- Earnings call transcript Q3 2022

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Operator

Good day, ladies and gentlemen, and welcome to the Tecnoglass 3Q 2022 Earnings Conference Call and Webcast. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, Brad Cray of ICR. Sir, the floor is yours.

Brad Cray

Thank you for joining us for Tecnoglass' Third Quarter 2022 Conference Call. slide the accompany Tecnoglass Investors the be call website. of on obtained section copy presentation this to may A of the

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

Jose Manuel

in Thank across continued our on everyone, the could metrics delivered half thank all momentum back Once third for business nearly our operating with you, a strong more while complex I performance. in The results environment. macroeconomic quarter and into we participating again, thrilled be XXXX. record Brad, financial you, not today's call. of

Our continued our to residential focused record leading by market results were the business. especially of architectural execution We're strong entire driven our the of glass in further performance and single-family with our industry. the advance position happy team share capture

project the In addition commercial seeing our to acceleration in invoicing. we are

diversify customers, our success end our to new effort geographies. and business innovative attractive Our with validates multiyear products within markets

excess pleased During record the XX%. third gross our quarter, margin we were in of achieve especially to

we our clearly While short our this exceptional business. operations modernize, of flow. quarters industry. maintain in revenues gross have helped strong automation best continue leverage as capital This returns times how the positioning. our margin power our diversified enable investments lead generate and automate gives working further current us XX management expand us and us mix the our that cash confidence straight our increased will produce revenue targeted and to Separately, to we the our made market our can level, possible demonstrates is by and ahead our our business capacity normalized integrated our and grow platform strategic to was in through well investments performance unique vertically This of previous enhancements, of

million cash value program growth to generating share shareholders. to value. to profitable while avenues path return based and additional Today, an for strong repurchase highly and are flows shareholders. dynamics In executing ongoing allocating strategy another to deliver we XX summary, our expect capital our continue to above-market growth authorization announce through business very the backlog, we're cash to We as the of create on carefully multiple growing pleased

approach to prudent We have allocate generate are returns. trajectory proud to capital taken we of attractive execution the our and team's

given We to the well positioned underway in Tecnoglass another delivers in demand to with our significant turn advantages, cost an I operation efficient. year well our even investments gain products, produce our integrated, provide extremely market structure believe the portfolio and backlog. have additional pressures a low-cost industry, to is will a to In situated share the we over innovative business make efficient, details intensify and event now call of the more to macro highly vertically on record results. Chris record

Christian Daes

Thank you, Jose Manuel.

was is to backlog ability for demand straight of and month month us. business to XXXX as X. has on commercial momentum on of which resilience in in exceptional into our a an the the Slide the residential elevated for ABI remodel continues and Tecnoglass in for largely performance our to which single-family share been work addition our be to expansionary strong XXth capitalize date. year to Despite Index invoicing interest repair territory market The rates, gaining Moving highest our continued October, solid has reflects September.

is very commercial in start activity of in to secular of as of high-rise period. projects. backlog in The customers quarter variety of pipeline markets our a a medium- Approximately mainly of addition the the year record wide X/X to projects backlog, prior and end to composed pick to trends million commercial is Our reflection ones related residential and A backlog projects. XX% success climbed the where which of that at compared while to a areas represents increase $XXX healthy of about strong. remain our record continue permitted resume end new geographical attractive buildings of an up is X/X

our both not of terms, fully growth shorter projects. residential duration reminder, backlog, a As single-family captured in is our the given trajectory

which that momentum into XXXX in year our mentioned, is reflected revised I upwardly discuss detail. across full business continued our the seen Santiago have more fourth outlook. will we As quarter, in

due macro That competitive the low-cost markets our all operations with end vertically have U.S. said, us to in are the cycle. the our through prospects give confidence aware continue to in We advantages conditions we remain to ability growth regions many our many We well challenging integrated lead growing confident times. and market in outperform in ability our short of our being and structural that

these over seen to production XXXX. approximately further several and by continue enable are of automate, quarter relationships share facilities. in end and residential side are annual and Therefore, the expand the to our our customer years, gaining sales our advantages optimize million These investing decrease output us capacity market of As we expanding investments to commercial our to on last production both should of second the installed the of to equivalent expected our $XXX business.

