoglass (TGLS) 10 May 192019 Q1 Earnings call transcript