Q4 2022 Tecnoglass Inc Earnings Call
Speaker 1: The.
Speaker 1: The.
Speaker 2: Greetings and welcome to the TechnoGlass 4th quarter 2022 earnings conference call. At this time, all participants are on a listen only mode. A brief question and answer session will follow the formal presentation. If anyone's require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker 2: It is now my pleasure to introduce your host, Fred Kray, of ICR. Thank you, please go ahead.
Speaker 3: Thank you for joining us for Technoglass' fourth quarter in full year 2022 conference call. A copy of the slide presentation to accompany this call may be obtained on the Investors section of the Technoglass website. Our speakers for today's call are Chief Executive Officer Jose Manuel Bias.
Speaker 3: Keep operating officer Chris Dias.
Speaker 3: and Chief Financial Officer Santiago Garaldos.
Speaker 3: I'd like to remind everyone that matters discussed in this call, except for historical information, are forward-looking statements within the meaning of the private security's litigation reform act of 1995, including statements regarding future financial performance, future growth, and future acquisitions.
Speaker 3: These statements are based on technical aspect expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may differ in a material nature from those expressed or implied by the statement herein due to changes in economic business competitive and regulatory factors and other risks and uncertainties affecting the operation of technical assets business. These risks, uncertainties and contingencies.
Speaker 3: are indicated from time to time in techno glasses filings with the SEC. The information discussed during the call is presented in light of such risks. Further, investors should keep in mind that techno glasses find anti-results in any particular period may not be indicative of future results.
Speaker 3: Technoglasses under no obligation to and expressly disclaim any obligation to update or alter its forward looking statements, whether as a result of new information, future events, changes and assumptions or otherwise.
Speaker 3: I will now turn the call over to Jose Manuel beginning on slide number 4.
Speaker 4: Thank you, Brad and thank you everyone for participating on today's call.
Speaker 4: 2022 was a phenomenal year for techno glass.
Speaker 4: We are extremely pleased with our performance and the talented group of people in this company.
Speaker 4: We achieve a district quarters of the strong double digit organic revenue growth.
Speaker 4: We need record results in each quarter as we continue to outperform our end markets.
Speaker 4: even during this uncertain time for the industry.
Speaker 4: This outperformance was driven by several factors.
Speaker 4: The focus and execution of our dedicated team members, capitalizing on revounding commercial activity, and solid demand for our innovative single family residential products.
Speaker 4: of which ourselves almost double for the full year.
Speaker 4: This impressive performance has been supported by traction with new and existing customers, given our commitment to exceptional service, as well as our focus on depending on presence in attractive markets, especially the Southeast USA.
Speaker 4: All continuous success is on social-supported by a vertical and integrated business model.
Speaker 4: This has allowed us to minimize the impacts of supply chain constraints and inflationary?ogue.
Speaker 4: We can deliver products with lead times that we believe are well below industry average. This is evident in our record growth model performance during the full year.
Speaker 4: which increased 800 basis points to 48.8%. Furthermore, we produce record full year adjusted in the day of 266 million.
Speaker 4: and emerging of 37.1%. Our industry-leading margins are partly attributed to our continuous focus on implementing a creative automation and capacity investments.
Speaker 4: which have allowed us to realize immense operational efficiencies in our business.
Speaker 4: Additionally, we continue to get the strong upper 80 leveled on our growth.
Speaker 4: with positive revenue mix and pricing dynamics.
Speaker 4: Furthermore, strong margin performance and positive working capital management allow us to achieve another year of record cash flow generation.
Speaker 4: The exceptional cash flow profile we have built up over the past several years has provided us with a lot of financial flexibility to invest in our business. We have voluntarily paid down debt and further improve our net leverage ratio to a very conservative
Speaker 4: 0.2 times net depth to adjust the divina at UN. Our cross-generation capabilities and strong balance have also allowed us to create value for our shareholders.
Speaker 4: through our increased dividend and additional investments in automation and capacity of our plans.
Speaker 4: This has significantly enhanced our ability to meet the high levels of demand for our problems, as indicated by our growing backlog. In summary,
Speaker 4: This has significantly enhanced our ability to meet the high levels of demand for our problems, as indicated by our growing backlog. In summary, we are thrilled with the direction of our business.
Speaker 4: We entered 2023 as a much stronger company supported by a record backlog and improved cash flow position.
Speaker 4: We have further extended our leadership position in the architectural glass industry. As we look forward, we will continue to leverage pecno glass as vertically integrated with our additional required offer.
Speaker 4: es réduil?? traffica facilities
Speaker 4: and proving growth investments to maintain our industry leading managers, gain additional market share and create additional value for all our stakeholders. I will now turn the call over to Chris to provide additional details on our record backlog.
Speaker 5: Thank you, Jose Manuel, moving to our backlog on a slide 6. Our business prospect remains strong heading into 2023. This is reinforced by our growing backlog, which rose approximately 24% year over year to a record 725 million in the fourth quarter despite its...
Speaker 5: 44% increase in invoicing year over year. We were also pleased to see positive overall quoting and building activity through the fourth quarter, which has remained healthy into the first quarter of this year. I say, quick reminder.
Speaker 5: Approximately two-thirds of our backlog is composed of medium and high-rise residential buildings, while one-third is related to a wide variety of commercial projects. Our single-family residential growth trajectory is not fully captured in our backlog, giving the shorter-term spot duration of projects.
Speaker 5: Our Brazilian performance above market growth and record backlog continue to be driven by our reputation for exceptional service in innovative products offering and reliable lead times that allow us to deliver higher quality products to our customers in a timely manner and at attractive value. Our track record of exceeding expectations on the high profile.
Speaker 5: the US average.
Speaker 5: Secondary and demographic trends continue to favor the Saudis and South Central US, where we have our largest presence.