integrated are ensure an remain growth times that have lead are the the world-class best to long-term both operations and room new to vertically We customers. among in existing with our industry investing that

Our business have and flows reinforces I outlook record to deliver for the ability obtain financial turn of our new the improved confidence producing now will operations, we the results. innovate, discuss over year. results exceptional and our to call to strong cash Santiago in

Santiago Giraldo

Thank you, Christian.

Slide number X. to Turning

pleased We during our the XXXX. results are extremely with of outstanding third quarter

quarter Our and performance represents of another outperformance. solid execution market yet

driven Third organic and by our quarter were growth commercial both in single-family entirely revenues residential businesses.

and ability of from for has platform, vertically which Manuel times Christian integrated we our our strategy of supplier structural to capture provided growth Tecnoglass execution made advantages and innovative by demand the Jose As our focused products a are shorter choice. to our provide benefiting lead mentioned,

share important reflecting new reiterate $XX.X residential and to I'd million quarter is An an to are of and total single-family base revenues, like and residential customer Third a fluctuations to remodel accounted increased compared for activity, approximately rate when construction. not of as to gains. tied single-family sensitive to X/X expanding revenues record XX% revenues which XX% point that our mortgage the residential year-over-year is renovation highly

the strong geographic single-family New South business in expansion planned of to our of York including residential garage seeing Southeast are and from We additional U.S. in showrooms developed complement South the and opening presence product already openings process have brand-new in we We're showrooms Carolina Central internally. fuel Multimax our regions that products, and other benefits in and new door with the also a

with turnover number like current environment. X% natural capacity green as differentiating to stabilizing low of plant supply upgrades. our three, our Number are power Now four, inputs cost the one, solar More glass key choice. at an and retain including hedging unique benefiting Tecnoglass several cost and supply cogeneration energy, in of XX% and savings prior Number to advantages raw and inflation investments two, gas. to through And on-site on from venture a competitive energy around keeping I joint are: Saint-Gobain. through would employer Slide Number factors return our Number business power, of cost in on specifically, people-focused tight dependable the revenues. a higher five, aluminum talent through that of reiterate our culture quality supporting and to automation transportation X% success X,

third million growth both by number Slide on a revenue of was increased This gains. quarter. drivers year-over-year driven in increase share $XXX.X market in and Total the to activity the to organic all record XX.X% turning residential addition Now to X. single-family revenues for commercial solid

have Our commercial continued construction the quarter XXXX through expected each in sequentially year. momentum grown with through revenues

million quarter. of a XXX quarter doubled $XX.X in year #XX. to EBITDA of $XX.X to basis prior Adjusted more Slide for the quarter million adjusted drivers of increased to third compared the the on XXXX. XXXX EBITDA Looking margin XX.X% at third Adjusted of compared EBITDA the of quarterly than points record

margin XX.X% gross of to to representing $XX.X representing compares profit Third XX.X% a gross year doubled million profit in the quarter. prior gross quarter a roughly $XXX.X million, margin. gross This

shipping to margin as dollar. Our of efficiencies, year recent in in million residential favorable costs volume higher favorable dynamics, unit majority increase fragmented expenses was to operating U.S. higher on greater a given of $XX.X controls the SG&A FX pricing tight $XX.X and reflected and to in operating trend a partly sales higher more improvement of attributable single-family million due the market. with part a the compared result quarter, the significant mainly strengthening prior cost serve the to leverage shipping sales, automation,

settlement to now contracted expense we project into a in is incur fully which a related Additionally, resolved. XXXX, onetime

As the a quarter. percentage total was SG&A of year compared XX.X% XX.X% in to prior revenues,

year of XXX as the Excluding revenues total the points settlement, improved by a basis to compared SG&A percentage prior quarter.

