Tecnoglass Reports Second Quarter 2020 Results

Barranquilla, COLOMBIA


- Reports Net Income of $16.1 Million, or $0.35 per diluted share -

- Focused Execution and Structural Advantages Produced Record Gross Margin of 38.8%; Adjusted EBITDA of $23.3 million at a Record Margin of 28.4% -

- Generated Record Cash Flow From Operations of $24.3 Million -

- Significant Demand Recovery in U.S. Since April Drove Sequential Monthly Revenue Improvement as Quarter Progressed -

- Backlog Expanded to a Record $550 million; Up 4.8% Year-over-Year -

Second Quarter 2020 Highlights

  • Total revenues of $81.9 million, 96.6% from the U.S., and includes two non-invoicing weeks in the first half of April during previously communicated suspension of production facility operations, which deferred a portion of revenues to future quarters
  • Adjusted net income1 of $9.4 million, or $0.20 per diluted share
  • Gross margin strengthened to 38.8%, driven by lower unit input costs, completion of automation initiatives and favorable revenue mix
  • Adjusted EBITDA1 of $23.3 million, representing 28.4% of total revenues
  • Cash flow from operations of $24.3 million, in excess of Adjusted EBITDA
  • Total liquidity of approximately $136.0 million, including cash of $63.4 million and availability under existing lines of credit
  • Declared a $0.0275 per share cash dividend

BARRANQUILLA, Colombia, Aug. 06, 2020 (GLOBE NEWSWIRE) -- Tecnoglass, Inc. (NASDAQ: TGLS) (“Tecnoglass” or the “Company”), a leading manufacturer of architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries, today reported financial results for the second quarter ended June 30, 2020.

José Manuel Daes, Chief Executive Officer of Tecnoglass, commented, “I could not be more pleased with our talented employees for their ability to overcome this unprecedented environment while maintaining dedication to excellence, as demonstrated by our results. We achieved record gross margin, operating margin and Adjusted EBITDA1 margin in the second quarter without taking any headcount reductions related to the economic impacts of the COVID-19 crisis. Since reopening our production facilities in the second half of April, the pace of invoicing improved significantly as we progressed through the quarter, particularly in the U.S. which represented 97% of second quarter revenues. In June, we hit a monthly record level of residential orders, and that momentum carried into July. Our strong working capital management as well as benefits from our high return automation initiatives collectively allowed us to generate record levels of free cash flow. In turn, we were able to deleverage our balance sheet and continue strengthening our financial flexibility, with liquidity of $136 million at quarter end. As we look forward, we believe we have the financial resources to continue executing our growth strategy and further enhancing our position as a premier architectural glass leader.”

Christian Daes, Chief Operating Officer of Tecnoglass, stated, “For the second quarter, taking into account two non-invoicing weeks in early April, we estimate our U.S. revenues would have been down in the high-single digit percent range year-over-year. We believe that the worst of the pandemic-related economic crisis is behind us. In nearly all of our regions, economic lockdowns are easing and business conditions have started to recover. Despite a recent uptick in COVID-19 cases in Florida and the rest of the United States, we are now seeing quoting and bidding activity that is in line with pre-pandemic levels, as reflected by our record backlog. On the residential side, our business has accelerated in recent months supported by low interest rates and de-urbanization trends driving new home starts. We believe these positive tailwinds coupled with our lean cost structure and strong liquidity leave us well positioned to maintain our industry leading margins as we work to deepen our presence and capture additional share in attractive U.S. markets.”

Second Quarter 2020 Results

Total revenues for the second quarter of 2020 were $81.9 million compared to $113.9 million in the prior year quarter. The decrease was primarily attributable to two fewer weeks of invoicing in the first half of April as a result of the previously communicated suspension of plant operations. This proactive action was taken to assess global market conditions at the onset of the COVID-19 pandemic and timed in parallel with shelter-in-place guidelines by the Colombian government, during which time the production facilities were reconfigured to mitigate any potential risks of contagion. Since April, the Company experienced a positive sequential revenue trend in May and June. U.S. revenues were $79.1 million compared to $99.3 million in the prior year quarter, and represented 96.6% of total revenues for the second quarter 2020. Revenues in Colombia and other Latin American regions were significantly impacted by delayed activity at many customer job sites that have required extensive preparations to adhere to varying COVID-19 guidelines. Changes in foreign currency exchange rates had a negligible impact on Colombia and total revenues in the quarter.

