Q3 2020 Tecnoglass Inc Earnings Call
For historical information are forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 95.
Including statements regarding future financial performance future growth and future acquisitions. These statements are based on technical assets current expectations or beliefs and are subject to uncertainty and changes in circumstances.
Actual results may vary in a material nature from those expressed or implied by the statements herein due to changes in economic business competitive and our regulatory factors and other risks and uncertainties affecting the operation of Tecnor glasses business.
These risks uncertainties and contingencies are indicated from time to time and techno glasses filings with the Securities and Exchange Commission. The information discussed during the call is presented in light of such risks further investors should keep in mind that Tecnoglass is 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 changes in assumptions or otherwise.
I will now turn the call over to Jose Manuel beginning on slide number four.
Good luck.
Well, we would hope as you build the will to earnings call.
The positive mobile.
Our business could you.
We believe this local hospitals to sell as well please.
Very good though the ball surreal were lower click through low results.
Although year to date basis, we delivered record adjusted EBITDA of 72, Caldwell real low with a solar plus.
Well holds abrasions boards.
We'll we'll do the adjusted EBITDA budget year over year.
All will will vary Regal total workforce through all the.
During the third quarter, we burn through those programs with variable operating metrics gold to record levels.
Clued gross brawl group.
Adjusted EBITDA.
Operating cash flow.
We are extremely proud although tubes bill because you are really due to accomplish these results.
This complex environment.
Looking at the lower buckets, we could do to deepen our personal use the yours was robust nodes values, we preserve the worlds third quarter rather than go.
Copel to 86% just a year ago.
Bud Bud light Blue, although agrees residuals persons.
It's called Robo, the Suzhou to scare Lobo residual presence. It gives you very soon.
But the two recent years.
Resilient demand from the strong residential recovery.
So pulling through both positive see considerably housing fundamentals.
Let's go to Rubtwo sequential revenue.
Improvements in his review.
You know our business overall ability to either way about execute well.
Led to solid growth.
We could do to penetrate do close to where relationships.
We will do Brazil, so yoga surface.
But the projects have received across our footprint that we have code can you do to see improved buggered conditions overall.
To that point, our backlog remains strong at 500 Thirtys incremental.
What supply those with good visibility of the.
So the pipeline of projects, who plugs it would be worth.
And though bill do you really to blood throughput.
We expect or started to pursue the zoo us to go do do offsetting the slower recovery from but they're big related businesses.
There's real opportunity in Latin America.
You know this is your 200, our geographic presence and product mix well.
Well focus was generally a strong cash flow.
Hello tight working capital management.
Previous hardware its own.
Ultimate usually deserves a girl who calls about as well.
We have achieved to record cash flow quarters in a row.
Lou today, we have cold weather goods over somebody plus Oh.
Oh, well just to give you that flow from operations.
And we have achieved a dead leverage of wellpoint light bulbs, a level not seen since 2015.
We are extremely excited.
Consortium of mostly new ones the European banks lenders.
Right Good times already girls, who says.
The U.S. focus called Bobby.
Where we saw with battery Percentto a river.
This is reflected in the original clear those three old, we're bringing new growth opportunities.
Which was all due to the clubs comparable to or better than baby publicly traded as you as companies of similar size.
Our weighted average interest rate was.
Well pull the plug away from 7.5%.
Those two are the expected rate of approximately 3.5%.
This is a direct threat knowledge, but by the OLED those over the power behind Tecnoglass is low risk.
Strategically located group basically integrate their operations.
The expenses that go through those.
Oh, a structural as those things a lot of others within our industry.
To go do producing attractive growth.
Margins and cash flow.
Our management team is highly aligned with shareholders.
And the other three pursues devaluing the cold weather.
Save life does overlap.
Well the thing so well balance sheet.
A greater financial flexibility.
We are even better positioned to execute on our growth objectives.
We expect to deliver stronger due to limited budgets.
As we go do you to reap the benefits of our previously completed.
Although visual projects.
We have a highly efficient.
Subject to lead to very very low cost operation.
Well you loads portfolio I do the buyback program.
These proceeds resolves social acceptance as the recovery continues.