sheet at balance Slide and leverage improved on our Now XX. looking

improved XXX taken This with sheet, weighted actions our years again initiatives. has quarter EBITDA, we adjusted have of left last down XXXX. flexibility by once X.Xx leverage X.Xx to other quarter and past since net us over our to many fortify the a of over and growth execute We ratio LTM in have our points basis financial debt balance the low several to from year. interest significant record new average rate end, to improved third At

balance our As had total committed $XX approximately revolving September and liquidity resulting we facilities $XXX million, cash of credit million million. of in XX, $XXX availability approximately of under of

installation, we've themes and residential The discussed in improved to higher more improved mid- in Slide we margin end XX. penetrate generation XX% the factors, cash do depreciation related structurally in and operating to than improvements strategy to automation has now where into Taking we for margins range leverage driven our the gross on our number in improvement our operational margins don't indirect business and our these sustainable to have single-family the to revenues, market on be manufacturing by higher-margin expect XXs cost. calls. gross performance full and recent in year offset initiatives, shift labor compared Turning account and other structural XXXX. high been which to The the XXXX

margin now our strong previously performance, mid-XX% margin operating an flow term, range as exceptional quarter longer have to we third record generation normalized see maintained we communicated. $XX.X flow million. with think of of that we low XXXX, we cash upside on Building to gross our cash track Beyond

provided quarterly Our XX% value impressive history increase additional recent drive and our to has of our today's financial dividend with of million repurchase us for cash a program. shareholders, announced $XX new generation share quarter, last including to a flexibility authorization

facilities We further growing by and to to the glass us able our prepare to for our production capacity have future enhance increased automate operations backlog. aluminum also and indicated been demand increase

collectively cash increased been with working our flow the second to over to create annual mentioned, million value. the Christian provided we expense Overall, our entirely This us reduced management, by operating approximately to better and XX% generation. an of amount a installed have additional capital production quarter by equivalent has end favorable levers of our capacity track project XXXX. interest are more mix multiple As sales $XXX on revenues to by of funded increase profitability, of

in We value-enhancing for flow the our further full invest resources XXXX year continue to expect cash to strong strengthening initiatives.

XXXX we higher and pricing dynamics very $XXX advantages in an the XXXX, mix Moving sales, revenue We range. we the adjusted representing FX XX. midpoint XXXX our the to invoicing year be Slide EBITDA. expected range full third our favorable performance mainly pleased and strong number XX% XXs million leverage to and revenue exceptional Gross the to structural extremely outlook on our growth expect now are quarter our are into operations of organic of outlook our for on Based revenue the Based the full are in outlook with year. led from fully to increasing be October, now EBITDA year product higher performance, and by $XXX our residential. This midpoint anticipated installation the mix on to on attributable adjusted of to we be to million overall outlook, full and of In summary, range of $XXX this our for in single-family sales expect now growth at million. year of margin versus million, represents the at XX% the integrated range mid- exceptional in revenues momentum for $XXX to margins business. high

earlier and and further Jose our increase our operation. the pressures that gains we significant that in undertaken efficiency investments mentioned intensify, the have efficient call, maintain believe macro we the highly event As the can integrated vertically in we cost of given structure to share our performance

in record XXXX. questions. to are to year in open the we your results XXXX and We another year for way answer well record happy line please that, our be have will since each delivered Operator, questions. With on produce

Operator

first Instructions]. from question Securities. from [Operator B. coming And Riley the Rygiel Alex is

Min Chung Cho

Congratulations quarter. is Alex This on Min great actually this for a morning.

highest mentioned mix, level detail Just any changes the of XQ a in you month-to-date invoicing around that the had Jose provide Yes, terms Manuel, October. any wondering you if of in few you was I could questions. that results? from pricing,

Jose Manuel

of every Well, business. actually, no, aspect increasing in has been our

are we more think I residential.