Gross profit for the second quarter of 2020 was $31.8 million, representing a 38.8% gross margin, compared to gross profit of $38.8 million, representing a 34.1% gross margin in the prior year quarter. The 470 basis point improvement in gross margin mainly reflected lower raw material costs, greater operating efficiencies from prior automation initiatives, and a higher mix of revenue from manufacturing vs installation activity. Selling, general and administrative expense (“SG&A”) was $16.5 million compared to $20.6 million in the prior year quarter, primarily attributable to lower variable expenses related to shipping, travel and commissions, as well as cost controls. As a percent of total revenues, SG&A was 20.2% compared to 18.1% in the prior year quarter due to lower revenues.

Net income was $16.1 million, or $0.35 per diluted share, in the second quarter of 2020 compared to net income of $7.7 million, or $0.17 per diluted share, in the prior year quarter, including an after-tax non-cash foreign exchange transaction gain of $13.3 million in the second quarter 2020 and a $1.2 million loss in the second quarter 2019. As with previous periods, these gains and losses are related to the accounting re-measurement of U.S. Dollar denominated assets and liabilities against the Colombian Peso as functional currency. Adjusted net income1 was $9.4 million, or $0.20 per diluted share, compared to adjusted a net income of $9.2 million, or $0.20 per diluted share, in the prior year quarter. Adjusted net income1, as reconciled in the table below, excludes the impact of non-cash foreign exchange transaction gains or losses and other non-core items, along with the tax impact of adjustments at statutory rates, to better reflect core financial performance.

Adjusted EBITDA1, as reconciled in the table below, was $23.3 million, or 28.4% of revenues, compared to $25.8 million, or 22.6% of revenues, in the prior year quarter. The improvement was driven by stronger gross margin. Adjusted EBITDA1 in the second quarter 2020 included $0.9 million in contribution from the Company’s joint venture with Saint-Gobain, compared to $1.0 million in the prior year quarter.

Dividend

The Company declared a quarterly cash dividend of $0.0275 per share for the second quarter of 2020, which was paid on July 31, 2020 to shareholders of record as of the close of business on July 8, 2020.

Business Outlook

Santiago Giraldo, Chief Financial Officer of Tecnoglass, concluded, “The improving sequential monthly revenue trends that we experienced during the second quarter continued into July. Based on our current invoicing schedule and underlying market environment, we expect revenue in the third quarter to continue on a positive sequential monthly trend. As we execute our strategy during this extraordinary period, we will maintain our focus on safely serving customers, aggressively managing costs and delivering strong cash flow. While uncertainty persists associated with COVID-19 developments, we believe we are well situated to outperform our markets as global economic conditions further improve.”

Webcast and Conference Call

Management will host a webcast and conference call on Thursday, August 6, 2020 at 9:00 a.m. eastern time (8:00 a.m. Bogota, Colombia time) to review the Company’s results. The conference call will be broadcast live over the Internet. Additionally, a slide presentation will accompany the conference call. To listen to the call and view the slides, please visit the Investor Relations section of Tecnoglass' website at www.tecnoglass.com. Please go to the website at least 15 minutes early to register, download and install any necessary audio software. Due to potential extended wait times to access the conference call via dial-in, the Company encourages use of the webcast. For those unable to access the webcast, the conference call will be accessible by dialing 1-855-327-6837 (domestic) or 1-631-891-4304 (international). Upon dialing in, please request to join the Tecnoglass Second Quarter 2020 Earnings Conference Call.

If you are unable to listen live, a replay of the webcast will be archived on the website. You may also access the conference call playback by dialing (844) 512-2921 (Domestic) or (412) 317-6671 (International) and entering pass code: 10010493.

