Tecnoglass Inc. Price & Performance (TGLS)

These risks, uncertainties, and contingencies are indicated from time to time in Tecnoglass' filings with the SEC. The information discussed during the call is presented in light of such risks. Further, investors should keep in mind that Tecnoglass's financial results in any particular period may not be indicative of future results. Segment Glass 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, changes in assumptions or otherwise. I will now turn the call over to Jose Manuel, beginning on Slide number four, Thank you, Doug, and thank you everyone for participating on today's call.

We are proud to report exceptional results For 2024, Our record revenues of $890,000,000 And the strong profitability demonstrate our consistent track record [indiscernible] While maintaining operational excellence, through our vertically integrated business model. This year impressive performance reflects growth base as across our business. Our Seagull family residential revenues reached all time high of $372,000,000 driven by successful micro share gains continued strength within our main markets The additional ramp up of our geographic expansion. In our multifamily and commercial businesses, we achieved solid growth to a record of $580,000,000 driven by strong execution of our expanding backlog. Our strategic investment in automation and manufacturing capacity are proven instrumental to our success. These enhancements deliver significant returns to improve operational efficiencies enabling us to meet growing demand Well, by integrating our commitment to innovation and quality. Despite facing currency headwinds, and increased payroll expenses, early in the year were pleased to maintain industry leading margins which improved the question into the year as currency effects rates normally Our ability to maintain strong profitability is doing large part to our structural competitive advantages. Particularly a significant amount of purchases in labor and other administrative costs and expenses. And fully vertically integrated about it.

The former has proven especially valuable given the persistent construction labor shortages and wage inflation pressure in the broader construction industry within The U. S. Our exceptional margin profile with generated record operating cash flow of 170,500,000.0 I'll disclose the refuse of our business model. [indiscernible] has strengthened our financial position We achieved an net cash position by year end [indiscernible] to shareholders Through our increased cash dividend, The repayment of $65,000,000 in debt during 2024 has further than half our financial community as we prepare for the increased levels of demand that we anticipate over the coming years. Looking ahead, [indiscernible] Our record 2024 performance Including an all time high backlog at year end, and strategic initiatives particularly as it relates to our geographical expansion [indiscernible] Collectively provide clear visibility into 2026 and beyond. Our operational foundation market leadership, And focus on innovation gives us multiple avenues to unlock shareholder value. I will now turn the call over to Chris to provide additional operating highlights. Thank you, Jose Manuel.

Moving to Slide number five. Our significant business momentum throughout 2024 culminated in record results for both the fourth quarter and the full year. This performance demonstrate the resilience of our business model and consistent ability to outperform the broader market. The strength in our single family residential business was especially noteworthy with revenues growing 11% year over year to a record $372,000,000 with the new showroom lease signings in process for the California and Arizona markets. And currently, we are already seeing orders pick up in these regions, given our established sales force presence and product availability. Our solid growth also reflects a ramp up of vinyl windows deliveries in the second half of the year. Our exceptional performance in single family residential and the large opportunity with the ongoing geographical expansion and further diversification into vinyl products reinforces our confidence in further market penetration and growth potential for 2025. Our multi family and commercial business delivered another outstanding year with revenues growing mid single digits to $518,000,000 Our backlog reached an all time high of $1,100,000,000 at quarter end, representing exceptional growth of 28% year over year.

This marks our thirty first consecutive quarter of year over year backlog expansion, reflecting both and strengthening market leadership and growing demand for innovative products.

Quality of our backlog remains strong. Particularly robust activity in high end residential. Luxury lodging and Class A office space projects. We are also seeing encouraging signs of project activity presuming in certain geographies that have remained largely dormant since COVID-nineteen. Combined with strong momentum in quoting and bidding activity across our markets, we are exceptionally well positioned for continued growth in 2025 in this end market. This high level of visibility reinforces our confidence in continued market share gains and sustainable growth. Moving to Slide number six. Our backlog has shown consistent sequential growth each quarter since 2021. Demonstrating sustained business momentum and strong project pipeline. This momentum has helped maintain our book to bill ratio of 1.3 times as of quarter four twenty twenty four. We have maintained a book to bill ratio above 1.1x for sixteen consecutive quarters. With approximately two thirds of our backlog typically converting to revenue within the next twelve months. This provides strong visibility on future revenues and support our growth trajectory for 2025 and beyond.

The quality of our backlog is underpinned by our late stage installation profile and focus on interest rate resilient projects. Our project cancellation rate remains near zero since we typically install windows in buildings that are typically already in the construction process. Additionally, our backlog is concentrated in projects that have historically demonstrated resilience to interest rate changes. While delivery timing may fluctuate due to external factors, our consistently strong book to bill ratio reinforces our confidence in future revenue conversion. I will now turn the call over to Santiago to discuss our financial results and outlook for 2025. Thank you, Christian.