demand commercial. of more on, to that's be that of or Florida. we January new we have that end outside add that today, but penetrating the believe a We rapidly year. from [indiscernible] we The is to can year are in a lot We only markets the are be change increasing we that seeing hope until going X, XX% is

Min Chung Cho

is next in year? to Excellent. SG&A in may that any is the That's Is and or like $X the of fourth XXXX? hear. quarter so. excluding million did Or expense back come quarter charge, great that the quarter, you in the Also, into around it that kind spending sustainable Santiago, of looks the settlement XX.X% hold probably on kind back

Santiago Giraldo

No.

of always get cost a very I think it can felt within that leverage on sales, operating that have is SG&A, based we on that the strong we level given there's fixed lot line. of

the tailwind, dollar FX equal, So but peso, held everything obviously, is how that believe the is a it this that, quarter strong the given we sustainable. against -- was became

Min Chung Cho

expansion through construction been expect homebuilders bit rates. question coming and little Okay. new assuming then in And rise obviously, share Can talk or still last that on the about geographic me. just Multimax But given your you a the for Perfect. outlook for you growth site I'm product, has is down down gains.

Multimax relationships, be geographic expansion around details any helpful. just would So customer

Jose Manuel

Yes.

And is we and builders West out or that are two We now three landed have for reaching performance, Normally, on jobs. them. the we unusual. seeing we're other now have the to us, to nothing which hunt Coast

competition Now us doing see product. out deliver company. a have to we and to our they're product reaching They well for good like time, very the really they us it. and and a on reliable quote with we have We

I So we're going growing. to believe keep

Operator

from Baird. is question coming from next the And Tim Wojs

Timothy Wojs

kind step indicate I bit guide, down making is even QX from in that the does that kind if Maybe a the there's little something pretty strong. take job. I though full missing implied on revenue October year sequentially, nothing Great of it of was kind just just guidance because of a of your guess sure

just make that, want like So sure explain that anything missing I seasonality it. might I'm to not around or anything

Santiago Giraldo

maintenance. a No, fact slower you have place, given into have that holidays hit go months. it, Tim. is winter scheduled in the Typically, We December the you the month you

not best has not we QX seasonal you we of that say if typically quarter. and ton have So low orders, but we case. working, if a to that's backwards, been the look will, have to keep a That's

in bit we So baking seasonal step-down are of given reasons. a a little

Timothy Wojs

where like to today quarter. mean, benefit it on it's seems over it a X I the just quarters, is mean to this I next X to to be guess it's an then be on And going the relative margins. seems just not peso I like FX. going even tailwind bigger dollar, the the just

where us remind and in income So denominated expenses could Colombian the kind I your fall you statement? of guess just those peso

Santiago Giraldo

Yes, yes, absolutely.

in cost expenses we pesos. our have Colombian in of is about Our structure and and XX% dollars one U.S. XX% cost where

remains in peso into from as peso the alone, you a to forward going And year. XX% be But goes, question. weakness for across our it sure. So if will happens P&L. and sense continue benefit a X.X% that's a you us gross of selling benefit in What perspective as a quarter COGS obviously, P&L. it continues U.S. had the this weak, beneficial pretty be continued margin your P&L have we To to be Colombian perspective, will to be to is give if to answer with about the will the the far seen. of compare It SG&A. in last To much

Timothy Wojs

today market out guess, maybe I way pricing there contributed on I the some what your to markets? side, pricing is mean, the And in of And of from versus quarter? is your guess where then kind of peers any in break standpoint, kind a I pricing

Santiago Giraldo

the to one. one, answer and I'll the first I'll Jose to second defer answer

XX into days into tailwind right of starts on quarter. we quarter, later, the which based X% the so a the that XX, price in took July increase fell provided it it about flowing For only May,

in Jose pricing dynamics I'll far on elaborate the market, the As that. let as

Jose Manuel

few it -- they're do have down market today, we keep even go Nevertheless, have to It dramatically we to materials our their lot still share. better, performs though XX% seems We get and product we reducing everybody. raw better I because finally. down better. been And penetrating going the a are with I been down, to A peers markets. and materials and of some prices. new But we're the same, par everybody so is going on par sustain the to let's prices we trying because pricing. of market keep the say, have sustaining to prices, the Well, reducing have business. of mean, our obviously growing acceptance. going with competitive very We believe see have have looks to the the

