Q1 2022 Tecnoglass Inc Earnings Call
Ladies and gentlemen, please standby the conference will begin momentarily. Thank you for your patience and I said, you're pleased I mean underlying.
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Good morning, and welcome to the technical Glass, Inc. First quarter 2022 earnings conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four.
On your telephone keypad, if at any time during the conference you need to reach an operator. Please press star Zero as a reminder, today's conference is being recorded I would now like to turn the conference over to Brad Cray Investor Relations. Please go ahead.
Thank you for joining us for technical losses first quarter 2022 conference call a copy of the slide presentation to accompany this call may be obtained on the investors section of the second Westwood.
Our speakers for today's call are Chief Executive Officer, Jose Manuel Dias, Chief Operating Officer, Chris Diet, and Chief Financial Officer, Santiago Giraldo I.
I'd like to remind everyone that matters discussed in this call except for historical information are forward looking statements within the.
Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance future growth and future acquisitions.
These statements are based on technical losses 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 regulatory factors and other risks and uncertainties affecting the operation of technical losses does it.
These risks uncertainties and contingencies are indicated from time to time in technical asked with filings with the SEC the.
The information discussed during the call is presented in light of such risks.
Further investors should keep in mind that sector wash its financial results in any particular period may not be indicative of future results.
Technical losses 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 Brad and thank you everyone does your baby on today's call.
We are thrilled, but going through your track record of exceptional performance at the blender glad to do that.
We reported another quarter of record results.
Building from our momentum through two of them were so good.
As proof of growth of our business in the first quarter.
Resulting in record total revenues gross profit Oh boy.
Brokers are.
Most of it is the Butler.
Theres a stunning accomplishment is attributable to the closure of the wall.
My girls all levels of our business.
We are further fully repaired or buses or that's a lever you got good drugs a garage space.
Sounds about Cologuard to single family residential books, which represents a 44% in the first quarter revenues contributed to our.
Our dogleg drove inclusion by the Hudson.
Year over year.
This was driven by a really big blah blah blah blah blah relationships, we've called blood draws are builders in there.
Single family residential bucket.
We all know the grocery really strong footprint of the soldiers to U S. Well, it's like a little girl waves remains of this book.
In our multifamily and commercial business. We were also extremely pleased to see very strong momentum.
The large project demand.
Everybody Boardwalk rose to a record of about 651 billion.
A record 44 boys.
Gross margin held drug will suddenly bottom line results, but go digital to illustrate the success of our girls was thought of as well.
We produced record quarterly adjusted EBITDA of 45 4 million.
Growing 35% zero, where you do.
So a regular budget of 33%.
Perfect.
This was achieved through approval Boise leverage driven by structural and sustainable improvements, we have made to our vertically integrated with bloodsport.
So to really grow regimens.
Innovation is one of those or a higher mix of single family revenues.
Which carry higher margins with noise pollution.
Well the vulnerable visibility in our business, there's still Walker W. The Lowe's win big water, we were pleased to generate or knives or spreads quarter over almost sobriety does slow a flood or something million.
There's a lot of those to prepare that Israel 50, maybe a little bit.
Was it worse.
Were spoken or balance sheet to achieve the lowest leverage went through you know here's three Oh boy six days.
The adjusted EBITDA.
In conclusion.
First quarter results for laterals with Gulf Wind as you know.
Oh it was yours.
Sure.
It's been a really big deal.
Employer of choice.
The resilience of our business both of those books or on a bus tour.
There was another exceptional zero perfect I really see it.
Florida, Theres really plug and play with.
We will continue to leverage our industry, leading platform to drive profitable growth and deliver exceptional value creation.
I will now turn the call over progression the providing of Israel do those on a regular boardwalk.
Thank you for someone who is moving to.
Slide five.
Well as I mentioned, we were excited to see that lesion on momentum in our single family residential business. What are the revenues again more than doubled year over year.
At the same time, the ongoing momentum in our multifamily and commercial end markets is evident.
Our backlog increased approximately 18% year over year to a record 651 million at quarter end.
Supporting our growing backlog and expectations weren't commercial recovery is the March Abi index, reading, which accelerated to 58.
That is family in expansion territory.