Oh, thank nonetheless <unk>.
2020 has built up milestones you well.
On many fronts. So far as we plan to go do you view driving additional value in the business in the years ahead.
I will now turn the call over to cruise to provide additional details although bioglue.
Thank you I wasn't runway.
Moving to our backlog on slide five our.
Our third quarter, we sold reflecting continued recovery in the U.S. and overall it pent up demand for our best in class architectural glass products.
During the third quarter, we continued to broaden our customer relationships and strengthen our presence in new markets I can always on increasingly dire.
Nursing fiber footprint, allowing us to achieve goes in a complex environment.
At the end of the quarter backlog remains strong at 536 million up 1% year over here with 88% of that backlog represented by our business in the U.S. any important to reinforce several factors.
Our actual commercial work, which includes all nonresidential project types, it's approximately one third of our backlog.
The majority or roughly two thirds of our backlog, especially in Asia related deal.
These mainly consist of medium rise and high rise multifamily projects.
On the other hand single family housing is under represented in our backlog.
This is because of the shorter term nature of dose orders.
Therefore, I will point out that a significant portion of our growth trajectory is not getting fully capture in backlog like he was several years ago.
These we've continued to influence their relationship with you in backlog I'm for war revenue given our increasing mix of revenue from single family housing end markets.
Our U.S. fashion continues to drive high margins in our business.
We operate across an increasing number of highly attractive the helium markets.
This includes the Gulf Coast, an area that we most certainly gain increasing appreciation for their protection that our impact my system windows provide after experiencing a record number of hurricane Landfalls this year.
Today, we have had no material project cancellations in our backlog even during this time that make.
That said the rapid execution of backlog invoicing during the third quarter was five and the replacement rate.
This created a temporary airport get before our pipeline of pent up demand as talk to repopulate backlog.
We are having many conversations with customers on boarding activity remains very active.
They Avi index continues to increase off its low point earlier this year.
Member Avi I improved 47 from just 40 last month, reaching seven month high teens that pandemic begun.
Oh, certainly even more exciting point, the AB eyes multifamily sub index increased to 54 in September which supports the favorable trends that we are seeing in that two thirds of our backlog, which is tight towards multifamily residential.
Most of the positive trend occur in the southeast where we enjoy our strongest market positions.
Additionally, recent data from Ivy is war, so, yes that U.S. nothing glazing contract. So industry revenue is expected to increase at an annualized rate of 2%.
Flex our EPS for the U.S established position in the southeast to expand into other you as mark.
Good.
Through our enduring commitment to innovation and reputation quality and service.
This effort continues we are confident in our ability to further grow our business through a combination of underlying margin improvement undisciplined market share gains.
Beyond our record of success in executing our projects in backlog another important driver of that Englobal. Our story is our rapid expansion into the U.S. housing market.
Which I will detail further on slide six.
Our single family residential abrasion is exceeding our expectations since we entered this market several years ago.
Today these business accounts for nearly a fifth of our us revenue compared to only 3% in 2017.
As we look at the current environment since.
Single family macroeconomic Tailwinds are exceptionally strong evidenced by double digit housing starts and existing home sales grow in recent months low supply and interest rate near all time lows.
These said sturdy foundation for continue share gains through new products and solid execution.
Last quarter, we discussed additional steps that we have taken in recent months to expand our single family business beyond South floria into other markets in Central Florida, and the Florida Panhandle.
This expansion is on track and clearly benefiting our results as.
As we experienced single family revenue growth of 20% sequentially since quarter two 2020.
Additionally, an increase in single family product mix provides us with greater manufacturing revenue, which bodes well for our margins and cash flow are these business carries.
A lot shorter cash cycle.
As an important point, our single family portfolio of mainly impact resistant windows are best suited for hurricane prone coastal markets.
We have largely grown by selling our approach to contact us.
Who primarily do renovation upgrades or bill high end custom homes in Florida.
New single family residential construction, particularly with a large scale production builders has been largely on top for us there.
Therefore, we are very excited to have recently introduced a new product line called multi Max that includes several malls for homebuilders.