Turning to single family residential, on Slide number seven. During the fourth quarter, we generated single family residential revenues of $93,500,000 compared to 77,100,000.0 in the prior year quarter.

Despite challenging macro conditions, we achieved record full year 2024 single family residential revenues of $372,100,000 a year over year increase in both periods primarily reflected continued market share gains geographic expansion and broaden product offerings. We continue seeing significant market share potential driven by our expanding dealer network with very efficient five to six week lead times strategic geographic expansion with new showrooms in key markets and our entry into the vinyl window market. Which has more than doubled our addressable market. We saw deliveries of vinyl products pick up toward the end of last year and expect that momentum to continue into 2025. As we leverage our existing network and sign new clients to meet growing demand. Looking at demographic trends in our main markets, on Slide number eight. We are operating in states that are projected to capture the majority of U. S. Construction spending growth through 2029. Florida and Texas two of our core markets are expected to account for nearly 30% of all construction starts over this period. Representing approximately $84,000,000,000 in combined growth opportunities. [indiscernible] aligns with broaden population migration patterns towards the Southeast. Where states are projecting above average population growth rates exceeding 6.5%.

Furthermore, federal infrastructure spending through the Infrastructure Investment and Jobs Act is providing an additional tailwind with substantial funding still to be deployed across our key markets. These demographic and federal spending trends provide strong structural support for our continued expansion and reinforce our strategic focus on this high growth region. That being said, our ongoing geographical expansion should allow us to also capture market share in many other geographies. Where we currently don't have a significant presence. Turning to the drivers of revenue on Slide number 10.

Total revenues for the fourth quarter increased 23.1% year over year. To a quarterly record $239,600,000 while full year revenues increased 6.8% to a record $890,200,000 Growth in both periods came from our single family residential and multifamily commercial business. Driven by strong activity in our main markets, geographic expansion and our broadened product offering. Looking at the profit drivers on Slide 11. Adjusted EBITDA for the fourth quarter twenty twenty four increased 27.9% year over year to $79,200,000 representing an adjusted EBITDA margin of 33.1%. Full year adjusted EBITDA reached $275,800,000 representing a margin of 31%. Fourth quarter gross profit was $106,500,000 representing a 44.5% gross margin. Compared to gross profit of $83,000,000 representing a 42.6% gross margin in the prior year quarter. The margin improvement reflected benefits from stronger pricing, stable raw material cost operating leverage and more favorable foreign exchange rates. Full year gross profit totaled $380,000,000 representing a 42.7% gross margin aligning with our target range of low to mid-forty percent despite early year foreign exchange headwinds that have since stabilized. SG and A for the fourth quarter was $39,400,000 or 16.4% of revenue. Compared to 32,400,000.0 or 16.7% of revenue in the prior year quarter.

Full year SG and A as a percentage of revenues was 17.2% compared to 15.7% in the prior year quarter. The increase in both periods primarily reflected higher transportation and commission expenses from revenue growth increased personnel expenses from annual salary adjustments, and certain non recurring expenses related to our strategic review. Turning to our view of U. S. Aluminum tariff dynamics, on Slide number 12. We are actively monitoring the industry wide developments associated with the proposed 25% U. S. Tariffs on imports of aluminum and aluminum components of manufactured goods to be potentially implemented in March 2025. While the implementation of such tariffs remain uncertain, we have already taken steps to attempt to minimize any impact on our business of such tariffs by securing alternative sources of aluminum from U. S. Suppliers which would be excluded from potential tariffs. We believe these alternative sources will be able to meet all of our production needs.

Notably, domestic aluminum production has declined by approximately 10% since 2017 despite previous tariff measures. This factor coupled with growth in aluminum intensive industries has created an incremental need for industry wide imports. As demonstrated last year, we would again work with our clients to manage pricing in a matter that both help us mitigate the incremental cost while also moderating the broader inflationary impact on customer projects. Given how The U. S. Market is not self sufficient in aluminum production. As a result of these dynamics, we would expect a more favorable pricing environment driven by broader inflationary pressures and a continued tight labor market that constrains industry capacity. Beyond pricing dynamics, we're strategically expanding our presence in the vinyl window market. Further diversifying our product portfolio. Our significant labor cost advantage combined with ongoing operational efficiency initiatives and our fully very clean integrated platform position us well to maintain attractive margins while offering competitive pricing. These factors collectively reinforce our confidence in our outlook. Now examining our strong cash flow and balance sheet, on Slide number 13. We generated record operating cash flow of $170,500,000 for the full year 2024. Driven by effective working capital management and a higher mix of single family residential revenues.