Near the index peaked in May of 2021.
During March the a b I reading for both new project inquiries and signed contracts are expanded to 63.9 and 60.5, respectively.
These positive data points. In addition to our conversations with customers are feeling a protection for all of these projects breaking ground in 'twenty to 'twenty two.
It is again important to note that a large number of our new projects are located in the southeast U S.
Which new construction is outperforming all other regions.
As a reminder, our single family originations growth projections are not capturing backlog, even the shorter terms thought that duration of projects.
Additionally, the majority of our backlog is comprised of medium and high rise residential projects, which are currently outperforming most all of the commercial sector.
The remaining portion of our backlog is related to a variety of other commercial players, where we continue to see broad demand recovery.
Looking ahead, we are encouraged by the solid trajectory and single family I can take drugs that demand. In addition to our growing backlog of multifamily and commercial projects, which gave us solid visibility on our multiyear project pipeline.
Our unique vertical integrated model, nobody broad pipeline and a strong geographic precision have allow us to better serve existing customers I'm pretty sure. They should have on market share as we deepen our presence in attractive in South East Asia.
South Central U S markets.
I will now turn the call over to Santiago on slide six to discuss the strong demand for it.
Single family products vertically integrated strategy financial results and improved outlook for the year.
Thank you Christian our first quarter results reflect our strong business trajectory.
I'll lead execution demand for our products and broader macro dynamics continue to provide tailwind for our business.
As we've highlighted in recent quarters, we remained better position than ever to take advantage of these tailwind given our very clean integrated platform and geographic positioning.
Which have allowed us to deliver superior quality architectural glass products, which much shorter lead times at an attractive value.
These factors truly differentiate our business in this inflationary environment.
Our ability to control costs has allowed us to compete effectively in the marketplace and deepen our existing relationships with customers.
And it is for these reasons that we are consistently producing exceptional results.
A key theme we touch upon over the past few quarters is this step change in our profitability.
Which has been primarily driven by our rapid expansion into the highly profitable single family residential end market where demand remains robust.
Single family revenues continued to be the bright spot in our business and increase over 155% year over year in the first quarter.
These represented 44% of our revenues.
An important point I would like to highlight is that approximately 65% of our single family residential revenues are tied to our R&R business.
Which is a much more stable and comes with a much lower interest rate correlation when compared to new residential construction.
We continue to see further potential for upside in single family by expanding our dealer base further geographical diversification into U S regions and the introduction of new products through our multi Max line, specifically catering to our growing shipments to production homebuilders.
All of these growth opportunities continued to be bolstered by the secular trends of the large scale population migration into the southern U S.
Given by Covid related factors more favorable tax environment and corporate relocations.
Now on slide seven.
I'd like to reiterate how our decades of investments and strategic positioning.
Have given us a premier advantage in this supply constrained and rising cost environment.
We are winning with customers because they know they can depend on us.
Some of the important factors driving our strengths are.
Number one.
Prior high return investments in plant automation and capacity upgrades number two.
Stabilizing our costs through hedging on aluminum inputs and dependable supply of raw glass through our JV with single bond.
Number three being unemployed or of choice to maintain quality talent and low turnover in our labor market with ample talented supply.
Number four keeping transportation costs at around 5% of revenues and number 515% energy savings from Green energy through our solar power and our cogeneration of power through onsite and natural gas emissions as demonstrated by our results over the past.
A few quarters.
These differentiators have.
Provided us with structural competitive advantages and have materially increase our profitability and cash flow compared to where we were prior to the pandemic.
We see this step change in our result, our structural rather than temporary.
The investments we've made in our platform have permanently enhanced.
Our ability to introduce new product offerings quote more projects deliver products on shorter lead times than the industry average and expand our customer relationships through our enhanced delivery capabilities now.
Now turning to the drivers of revenue on slide number nine.
Total revenues increased 26% year over year to a record $134 5 million for the first quarter.
This increase was driven by our strong sales to the single family residential market and market share gains importantly, commercial construction saw sequential growth each month during the quarter with this momentum expected to continue through 2022.
As a reminder, we previously completed the acquisition of antenna solar during the fourth quarter of 2021, Panamax domiciled company that serve exclusively at an importer and distributor of techno glass products in the country of Panama.