The issue to help us generate additional organic growth by significantly expanding our addressable markets to a wider target market.
We are pleased with this trend in our business and remain poised to capitalize on a strengthening recovery in the us.
I will now turn the call over to Santiago.
Of course, our financial results and outlook.
Thank you quicker I will start by discussing our financial highlights for the quarter on slide number.
Africa, and Quintin mentioned, we are extremely pleased with our outstanding results during the third quarter of 2012.
We improved many metrics to their highest level in our company's history.
To conclude record gross profit adjusted EBITDA and operating cash flow growth.
Given by the focused execution of our team to unlock value to our vertically integrated structural advantage.
Looking at our top line you had revenue for the quarter were 95.7 million or 93% of our revenue.
Compared to $92.8 million or 80% of our revenue in the prior year quarter.
It represented a 3.1% increase year over year, and 21% sequential growth compared to the second quarter, reflecting a strong recovery.
Growth in our single family residential business outpaced growth in the rest of our business.
We were pleased to see two quarter conditions in all of our end markets.
Our strong performance in the U.S. has been the primary driver of our results and help our lease up that delayed activity at many customer job site in Colombia, and other Latin American markets, which will remain in the early stages of recovery due to that and then.
Looking at the drivers of adjusted EBITDA down to slide number nine.
We continue to generate benefits from our prior high returning series to improve our cost structure and Cleveland research.
Adjusted EBITDA in the quarter increased to 28.5 million compared to 24 million in the prior year quarter.
Adjusted EBITDA margin of 27.5% Recollect correctly 550 basis point improvement compared to the third quarter of 2019.
580 basis point improvement in gross margin to 38.8% more than offset the impact of lower revenue.
The improvement in gross margin was mainly related to lower raw material costs.
Greater operating efficiencies from prior automation initiatives and a higher mix of revenue from manufacturing activity versus installation activity.
The reduction in energy in a dollar was good.
Lower variable expenses related to shipping coming.
Commissions and other personal expenses as well as tight cost control.
A copper Senate have failed as DNA, what unfavorable due to lower revenue.
Our significant margin improvement in 2020 is the testament to the prudent investments in our business over the past several years to improve efficiency and produce the highest quality products for our customers.
[laughter] hardware supported by our dedication to quality and innovation, which we are able to aktiv in multiple areas of our vertically integrated platform.
Looking at our improved balance sheet and leverage profile on slide number 10.
He has been a long standing goal for us to improve the term of our debt and we were very pleased to announce earlier this week.
Nearly 300 million senior secured credit facility.
This consist of about 250 million delayed draw term loan and a 50 million committed revolving credit facility.
Our maturity schedule was extended by three years to 2025.
Compared to a weighted average of 2022 for our previous facility.
The new facility has an initial interest rate of LIBOR, plus a spread of 3% bigger.
Beginning in April 2021, the spread will be based on our prevailing leverage greenfield.
We therefore expect the spread over LIBOR could equate to a level of 2.75% in April in accordance with our credit agreement. This.
This will represent an approximately 400 basis point reduction from our weighted average interest rate of 7.4% previously.
Through these new facility, we intend to pay down all other existing indebtedness.
Starting with our previous facility and lines of credit.
Our existing 210 million of senior note, which bear an increase of 8.2% will be redeemed at the end of January of 2021 upon a step down in the redemption price.
Following the pay down of previous facilities kind of redemption of the notes, we will significantly reduce our imitation schedule and cash interest expense we.
We estimate aggregate savings will be approximately $11 million per year.
The recapitalization of our debt structure will significantly enhance our financial flexibility to execute on our growth objectives.
We are grateful that our core Clarkson of mostly U.S. and European lender have recognized our strong track record of growth and cash generation anti U.S. focus company I.
I suppose I mention the terms of the deal with like B pack, and our comparable to or better than many similar type publicly traded U.S. company.
During the third quarter, we generated record cash flow from operations of 26.2 million, bringing our year to date.
To approximately 51 million.
These reflect our aggressive asset management tight cost control working capital improvement and automation benefit.
Weve capex during the quarter largely limited to maintenance spend.