Which feature upfront payments and shorter sales cycle without retaining. Capital expenditures of $79,600,000 dollars included scheduled payments on previous investments, investments in efficiency, and a payment for Miami headquarters and flagship showroom to drive incremental business activity. Our strong cash generation enhances our ability to create and return value to shareholders.

During the year, we generated $91,000,000 in free cash flow which allowed us to return $19,700,000 through cash dividends and position us well to opportunistically execute on our recently increased share repurchase where we still have approximately $76,500,000 available under the most current authorization. Given our strong cash generation, we ended the year in a net cash position after repaying $65,000,000 of debt throughout the year. As of December 31, we maintained a cash balance of 135,000,000 and availability on their committed revolving credit facilities of $170,000,000 providing total liquidity of approximately $3.00 $5,000,000 We remain very pleased with our growing cash generation capabilities which provide multiple levers to drive additional value. On Slide 14, we highlight our ability to generate returns significantly above the broader industry on a trailing three year basis. This outperformance reflects successful strategic investments and operational initiatives. Compared to our peer group, our industry leading margins and strong cash flows have delivered superior shareholder value creation. Now moving to our outlook [indiscernible] Based on our momentum through year end, and our strong performance during 2024, we're introducing full year 2025 outlook for revenues to be in the range of $940,000,000 to $1,020,000,000 representing entirely organic growth of approximately 10% at the midpoint of the range.

Additionally, introducing our adjusted EBITDA target to a range of $300,000,000 to $340,000,000 Our high end outlook assumes continued downward trends in interest rates benefiting mortgage rates high single digit growth in our legacy residential revenues, and vinyl revenues reaching approximately $40,000,000 We're also expecting improved activity in short term commercial projects and gross margins in the mid- to high-40s range. Supported by favorable foreign exchange rates with the Colombian peso at or above 4,200. The low end of our range contemplates potential headwinds from broader implementation of aluminum tariffs impacting construction spending, higher interest rates and a stronger Colombian peso. Under this scenario, we assume flat to low single digit growth in legacy residential revenues vinyl revenues of approximately $15,000,000 and gross margin at the low 40% range. While we anticipate some margin pressures, from increased installation revenues, tied to high end condo activity in Florida, and a mandated 9% salary increase in Colombia we expect these impacts to be largely offset by continued operating leverage, efficiency gains and more favorable pricing environment as I discussed earlier. On the SG and A front, we anticipate leveraging our fixed cost to help mitigate the impact of wage increases. We expect another strong year of free cash flow generation.

Capital expenditures are projected to be in the range of $65,000,000 to $70,000,000 which includes the tail end of previous investments maintenance CapEx and further investments in efficiency initiatives. As well as our new Miami flagship showroom and executive office.

Working capital should continue to be a source of cash as we further penetrate residential markets. This will be particularly offset by longer cash conversion cycles in our growing installation business.

In conclusion, our fourth quarter and full year 2024 performance showcased Tecnoglass' market leadership and operational excellence. Our record revenues industry leading margins and strong backlog reflect the success of our strategic initiatives. We entered 2025 with strong momentum in our Vinyl Window business with Q1 orders trending above Q4 twenty twenty four, invoicing levels. This combined with our geographic expansion progress, and continued strength in core markets, supports our confidence in delivering another year of profitable growth. With that, we will be happy to answer your questions. Operator, please open the line for questions. We will now begin the question and answer session. [indiscernible] first question today is from Julio Romero with Sidoti. Please go ahead.

Good morning. This is Justin on for Julio.

Good morning.

So on vinyl, can you talk about the cadence expected of Vinyl revenues? You're projecting a $15,000,000 to $40,000,000 for the year. [indiscernible] expect Vinyl to keep growing We have been opening No salesman in many, no states [indiscernible] and it has had a very nice reception We don't know the figures exactly, we hope it's going to be double what we did last year. Great. Thanks for the color there. And then on capacity, can you talk about the potential for capacity expansion in 2025? And is there any capacity expansion embedded in your CapEx guidance? Yes. We are running like 65% to 70% capacity today. And we are Making some investments, especially to become more efficient it comes to the aluminum side of the business, we're going to We're buying a lot of automation for the factory So we can produce more with a lot less. And certainly betting that we are going to grow and that we will have enough capacity to keep delivering within the fourth to five window frame that we have today. Weeks, four to five weeks.

Great. That's all for me. Thank you.

The next question is from Brent Thielman with D. A. Davidson. Please go ahead.