After eliminating intercompany sales to Ventana solar contributed revenues of approximately $2 3 million to our full year revenue our results for 2021 have been adjusted to reflect the retroactive recasting our results in line with a S E eight O $5 52.
Accounting for the consolidation of acquisitions under common control.
Looking at the drivers of adjusted EBITDA on Slide 10.
Adjusted EBITDA for the first quarter 2022 increased 35, 1% to a quarterly record of $45 4 million compared to $33 6 million in the prior year quarter adjusted.
Adjusted EBITDA margin at a record of 33.7% increased 360 basis points compared to the first quarter 2021.
First quarter gross profit grew 33, 2% to $60 3 million presenting a record 44, 8% gross margin.
These compared to gross profit of $45 3 million, representing a 40.6% gross margin in the prior year quarter.
Our 420 basis point improvement in margin was mainly attributable to operating leverage on higher sales greater operating efficiencies related to automation and a higher mix of revenue from manufacturing versus installation activity due to an increase in the mix of our single family residential.
<unk>, where we do not carry out installation.
SG&A adjusted EBITDA Bridge excludes expenses related to 2.7 million of nonrecurring costs associated with professional fees as detailed in our press release.
Higher revenues and strong margin performance more than offset for me a 4 million increase in SG&A, mainly attributable to incremental shipping expenses for higher sales volume and higher shipping rates.
Now looking at our improved balance sheet and leverage on slide 11.
As we discussed in previous quarters. The recent amendment of our senior secured credit facility and a recap of our dead has put us on strong footing to execute on our growth objectives in.
In the first quarter, we continued our solid track record of cash flow generation with operating cash flow of $27 1 million.
Importantly, our cash flow generation has allowed us to drive additional value in our business, giving us excess cash to reinvest in growth capex in anticipation of future demand, while also prepaying $15 million of debt during the quarter.
At quarter end, our cost of debt reached its lowest interest rate tier of LIBOR plus 150 under our credit agreement.
As a reminder, we have no floor on LIBOR.
Given continued growth in adjusted EBITDA, our strong cash flow generation and debt repayments. We were pleased to see our leverage ratio decreased to a very conservative 0.6 times net debt to adjusted EBITDA at quarter end down sequentially from 0.8 times at the end of 2021.
At quarter end, we had a cash balance of approximately 84 million and availability under our committed revolving credit facilities of 165 million, resulting in total liquidity of approximately 250 million.
On slide 12, we're highlighting the evolution of our gross margin improvement and cash flow generation capabilities over the last several years.
The step change in our gross margins can be attributed to the structural and sustainable operational improvements related to our automation, they're shifting our business strategy to penetrate the higher margin single family residential end market and significantly better operating leverage on the business.
Given these factors, we now expect our gross margin to normalize in the low forties range compared to just 31, 5% in the full year 2019.
Our strong record of cash flow generation. He's had direct result of our increased profitability better working capital management reduced interest expenses and higher mix of single family revenues, which carry a shorter cash cycle profile.
These factors in addition to our working capital improvements due to the reduction in our data outstanding.
Structurally improve our cash flow generation capabilities.
Moving to our outlook on slide 14.
Based on our positive momentum into the second quarter and growing project pipeline, we are increasing our full year 2022 outlook for revenue and adjusted EBITDA growth.
We now expect full year 2022 revenue to be in the range of 580 to 605 million. These.
This outlook represents organic growth of 19% at the midpoint led by single family residential based on the sales outlook and anticipated mix of revenues. We now expect full year adjusted EBITDA to be in the range of $185 million to $195 million representing.
26% growth at the midpoint of the range.
As I mentioned earlier gross margins are expected to normalize in the low forties range.
Benefiting from the many structural advantages that differentiate technical lies within our industry.
We are updating our expectations for capex in 2022 to approximate 25 to 30 million primarily related to the tail end of our most recent automation investment as well as other growth investments in our operations to efficiently manage increasing demand for our products maintenance cap.
Rex continues to represent less than 2% of our sales, we anticipate strong cash flow for the year, which in addition to our current liquidity position provides ample flexibility to execute expected growth.