In turn we further elaborate our balance sheet to end the third quarter. We are very conservative net leverage ratio of 1.9 times net debt to LTM adjusted EBITDA.
From a capital allocation perspective, we remain committed to maintaining our defensive or balance sheet investing in value enhancing opportunities and returning a portion of capital to shareholders through our task maybe then.
Moving to our outlook on slide number 12.
As we move into the month of October single family residential continue to represent a growing share of our revenue and it's supported by strong crane eating home sale and single family housing starts.
Based on our current invoicing schedule and underlying market demand. We are pleased to provide our full year 2020, adjusted EBITDA outlook of 95 to 100 million, implying year over year growth or 6% at the midpoint of the range.
This outlook also implies roughly 18% growth in the fourth quarter of 2020 adjusted EBITDA on revenue is comparable to the prior year quarter.
We expect to have a higher mix of product versus installation revenue.
Furthermore, we continue to expect the U.S. to represent a significant majority of our growth through a year end led by residential with stronger demand in the U.S. are expected to offset the lower recovery you know Latin American Mark.
Given sustainable benefits related to our automation initiative, a higher mix of manufacturing revenue and weak local currency for the rest of the year, we expect our adjusted EBITDA margin for the fourth quarter of 2020 could be higher compared to the prior year quarter are they lower.
Quaintly compared to their quite exceptional level in the third quarter of 20 point.
In regards to gross margin.
Our markets on raw material costs that arise over the next several quarters, we expect gross margin to trend back toward a more normalized level in the meat Thirtys range. These.
These normalized margin is slightly higher than our previously communicated low to mid Thirtys range due impart to our previous capex investments in automation anything.
We are very excited about our success so far in 2020, considering the unprecedented circumstances of this year.
Moving forward the momentum in our business, it's possible, we expect to drive additional market share gains through the continued expansion of our business.
We are working closely with our customers to execute on our backlog and invoice single family orders across our footprint.
Our focus on attracting new project opportunities that allow us to continue gaining share to their recovery.
I innovative product portfolio strong industry relationships and structural competitive advantages provide us with the right foundation to continue growing faster than our end markets the 2021 and beyond.
With that we will be happy to answer your questions. Operator, Please open the line for questions.
Thank you at this time, we'll now be conducting a question and answer session. If.
She'd like to ask a question. Please press star one from your telephone keypad and the confirmation tone indicate your line is in the question queue.
You mean for Star two if you let your move your questions from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while the poll for questions.
Thank you and our first question is coming from the line of Mike Shlisky with Colliers Securities. Please proceed with your question.
Good morning, gentlemen.
Morning, My gratitude to your phone.
Good morning.
Hi, guys, you're probably getting some some crazy back and your business is essentially a U.S. company.
It's Joe I'm glad it's probably showing up in your actual lending agreement.
I wanted to ask just a couple of details on that on that agreement.
It does enhance beating any kind of EBITDA slowdown anytime soon.
So you will still be generating decent free cash do you have any plan to repay. This this deal early day point and are you restricted from any debt pay down for the first few quarters or or you know couple of years or so.
Oh, Thanks, well first of all it is definitely encouraging to see how these deal works on the reading I think as you mentioned one of the key factors and the financing was to see these company I tell you what based company in the sense that our exposure is now 95% into the U.S. Mark.
And clearly you know about studies showing based on how resilient that much.
Okay has been having some other marketing a lot weeks now account for very little of what we do so.
So that was a fundamental apart all.
Being able to get the deal done in the terms that we were able to get it done. So that was very encouraging acquired or got paid down or prepayments. We have flexibility to do so so as we move forward and the company continues to generate a healthy amount of cash flow.
We see that from a capital allocation basketball make better sense, we are able to do so so we don't have any prepayment penalties.
'cause pickles, so we'll manage our cash flow accordingly, and if it makes sense to prepay. Some of these that I had a time, we will the nice thing is that their way to the credit agreement.
Was negotiated we do our flexibility on the amortization schedule based on advertising that are quite percent, though the capital for the first three years and then 7% four years four and five so we do have ample flexibility body. We competed.