Santiago Giraldo

What add, a our Tim, case going coming would now. down bit, the I because to base down come down not that have to just elaborated, per margins quite pricing is coming aluminum because as $X,XXX Jose is from $X,XXX about ton also costs drop namely input are that right

So in our it's not deterrent a margins to case.

Operator

Romero Julio Sidoti next the & Company. from is from question And coming

Julio Romero

on comment the normalized On about you your gross upside longer-term gross made thinking margin to about margins range.

solely what's there Just product what versus in that to to you install related in Is improvements talk normalized Or about maybe is operational that assume be... the a change maybe it driving automation? confidence upside? mix is

Santiago Giraldo

I on to last able saw bridge think year. business that for upside get that operating were of leverage on accounted about the the X% we we the against

seen there. But We operating are XXs, can count because the quite said also may FX XX.X% strengthening bake the last what don't as level pricing not Tim, with to to the were be right, then we rapidly obviously, high that to to why cannot And input to this we quarter. also, revenues, margins the I as leverage. of very leverage. the reduced temporary get That's the other because We on dollar happens. to a being just with but was effect. That prices be a count related So down And in down. on factor remains mid- over upside guiding are the coming bit of to can that go able on because get efficiencies. count we we costs

of amount was biggest the we So with that operating sales. level I on say would surprise get that this the can the of business leverage

Julio Romero

you. Got

this year, sustainable. of kind are So the FX op but year, inefficiencies unclear beyond pricing leverage forward this going beyond

Santiago Giraldo

That's right. efficiencies Operating initiatives. prior automation leverage from and

Julio Romero

helpful. can can little in on as product more what you anything Anything Got it. terms talk you after the that And that's a developed? that the you maybe could market provide TAM give you've garage about going would door new of be

Jose Manuel

of be the has the product, ago, Yes. success. months the We for have the just out is a are that three and And we March else, Florida is a we backlog the a those have Jose. next of year. of non-hurricane on It launched been that actually, for launched that market, by of great door hurricane garage like product everywhere development huge This sold. and and both will will same be product. lot It only

XX I installed, It is so Everybody works it. about around far. believe, It's We really happy a product. well. have beautiful

Julio Romero

share helpful. of to What Got thinking you encouraging it. kind program. of repurchase That's see in the the buyback announcement And about very deployment? the are maybe of terms cadence

Santiago Giraldo

going We're wait to take cautious and see, approach. a

when have put time far as goes. been as a We line in it

we're we to market So shares that for is. and a for as see get undervalued what as to are well it's And reaction opportunity cash company the shareholders good going the back. certainly believe the

going it goes. month, wait we target how any set and to specific a see out So we'll haven't for just

Operator

from [Operator Instructions]. coming Raymond is from Wilson Joshua next The question James.

Joshua Wilson

in single-family Great what assuming color on quarter. you early the fourth any you're like some on in And that quarter? give what thoughts maybe have Could 'XX? growth you us for look could

Santiago Giraldo

assuming you from We're revenues QX. I'll higher slightly one. take the in Yes, first saw what

So that for bake a equates comparable comparing year. against it higher into you you're can kind of Obviously, what last growth.

the as I'll look year new Jose like, provide more far let that take will what to color. As

Jose Manuel

XX% because or geographic market, more to the grow XX% year, We of less. hope more to than next around local by growth XX%

Joshua Wilson

as capital your year, could spending on flow for impacts. flow it like of the CapEx the can us outlook an especially you update generation to as And cash working CapEx this with then think what -- look cash we Great. cadence free relates and give about the and

Santiago Giraldo

in quarter as have the see you QX. bit line sales. million sales did what would to to XXXX flow, growth, of in operating of by we $XXX Obviously, flow we with get continue working from capital. operations invest were on growth similar But quite CapEx to about capacity I earlier, cash or generate to in discussed a in a $XXX of we able cash we the rapid nevertheless, Yes. to with million usage a and expect

So to kind I would of saw QX to year, similar on And on once better our expect we what projections, guidance provide that. next you we'll be fine-tune QX.