About Tecnoglass

Tecnoglass Inc. is a leading manufacturer of architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries. Tecnoglass is the #1 architectural glass transformation company in Latin America and the second largest glass fabricator serving the United States. Headquartered in Barranquilla, Colombia, the Company operates out of a 2.7 million square foot vertically-integrated, state- of-the-art manufacturing complex that provides easy access to the Americas, the Caribbean, and the Pacific. Tecnoglass supplies over 1000 customers in North, Central and South America, with the United States accounting for more than 80% of revenues. Tecnoglass' tailored, high-end products are found on some of the world's most distinctive properties, including the El Dorado Airport (Bogota), 50 United Nations Plaza (New York), Trump Plaza (Panama), Icon Bay (Miami), and Salesforce Tower (San Francisco). For more information, please visit www.tecnoglass.com or view our corporate video at https://vimeo.com/134429998.

Forward Looking Statements

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth and future acquisitions. These statements are based on Tecnoglass’ current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors, and other risks and uncertainties affecting the operation of Tecnoglass’ business. These risks, uncertainties and contingencies are indicated from time to time in Tecnoglass’ filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Further, investors should keep in mind that Tecnoglass’ financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events and changes in assumptions or otherwise, except as required by law.

[1] Adjusted net income (loss) and Adjusted EBITDA in both periods are reconciled in the table below.

Investor Relations:

Santiago Giraldo
CFO
305-503-9062
investorrelations@tecnoglass.com


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

  June 30,   December 31,  
  2020  2019 
ASSETS        
Current assets:        
Cash and cash equivalents $63,424   $47,862  
Investments  1,818    2,304  
Trade accounts receivable, net  91,010    110,558  
Due from related parties  8,777    8,057  
Inventories  79,454    82,714  
Contract assets – current portion  34,879    42,014  
Other current assets  24,298    29,340  
Total current assets $303,660   $322,849  
         
Long-term assets:        
Property, plant and equipment, net $136,666   $154,609  
Deferred income taxes  11,676    4,595  
Contract assets – non-current  8,707    7,059  
Due from related parties - long term  1,089    1,786  
Long-term trade accounts receivable  1,101    -  
Intangible assets  5,695    6,703  
Goodwill  23,561    23,561  
Long-term investments  45,691    45,596  
Other long-term assets  2,892    2,910  
Total long-term assets  237,078    246,819  
Total assets $540,738   $569,668  
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Short-term debt and current portion of long-term debt $18,744   $16,084  
Trade accounts payable and accrued expenses  51,855    61,878  
Accrued interest expense  7,502    7,645  
Due to related parties  5,134    4,415  
Dividends payable  1,309    67  
Contract liability – current portion  18,834    12,459  
Due to equity partners  10,900    10,900  
Other current liabilities  6,894    15,563  
Total current liabilities $121,172   $129,011  
         
Long-term liabilities:        
Deferred income taxes $817   $411  
Long-term payable associated to GM&P acquisition  8,500    8,500  
Long-term liabilities from related parties  634    622  
Contract liability – non-current  83    187  
Long-term debt  243,808    243,727  
Total long-term liabilities  253,842    253,447  
Total liabilities $375,014   $382,458  
         
SHAREHOLDERS’ EQUITY        
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2020 and December 31, 2019 respectively $-   $-  
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 46,117,631 and 46,117,631 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively  5    5  
Legal Reserves  2,273    1,367  
Additional paid-in capital  208,390    208,283  
Retained earnings  10,127    16,213  
Accumulated other comprehensive (loss)  (55,632)   (39,264) 
Shareholders’ equity attributable to controlling interest  165,163    186,604  
Shareholders’ equity attributable to non-controlling interest  561    606  
Total shareholders’ equity  165,724    187,210  
Total liabilities and shareholders’ equity $540,738   $569,668  

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

  Three months ended Six months ended 
June 30,June 30,
  2020  2019  2020  2019  
Operating revenues:             
External customers $81,590  $112,259  $167,696  $217,067  
Related parties  352   1,624   1,544   3,984  
Total operating revenues  81,942   113,883   169,240   221,051  
Cost of sales  50,146   75,046   107,017   150,322  
Gross profit  31,796   38,837   62,223   70,729  
              
Operating expenses:             
Selling expense  (8,961)  (11,219)  (18,629)  (20,781) 
General and administrative expense  (7,610)  (9,354)  (15,220)  (17,448) 
Total operating expenses  (16,571)  (20,573)  (33,849)  (38,229) 
              