Right. It is healthy amount of cash flow, we'll go ahead and use that accordingly.
Got it.
Yeah onto a different topic I wanted to ask about the about the pricing dynamics in the industry in the third quarter and maybe in the past.
During the fourth quarter here no. It sounds like not everyone are doing quite well talking about these days I'm curious if you've seen any sharp elbows.
He comes to bidding on anything you recently.
I'll, let jose Okay.
Yes.
Melissa we.
I'll be quoting tool.
Mhm Donepezil new jobs.
And do you see.
Below jobs.
Between especially mid rise low rise.
Hmm.
The group do you use the.
The large inventory than there was in the high rises husbands early release.
No all the lubrizol coli.
To the global high rises too.
Because.
All the above Derby week people hold all the good work from home.
News merchandisers to build a whole birds lawyer.
With better weather so discouraged.
He was the nose of the U.S., So we're going to lower my drugs.
And shows are scheduled to be little coal dozing houses.
So we're very happy we're real pleased with that.
The amount of quoting intermodal jobs or close to.
<unk> dollars.
Okay. Okay.
Thanks for that and then one last one for me it wasn't really mentioned it maybe it's not worth mentioning at this point, but can you update us on the impact of Carbonite team Oh, yeah as long as the yard irrational facility anything you should be aware of there.
Well this is Jim.
Oh I am in charge of operations on.
We haven't seen a hot many cases in July to launch probably five or six.
We are almost 5000 employees.
And as usual usually not I guess, the Cds under control a as a matter of fact, we have one.
People Die every two days you got an idea on probably less than 100 cases, a day when we used to have back in June and July a ball 8000 cases a day so.
It is pretty much in their guns only has to be there for the last.
Three months.
We hope that will continue to be on the same path.
Well, great. That's great news I appreciate the color then I'll pass it along thank you.
Thanks, Mike.
The next question is from the line of Tim Williams with Baird. Please proceed with your question.
Hey, it gentlemen, good morning, nice a nice job on the quarter and that and that that agreement.
Thanks, Thanks, and maybe just a a two part question first on residential I'm, just just a builder products that you're introducing here I mean, you know what are the.
Well what are kind of the operating say you need to do to go out and sell that product can you do you need to sign builders, you know to get that that product kind of going in is that something that can meaningful meaningfully help the residential business. As you look at 21 or is that more of a 22 type type opportunity.
No <unk> no.
We.
How many requests [noise].
I will.
The little Blue.
Do truck homes.
Mmm does is a very very low.
It was below that but we don't have you know both the whole.
So we do a little liberal loss.
Nine months, we tend to them.
And then we got to do no no shooters, we've done it all will be JV.
No request a week.
Sold a few jobs already with double.
<unk> <unk> <unk> and.
Though the sale doesn't lower in most cases.
Okay, Okay, and then I guess on on your your kind of existing on our business.
On the residential side one of your one of your peers spoke about I think 20% order rates in Florida This quarter.
Are you seeing kind of a similar level of order activity and would you expect that that kind of convert over the next couple of quarters.
Yes, we do we do we're growing I.
I mean, we're newly the businesses.
We're growing and everybody is doing really well.
Oh provision is doing better because there's a lot of movement.
Two new housing in Florida really.
Really encouraging.
And the wheel penetrating the market.
We're growing with the older she's declines and dirty look like well.
Jeez, when you were growing and growing.
Okay. Okay, and then and then maybe just on free cash flow you had really great performance the last couple of quarters.
As you look at 21 and incorporate that the debt refinancing savings is there a way to think about what kind of a normalized free cash flow number could look like going forward.
Our you know where will basically our hard rock as we close the year, because we'll have much better visibility on what working capital will look like.
Why growth rate, we we can achieve next year is it really going to depend on that.
From a capex perspective, you know, we don't anticipate to see.
<unk>.
Hi, Capex number based on the talk that you know there is a automation initiatives.
You know I being completed if we see other opportunities to further optimize then.
My husband topic 2021, but nothing like you saw last year for instance, so my expectation is that we will continue generating free cash flow I mean, I can talk about you know the level that we would expect on a normalized basis without really kind of understanding what the.