Operator

And question is Davidson. the next coming from Brent Thielman from D.A.

Unidentified Analyst

-- is flexibility is, orders on And meet it Could of will second Brent. the as first the This some the room your large in could half for year? you backlog talk color there us as you for give will with half these Just be about full? be to some the whether XXXX?

Christian Daes

place is that. putting -- since we Christian. -- good CapEx. This in Yes. We are

laminated We some capacity expect beginning June, capacity XX% more in in we more In XXX% January. in incremental to and insulated have have capacity to XX% more. March, glass will we'll glass. add By

go conclusions. and could Many X% we're sell, going next any into that. we we growth we are we don't much. sell interest, year without can like early be looks that So It really the want to to jump things but believe on all going for that even beyond financing on, if problem able market, to any

rate the in cautious in be years. to about at we following good we're putting percentage but capacity grow so can place we continue enough it, So a to want

Unidentified Analyst

quarter the quarter whether fourth XXXX? the -- demand of the that you and on XQ beyond little bit implications Hurricane Ian talk just could this And creates going a or about replacement

Jose Manuel

bit Well, about We the together to to houses Yes. see and believe We of they're the believe of when whatever. is then any going the all companies going and next and and time passes, year. insurance that how for takes the quarter it replacement go is between time that of a to hurricane windows the the the that. owners not government this

mostly already the of We sold. is of see year, a to on Florida. believe Coast West we're quarter movement this for So next going lot

Christian Daes

we're release, that because have to the prefer guide said October quarter. already know good we cautious we news and the was to the be we fail best-selling how a press December of Like want usual, and you as month to with good in. that orders results November in And we meet not We year. give to on we are expectancies. your going

Unidentified Analyst

any Could efficiency, if walk color led it. bullet how could plan on plan And and any And about one -- into if more initiatives through I but I on you of there's XX% forward if know what some question. the the gave may, could initiatives into you going points me to sort I you you new margin? ask XXXX? Got more gross adding you

Santiago Giraldo

Yes.

but So reasons just getting I you earlier. to that, mentioned couple only there's this bit -- a we bridge that reason, gross margin of added that not the versus but what of level sales to a of permanent to year, quite leverage have and last also saw kind sort of

instance, the this quarter. strengthened very dollar rapid at a peso pace the For against

about year. And we had to the that Fed discussed the that, And be in top of with for continue that on know basis will taken. is earlier actions XXX come had increase weak this the out orders we the about what's it on pricing taking gross of you margin. of is but that and effect peso points through in basis the XXX that going effect to obviously starts the we So QX points don't May flowing we that, of that positive pricing invoice of took expectation

out, until Christian and to incremental months includes the and These will facility. of hopefully efficiencies. capacity, to that continuing and we far to have continue next laid laid upgrade kind get June out, bring initiatives, as he to of add As also increase automate of do yes, as And automation, are couple $XXX of million. so XXXX as to capacity which we'll further should north

Operator

call I now the the hand And there remarks. closing lines. back like other Jose to were Manuel for from questions would no to

Jose Manuel

everyone, Thank Okay. our for leaving keep Thanks, call. news We growing We'll participating and on today's our good in plan you. keep excellence business. towards to to shareholders. working

Operator

and ladies you, today's gentlemen. Thank This conclude conference. does

a have and participation. wonderful for time, this at you lines your day. disconnect may your You Thank

Tecnoglass (TGLS) 6 Nov 222022 Q3 Earnings call transcript