In conclusion, we are firmly on track to produce another year of record results in 'twenty 'twenty. Two we have structural advantages best in class products attractive end market exposure and a conservative balance sheet, we are better positioned than ever to meet the strong demand for our products.
Provide greater returns for our shareholders through 2022 and beyond.
With that we will be happy to answer your questions. Operator, Please open the line for questions.
Thank you, ladies and gentlemen on the phone lines. If he would like to register for a question. Please press. The one followed by the four on your telephone you will hear a three ton palm Tech knowledge or request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three once again, ladies and gentlemen that is one.
One four to ask a question on the phone lines one moment. Please for our first phone question.
Once again, ladies and gentlemen, as a reminder that is one four to ask a question.
First question is from the line of Brent Thielman with D. A Davidson. Please go ahead. Your line is now open.
Yeah.
Okay, great. Thank you and congratulations on a great quarter.
San Diego I know you indicated margin should sort of normalize from here in the low forties range. The first quarter for the industry is.
Typically slower and you still put up you know 45 odd percent margins. So as we move forward through the rest of the year could we see a scenario of even better margins than what you saw in the first quarter, just as you push more volume in and benefit from improved operating leverage.
That was the base case that we use our brands is that commercial construction continues to ramp up as we move into the year right in and with that comes more installation. So that's that's what we use as a base case.
While operating leverage could certainly help our base case is basically assuming that commercial continues to grow and installation continues to grow so it weighs down on margins. That's why we are making.
In a low low forty's as opposed to continue growing hired in Q1.
Okay Fair enough and then I mean, a tremendous quarter again for free cash flow I mean, any reason, we wouldn't see this sort of level of conversion as we move through the kind of the remaining quarters of the year.
No I don't I don't think so I mean, I think the variable there is working capital. Obviously you know if you're if you do the math we're.
We're expecting higher revenues as we move into into the year sequentially right. So there's going to be a need for working capital to support our growth buyouts.
But outside of that I mean, our expectation is to continue the positive cash flow a trend throughout the year and obviously our profitability is much higher interest expenses are much lower.
So what we're expecting to do on Capex to support this growth, but everything held equal no. I mean, the expectation is to continue that's what you've seen in the last nine quarters.
Okay.
That and the last one just in the sort of medium and high rise is backlog based business is most of the dialogue for new projects now out into 2023.
Is it is it extending kind of beyond your core southeast regions in terms of where those projects like just what are you hearing there.
Well this is jose here the backlog there.
This girl is everywhere is growing.
So who's to specially.
But the northeast all the schools to Bobby.
The pictures.
The Chicago, we're doing the <unk>.
Little Walker, we're giving you a little color George we're very happy.
With Oh bravos them to clubs.
We're closer to the lower contract will be.
Commercial.
Please go there to go and open it up.
Yeah.
Okay, well very good congrats again I'll get back in queue.
Okay.
Thank you.
Next question is from the line of team well, it's with Baird. Please go ahead. Your line is open.
Hey, guys.
Nice job, maybe just to kind of tail onto the last question. Just just about backlog could you just talk through specifically what drove the big uptick in backlog sequentially I mean is that.
Is that all new orders and and I guess, when you think about how that backlog is it kind of shipping relative to your expectation and any kind of changes are you seeing any project delays at all.
Hello.
Hi.
Hello, I'm here I'm sorry.
Ah repeat myself.
So it will show both.
The backlog is growing.
Look old drugs that we're trying to do every day here.
Florida, and the northeast as I said.
The justice.
The southeast I mean, that's a good little little Florida down so there's a whole new.
New buildings Toby though.
We have Oh majority of those so.
Uh huh.
No plugged before you before perhaps even took preferreds.
Those oldest projects was yourself.
Between the time that you do show blowers.
Uh huh.
But everything but it will start maybe 23.
They will extend the lease for two years 'twenty three 'twenty four.
Okay. Okay.
And I guess on the U S residential side I mean, I mean do you guys continue to outperform there I mean, there's a lot of concerns circulating about rates and the housing slowdown I guess from where you're kind of sitting I guess, what are you seeing and if things would slow down do you have enough share opportunity, where you think technical as can be able.
To kind of grow through any slowdown in residential.
Well I believe we have shown.