Look like I would call it a way that the election that on their way and everything else because I keep variable teradata is gonna be working capital right. So the nice thing is that the more that we getting through residential that better that we cash flow because like eventually something carries a much harder past cycle right.
I mean, he's a spot business, where you get paid right away as opposed to other we pay nature or other things. So the expectation is to continue the trend I mean, I don't see any reason as to why not.
I'll give you you know are there clarity in more detail when we report next call.
Okay. Okay. That's helpful.
Good luck on the rest of the year and we'll see you next week.
Alright. Thanks.
The next question is from the line of Josh Wilson with Raymond James. Please proceed with your questions.
Thanks, Good morning, and congrats on the quarter.
Good morning, guys.
First question for me could you give us a sense of how much of your backlog is for 2022.
Typically the way it works Josh I back of the envelope is that two thirds of that backlog gets executed within the next 12 months.
And the remaining part of the backlog that goes into the Bakken Oh of 18 months or per month 12 to 18.
And that kind of back of the envelope.
And then it's also important to note that the more that we get into residential then more on a representative that the sales are in the backlog because you're not counting.
For all of that residential single family residential activity that is not accurate. There. So you know for a for modeling purposes or whatnot, you opt to account for that but on the residential on the commercial side. The back of the envelope calculation. These two thirds within 12 months and then one third.
Welcome to promote walked away.
Okay I want to make sure there were no changes there.
And then as it relates to your joint venture and we saw that you went ahead and made to land transfer a is that an indication that oh the plans to begin building the plant are back.
Back on line and you in San Japan have increased confidence in the outlook to go ahead and proceed there or is it just a.
Step, but you're still in a holding pattern.
Hello.
Ways going is that.
Colombia is sold out on the Gosh Oh right.
These rendino, which we are apart to beat on Needless to say we are in a boarding a lot of class eight in order to supply.
Uh huh.
Demand in Colombia, we still see a very good business Sunghwan seems a shame.
We have we are we are continuing we stay a religion.
On and we make a decision within the next few ones. Obviously, we want to know how all these buying dynamic will play out finally and make sure that everything is in line, but yes.
We are asking today, we're moving forward.
Got it and then one of your competitors talk about labor availability issues, both in the factory and Oh, well field can you talk about to what extent, that's having any troubling effect on it your production or installations.
[noise] Oh day. He you know in Colombia, we have 'em, we have had higher unemployment for a long time and buying he.
We could go to double or triple the size and deals that mean alternate or two higher Ah. So we don't have the approximate installation, we do very little installation in the U.S.G.
G M B.
We're doing fine and the rest would we sell to two installers are they have their own clearsign I'm personnel. So we don't see that happening to us at this moment.
Got it good luck with an export.
Thanks Mark.
The next question comes from the line of Alex Rifle was B. Riley FBR. Please proceed with your question.
Thank you and really nice quarter gentlemen.
Thanks, Alex.
[noise] San Diego looking at 2021 backlog is up a little bit, whereas he should grow.
Nicely, so does low to mid single digit revenue growth sound achievable in 2021.
Yeah, I think I was saying earlier, we like to have as much clarity as possible be put before we kind of start talking about guidance for 420 21.
But that's a fairly achievable, especially with the growth that you heard from criminals and while we expect.
You know family to continue doing over the next few quarters so for yet.
Okay, and then you made some comments about gross margins in the mid Thirtys.
2020 years is going to come in closer to 37%. So are you expecting 2021 gross margins to be flat to down a little bit and.
Yeah, and if so I suspect, it's because of a shift in mix, but if you could clarify that.
Yeah. So so basically there were a couple of moving parts here in.
In Q3.
I think he was the case in Q4.
Raw materials, obviously, you know aluminum what theyll mark cheaper at the beginning of the quarter and now it's up to par recovery level. So we got a little bit of benefit from that.
The quarter was also benefited from mix as we've just heard a crazy and we're doing a much.
Lower installation in the in the U.S. and.
And have gone for the next two quarters.
But a lot of other things are structural so you know we we increase.