Operating income  15,225   18,264   28,374   32,500  
              
Non-operating (expenses) income, net  7   353   (94)  628  
Equity method income  (166)  (22)  94   (22) 
Foreign currency transactions (losses) gains  13,309   (1,201)  (19,157)  2,085  
Interest expense and deferred cost of financing  (5,446)  (5,757)  (11,089)  (11,344) 
              
(Loss) Income before taxes  22,929   11,637   (1,872)  23,847  
              
Income tax benefit (provision)  (6,875)  (3,977)  (742)  (8,856) 
              
Net (loss) income $16,054  $7,660  $(2,614) $14,991  
              
(Income) Loss attributable to non-controlling interest  143   (181)  45   (174) 
              
(Loss) Income attributable to parent $16,197  $7,479  $(2,569) $14,817  
              
Comprehensive income:             
Net (loss) income $16,054  $7,660  $(2,614) $14,991  
Foreign currency translation adjustments  4,367   (2,052)  (14,921)  (282) 
Change in fair value derivative contracts  2,618   -   (1,447)  -  
              
Total comprehensive (loss) income  $23,039  $5,608  $(18,982) $14,709  
Comprehensive (income) loss attributable to non-controlling interest  143   (181)  45   (174) 
              
Total comprehensive (loss) income attributable to parent $23,182  $5,427  $(18,937) $14,535  
              
Basic (loss) income per share $0.35  $0.17  $(0.06) $0.35  
              
Diluted (loss) income per share $0.35  $0.17  $(0.06) $0.34  
              
Basic weighted average common shares outstanding  46,117,631   45,653,893   46,117,631   42,989,592  
              
Diluted weighted average common shares outstanding  46,117,631   46,144,017   46,117,631   43,479,716  

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

  Six months ended June 30, 
 2020   2019   
         
CASH FLOWS FROM OPERATING ACTIVITIES        
Net (loss) income $(2,614)  $14,991  
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:        
Provision for bad debts  691    524  
Depreciation and amortization  10,205    11,558  
Deferred income taxes  (6,478)   (317) 
Equity method income  (94)   22  
Deferred cost of financing  861    808  
Other non-cash adjustments  44    28  
Unrealized currency translation losses (gains)  23,585    (59) 
Changes in operating assets and liabilities:        
Trade accounts receivables  13,785    (22,065) 
Inventories  (8,252)   2,078  
Prepaid expenses  (1,017)   (1,232) 
Other assets  1,363    (1,367) 
Trade accounts payable and accrued expenses  (10,358)   12,635  
Accrued interest expense  (84)   194  
Taxes payable  (5,911)   (1,787) 
Labor liabilities  (982)   (327) 
Contract assets and liabilities  11,246    (9,682) 
Related parties  (1,200)   1,250  
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $24,789   $7,253   
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Proceeds from sale of investments  364    608  
Joint Venture investment      (34,100) 
Purchase of investments  (167)   (676) 
Acquisition of property and equipment  (7,395)   (13,778) 
CASH USED IN INVESTING ACTIVITIES $(7,198)  $(47,946) 
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Cash dividend  (1,265)   (2,170) 
Proceeds from equity offering      36,478  
Proceeds from debt  17,796    38,480  
Repayments of debt  (14,698)   (17,660) 
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES $1,833   $55,127  
         
Effect of exchange rate changes on cash and cash equivalents $(3,962)  $164  
         
NET (DECREASE) INCREASE IN CASH  15,562    14,599  
CASH - Beginning of period  47,862    33,040  
CASH - End of period $63,424   $47,639  
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION        
Cash paid during the period for:        
Interest $9,513   $9,529  
Income Tax $2,964   $8,369  
         
NON-CASH INVESTING AND FINANCING ACTIVITES:        
Assets acquired under credit or debt $907   $1,389  

Revenues by Region
(Amounts in thousands)
(Unaudited)

 Three months ended
 Jun 30,
2020 2019 % Change
Revenues by Region      
United States79,148 99,327 -20.3%
Colombia1,820 12,165 -85.0%
Other Countries973 2,392 -59.3%
Total Revenues by Region 81,941  113,883  -28.0%

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

The Company believes that total revenues with foreign currency held neutral non-GAAP performance measures, which management uses in managing and evaluating the Company's business, may provide users of the Company's financial information with additional meaningful bases for comparing the Company's current results and results in a prior period, as these measures reflect factors that are unique to one period relative to the comparable period. However, these non‑GAAP performance measures should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. 