Hey, thanks. Good morning. Yes, I mean, you saw some nice single family growth here in the fourth quarter don't get the sense that That's downshifting here in the first quarter. Maybe to the extent you could talk about that, I'm just just wondering if it's still outpacing what seems like a still sort of a sheepish new construction market so far? The beginning of twenty twenty five, In single family has been extraordinary. We see a lot of growth compared to December and compared to January in 2024.

Okay, great. And then you had some comments in here about sort of short term maybe smaller commercial projects embedded into the guidance range here. Understand those are a little more difficult to project, but just wanted to get sense historically what sort of portion of your business that would be Just trying to understand the swing factor here just considering huge backlog you have going in into the year?

Well, can you tell me exactly what information you need? Because the question is so broad.

I can elaborate here. Brent, I can help you out. Essentially, the lighter commercial monthly revenues as average between $10,000,000 to $12,000,000 per month. More or less. So if you take the full amount commercial construction that we did last year equates to about €510,000,000 So if you do the run rate, you're talking about $275,000,000 on light commercial. So essentially, call it 20%, 25% of the total.

Okay. But no sense to date that that's that the pace of that activity has really changed Santiago?

No. Based on orders for January and February is pretty much in January is an odd month because it's half a month, but February is been in line with that. So so far so good. Okay.

Yes.

And then I guess my last question since I seem to get question a lot about just all the strength in Florida and the Southeast and you clearly leveraged that Are you you seeing any more of a shift in new orders for the commercial multifamily business maybe outside of that region or do you envision that in the near future or you still see a market that's pretty ripe with sort of new build opportunity here?

Well, I was hearing a strong demand in many states including for example New Jersey New York, Washington, even California and Texas. We're very enthusiastic about the performance of our company, the acceptance and so many new jobs going out now with the new [indiscernible] I believe the momentum is going forward very well.

Okay. Very good. Thank you.

The next question is from Tim Wojs with Baird. Please go ahead.

Hey, everybody. Good morning.

Nice job.

Maybe just on the on the pricing question, I have a couple of questions on that. So I guess, did you have you guys raised price within your portfolio for anything? In 2025?

No, we haven't. Not yet. We're waiting to see how [indiscernible] but not yet nothing.

Okay.

And how much of your business is how much of your business would be impacted by the 25% tariffs? Is it the the kind of $50,000,000 or so of stuff that you do that's aluminum extrusion? Or it did include curtain walls and things?

No, it will include only the aluminum side of it. And so, Gabriel, you can further reply to that.

Yes, Tim. So if you do rough math raw materials is roughly 30% of revenues and out of that aluminum is about 40% of raw material. So if you back into the math, you're talking about a potential impact of about $25,000,000 per year, call it. That would be what we will have to kind of counter with price adjustments or just purely looking for alternative sources of aluminum. But everything held equal, that's the amount that you're talking about. Based only on the exports of the aluminum components of the window. Okay. Got you. So it doesn't include the window or the curtain walls. If it's a curtain wall itself, it doesn't doesn't it's not included in that, right?

Just the aluminum component. Okay. Theoretically, lot of your peers are importing these aluminum extrusions as well, right? So I mean on a relative basis, yes, you have some direct impact, but on a relative basis, you're probably less impacted than your peers. Is that a fair statement?

Yes, that is correct. And as a matter of fact, I mean, you can see some other companies that have already announced price adjustments. And essentially all of our competitors as you saw last year when that temporary tariff was put in place, what we saw was that our peers were adjusting pricing across the board. [indiscernible] is an even playing field. Okay.

And we like to play the safe So we're waiting to see how this all evolves and then we make a decision But so far historically in the last thirty years that we have been doing business, In The U. S, especially All these measures at the end, they end up benefiting us. So we're waiting to see how it all plays out.

And we'll compensate with The U. S. Aluminum or with pricing or a combination of both.

Okay. Okay. That's good. And then one of your competitors in Florida got bought out earlier this year. Or earlier last year. I mean has there been any kind of change in their behavior? And I guess there is some kind of discussion about them getting out of certain parts of the market. In Florida. Have you heard that? And has that been any sort of benefit to your business?

We have heard the same Robo that you just stated, but we haven't seen that Nevertheless, we are doing really well We see our company, like I said before, getting a lot of orders much more than the same months of last year So we're very happy We believe the acceptance of our product is great. So we're very enthusiastic Okay.

Sounds good. Thanks for the color and good luck on this year. Thanks Tim. This concludes our question and answer session.

I would like to turn the conference back over to Jose Manuel Deas for any closing remarks.

Thanks everyone for participating on today's Please have in mind that our company will outperform the market We'll try to do it all the time. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.