Our our our kind of guidance on gross margin from last quarter could these quarter based on the talking to worsen Whitey structural related to their frequency is related to the automation that was put in place.
So I think maybe thirtys could.
Could be the run rate it could be maybe another point here and there, but you know it could be conservative I think that absent a given quarter without higher makes oak installation.
That should be a normalized run rate of 35, 36%.
Okay, and then lastly.
Can you expand upon your plans to take the residential product outside of Florida.
[noise] Oh, yes, we do not.
No the there.
Hurricane season has been hugely hold Louisiana and benches we.
We have a loan requests and we have made a couple of reasons.
We are.
And a way of establishing.
A new distributors and dealerships all over the goals tools.
And on the East coast, where older we know tool luxury meal and we plan to roll to solve those go learn that soon.
<unk>.
That's excellent thank you very much.
Thanks Howard.
Our next question is from line of William Johnson with D.A. Davidson. Please proceed with your question.
Good morning, gentlemen.
Morning.
Well I mean.
Chris I had a question for you about the backlog mix I'm wondering.
Are you seeing a pretty significant shift away from office building projects towards those mid to high rise condominiums, you're talking about and also.
Are the types of glass products installed difference between those two project types.
Oh, yes, we have seen.
Hmm lurch.
All he is building lose a whole bills.
John <unk> the <unk>.
Yeah, we have seen Oh.
A surge.
And moves was Russ you lose a little a little Uh huh.
Those.
The July.
She is the cold change.
Lucas said no.
They require a builder shady Grove decision.
Closed the merger with <unk>.
<unk> no <unk> commercial.
So we're really happy about that.
And ER and we have the bonus pool in the boardroom for Moodys was I mean will the deal flow.
Okay.
[noise] supplier. So we're doing a really good I mean, we're very very excited about the hubs.
Excellent and you mentioned also in the call that your products are well suited towards hurricane prone markets I'm wondering when you look at your competitors.
Are they offering a similar type glass that's specific to hurricane come buildings or is that a fairly specialized niche that you guys alone occupied.
No no they offer a similar blows everybody offers isabella.
So my business to blur, we also old gloves, because we make everything.
<unk>.
So most of the suppliers the dual big.
Oh, so cool.
Oh I see below book.
Oh, gosh, I don't build to suit I mean, thats a window.
The performance a little bit loves it she was a well.
Well done.
Oh, the pleasures of the window will be the aluminum in the whole system.
The company is doing very well or.
No worries.
And Oh, we build performers.
Most of the most of the <unk>.
Okay, great. Thank you and then.
Visiting.
Sanchez I have a question for you about free cash flow. So it's nice to see.
And it's been pretty strong so far this year and as you guys paid down debt and get to a comfortable leverage level. What are your focus is with reinvesting that cash so into the business. So that it can compound into more free cash flow next year.
Absolutely I think that you know that from a capital allocation perspective, he was very important for us to get to a very comfortable leverage position and I think being sub two times.
It is getting us where we want to be I.
I think now we're gonna have to kind of find opportunities right I mean, our our installed capacity is at a comfortable level. After having completed the automation efforts last year right. So we have ample capacity to grow there.
So you know depending on what comes next and how things shape up bodies, one of our focus either too.
Continued delevering the balance sheet or two in reinvestment opportunities are going to add value to the shareholders. So.
More to come I think they are there will be opportunities too.
Kinda reinvest up right I saw that you're talking about.
That's helpful. Thank you.
That's all I had thank you gentlemen for answering my questions.
Thanks, Gary.
Thank you at this time, we've reached end of our question and answer session I'll turn the call over to Jose Manuel Davis for closing remarks.
Well do do you work cylindrical do you use to try again.
No merger.
With more close to worsen.
Little more approach.
No. One has been recognized you know maybe blew away, but or lenders.
We truly appreciate being able to go he lives in the capital markets.
Thank you again to everyone on the line reviews, you believe you today's call.
We appreciate your go did you drill to bring new lows.
Look forward to speaking again soon and you always good bundle.
Thank you. This concludes today's conference you may disconnect. Your lines. Finally, thank you for your participation.