 Three months ended
 Jun 30,
2020  2019 % Change
      
Total Revenues with Foreign Currency Held Neutral82,107  113,883 -27.9%
Impact of changes in foreign currency(166)  -  
Total Revenues, As Reported81,941   113,883  -28.0%

Currency impacts on total revenues for the current quarter have been derived by translating current quarter revenues at the prevailing average foreign currency rates during the prior year quarter, as applicable.

Reconciliation of Adjusted EBITDA and Adjusted net (loss) income to net (loss) income
(In thousands, except share and per share data)
(Unaudited)

Adjusted EBITDA and adjusted net (loss) income are not measures of financial performance under generally accepted accounting principles (“GAAP”). Management believes Adjusted EBITDA and adjusted net (loss) income, in addition to operating profit, net (loss) income and other GAAP measures, is useful to investors to evaluate the Company’s results because it excludes certain items that are not directly related to the Company’s core operating performance. Investors should recognize that Adjusted EBITDA and adjusted net (loss) income might not be comparable to similarly-titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP. 

Reconciliations of the non-GAAP measures used in this press release are included in the tables attached to this press release, to the extent available without unreasonable effort. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures.

A reconciliation of Adjusted net (loss) income and Adjusted EBITDA to the most directly comparable GAAP measure in accordance with SEC Regulation G follows, with amounts in thousands:

   Three months ended  Six months ended
   June 30, June 30,
   2020  2019  2020  2019 
          
Net (loss) income  16,054  7,660  (2,614) 14,991 
Less: Income (loss) attributable to non-controlling interest  143  (181) 45  (174)
 (Loss) Income attributable to parent  16,197  7,479  (2,569) 14,817 
Foreign currency transactions losses (gains) and FX derivatives settlements  (11,951) 1.201  20,515  (2,085)
Deferred cost of financing  508  415  948  808 
Non-Recurring expenses (extinguishment of debt, bond issuance costs, provision for bad debt, acquisition related costs and other)  910  681  1,805  1,425 
Joint Venture VA (Saint Gobain) adjustments  567  273  939  273 
Tax impact of adjustments at statutory rate  3,189  (822) (7,746) (135)
Adjusted net (loss) income  9,420  9,227  13,892  15,103 
          
Basic income (loss) per share  0.35  0.17  (0.06) 0.35 
Diluted income (loss) per share  0.35  0.17  (0.06) 0.34 
          
Diluted Adjusted net income (loss) per share  0.20  0.20  0.30  0.35 
          
Diluted Weighted Average Common Shares Outstanding in thousands  46,118  46,114  46,118  43,480 
Basic weighted average common shares outstanding in thousands  46,118  45,654  46,118  42,990 
Diluted weighted average common shares outstanding in thousands  46,118  46,114  46,118  43,480 
          
          
   Three months ended Six months ended
   June 30, June 30,
   2020  2019  2020  2019 
          
Net (loss) income  16,054  7,660  (2,614) 14,991 
Less: Income (loss) attributable to non-controlling interest  143  (181) 45  (174)
 (Loss) Income attributable to parent  16,197  7,479  (2,569) 14,817 
Interest expense and deferred cost of financing  5,446  5,757  11,089  11,344 
Income tax (benefit) provision  6,875  3,977  742  8,856 
Depreciation & amortization  4,964  5,717  10,205  11,558 
Foreign currency transactions losses (gains) and FX derivatives settlements  (11,951) 1,201  20,515  (2,085)
Non-Recurring expenses (extinguishment of debt, bond issuance costs, provision for bad debt, acquisition related costs and other)  911  681  1,806  1,425 
Joint Venture VA (Saint Gobain) EBITDA adjustments  869  973  1,868  973 
Adjusted EBITDA  23,311  25,785  43,656  46,888