Millions of the company.
The slowdown.
We could grow I mean, we have good growing.
Good so the Bud so.
I believe they're still going to be such a big slowdown.
I believe the merger.
What we're seeing is the <unk>.
News of commodities there.
So everything is going to stabilize.
The world's go there still could be back to normal.
That will help us a lot of the pricing.
For everything that goes towards sugar.
Even in a slow down.
We are growing with new customers.
Bravo.
Oh Oh.
Well the business.
I believe maybe we gotta go grow up 25% to 30% booked.
Third 12, 50%, there's still a little room.
Sure.
Okay. Okay. Good and then maybe just just on pricing. My my last question, just how is that kind of factored into your sales and margins. We've just seen a ton of pricing from your U S window competitors kind of go into the market. So are your sales you know prices going up as well, maybe just not as much or how do you think about the sales prices.
I guess, both in U S resi and commercial.
Well.
The decision makers, who are we.
Raised the prices.
For next week.
Oh the 212%.
Good food luggage.
That's really rush eventually commercial.
As you quote the labels the big all but a big old, though depending on the close of the alumina.
Really loves.
But the truth is the pleasure of going up.
Because of the scarcity of materials.
The commodities are going up but what we see.
Uh huh.
China is exporting more lately.
We believe we've reached through the war you Crave is good the stope supposedly benign so this pause.
Much better.
The oil prices go to cope Dover.
I believe.
Our pleasure.
Going up the bulge because otherwise.
Everybody's going to get hurt.
Hello.
We are doing really good.
Yeah.
We have a vertical integration.
Butch ball control well.
The costs are.
The rest of the local bedrooms as well, we're very happy with where we wish you a very bright future for the corporate team. One one thing I would add is that also on the single family residential a lot of our business is tied up to R&R as opposed to new home construction.
And as you know, there's not as much correlation with hot with interest rates or sensitivity to interest rates on that business. So we feel that we're that we are very well diversified within single family residential.
Okay, Great Alright.
Back in queue. Thanks, a lot guys I appreciate it.
Yes.
Thank you, ladies and gentlemen, once again as a reminder, if you have a question. Please press the one followed by the four on your telephone.
Our next question is from the line of Julio Romero with Sidoti and company. Please go ahead. Your line is now open.
Hey, good morning, Thanks for taking my questions.
Julio.
Hey, I'm sorry, if I missed this in your prepared remarks, but did you talk about how much the multimap sales or in the quarter.
We did not that that continues to trend at about two two and a half million per month.
And the thought is that with the added capacity, we can probably ramp that that segment more than we have been in the past, where we were more constrained.
Then we are now.
Okay, very good and I guess.
Just talk about the incremental capex spend you're planning I think $25 million to $30 million.
You know what projects that a priority this year and what kind of payback you may be expecting.
So the idea is to put in place another aluminum extruder paint line and over and we're basically kind of reaching capacity on the aluminum front.
To more laminating line for more window Assembly lines Theres, just broad need to continue growing pretty much everywhere based on the backlog growth that youre seeing and what Jose just mentioned for even for next year in 'twenty three.
Okay, Great and I guess my last question is you are performing very well in this environment I'm just talking about what keeps you up at night and what what you see as the biggest risk to your business.
In 2020, thank you.
Well the business skews a recession.
As a result of who comes to the country everybody's good they get hurt.
Interest groups portable who you go to page 12, let's do presume.
You never know, but.
Uh huh.
I believe the gold jewelry is poised to keep growing.
I hope <unk>.
The external agents cobos that'd be blasian wilford subtle they would have to really be more.
Interest.
Yes.
I believe that is going to help us by the beginning of this year at the latest.
Yes.
Okay.
Great. Thanks very much.
Thank you.
And there are no further question at this moment I'm, turning the call over back to Jose Manuel de S. Please go ahead go ahead with your conclusion, but any concluding remarks.
Okay.
Well I hope it gives you better able to lose coal.
The future looks very bright for the company and we hope to go.
Shareholders.
As a result.
That's true.
Yes.
Thank you, ladies and gentlemen that does conclude today's call. We thank you for your participation and all such a piece disconnect. Your lines have a good day.
Yes.
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