Speaker 5: This is fueling our backlog growth. We are focused on penetrating attractive and economically sound geographies.
Speaker 5: These have allowed us to capitalize on Storby high rise demand and wing market share in a single family residential which mostly consists of relatively resilient repair and remodel projects that don't carry a high correlation with interest and mortgage rates.
Speaker 5: Overall, we are encouraged by our significant accomplishments during 2022 and continue a moment across our end market so far in 2023.
Speaker 5: As we look ahead, we aim to deepen our presence and gain further share in the attractive Southeast US single-family residential end-market, but also to expand geographically by continuing to open showrooms and signing new dealers across the country. The expansion of a revolutionary multi-max-ball line...
Speaker 5: which targets production home builders is also gaining steam. Our latest automation and capacity in hazmines initiatives are on track to increase our installed production capacity to an output equivalent to approximately 950 million of annual sales by the end of the second quarter of 2023.
Speaker 5: We have already seen the benefit of that. We ended the year with production capacity equivalent to 800 million of annual sales, and we already progressively increasing such capacity during this quarter on our way to that 950 million capacity target. These investments will allow us to not only serve our customers better, but we also position as well to meet higher demand from both existing and new customers. We remain highly optimistic in the future of Technogloss giving our...
Speaker 6: about market performance, attributable, the resiliency of our very clean, integrated business model, and previously implemented, highly-turned automation and capacity intentions.
Speaker 6: Our focus efforts to further penetrate the single family residential market grow fourth quarter and fully at 2022 single family residential revenues up by 59% and 73% respectively.
Speaker 6: These accounts for approximately 43% of total revenues in 2022 compared to only 3% in 2017. Our continued expansion and success in single family relates to the quality of our products consistently low lead times and competitive pricing. It is also important to reiterate.
Speaker 6: that are approximately two-thirds of our single family residential revenues are tied to repair and remodel demand, which has remained relatively resilient in our markets and for our products, despite higher interest rates, pressure in national construction activity, more broadly. CalWinds related to tax and insurance incentives are also helping fuel the continued demand in our main markets. We're also seeing growth from traction with new product offerings, including our multi-max product line.
Speaker 6: and an innovative brand new high-end blast, the R-Sword that we have just introduced. Looking ahead, we continue to expect additional upside to our single-family revenues. We are growing our billar base and expanding geographically within the Southeast and South Central US. We are also introducing more products and opening new showrooms.
Speaker 6: in attractive geographies. Where we believe we have the opportunity to gain market share, including New York City and Childhood South Carolina, which are already operational. And others in Texas, Arizona, and California planned for the rest of the year. Now, on slide 8.
Speaker 6: I would like to reiterate several key competitive advantages you need to take the blood that are supporting our success in the field, high supply and dynamic cost environment. More specifically, the differentiating factors benefiting our business are number one, high return investments in plan automation and capacity upgrades. Number two,
Speaker 6: Catalizing our costs through hedging on aluminum includes and dependable supply of raw glass through our joint venture with Sangalon. Number three, a people focused culture to retain quality talent and achieve low turnover as an employer of choice that pays well above minimum wage. Number four, keep in transportation costs at around 5 to 6% of revenues. And number five, 15% energy savings from green energy, including solar power and inculgination of power through on-site natural gas.
Speaker 6: Turning to the driver for revenue on slide number 10. Total revenues increased 60.2% year-over-year to a record 211 million for the fourth quarter, and 44.2% year-over-year to a record 716.6 million for the full year 2022. Attributable to a strong rebound in commercial activity.
Speaker 6: growing demand for single-family residential products in market share gains. Importantly, I would like to highlight that our commercial construction revenues grew sequentially in each quarter of 2022.
Speaker 6: and continues to experience momentum into 2022. Looking at the drivers of adjusted EBDA on slide 11. Adjusted EBDA for the 4th quarter of 2022, more than doubles to a quarterly record of 87.2 million.
Speaker 6: for presenting an adjusted EBITDA margin of 41.3%. Adjusted EBITDA for the full year increased 76.8% year over year to a record 265.7 million, for presenting a margin of 37.1%.
We produce another record-four quarter in full-year growth profits on both a dollar and margin basis. Our growth profit for the quarter nearly doubled year over year to 110.2 million, representing a growth margin of 52.2%.
compared to a growth margin of 42.9% in the prior year course. The 930 basis point in improvement in margin mainly reflected operating leverage on higher sales, overall pricing dynamics.
Greater operating efficiencies related to automation and a favorable FF trend, even the recent depreciation of the Colombian past.
This strong fourth quarter performance contributed to a year of record-full-year growth profit, including 800 basis points of margin expansion to a new record-full-year growth margin of 48.8%. Higher nominal S-DNA for the quarter.
and here mainly reflected higher shipping expenses after results of a higher sales volume, higher shipping rates, and higher mix of sales going to the more fragmented single family residential channel due to the scatter nature of job sites.
At a percentage of total revenues, S-GMA for the fourth quarter improved 220 basis points to 15.8%.
For the full year, LGNA had a percentage of total revenues, was 17.2% and flat compared to the prior year, which was impacted by non-recurrent professional fees at the beginning of the year, in a settlement agreement charged during the third quarter.
Now, looking at our improved balance sheets and leverage on slide number 12, our exceptional track record of cash flow generation continues into 2022, during which we generated operating cash flow of 141.9 million.
This impressive cast generation has provided us with flexibility to drive additional shareholder value through the significant growth investments we've made in our operations. At year end, our leverage ratio once again improved to a new record low of 0.2 times
under a committed revolving credit facilities of 170 million, resulting in total liquidity of approximately 270 million.
Turning to our structural improved margins and cast generation on slide number 13. The step up in our growth margin is directly related to the structural and sustainable operational improvements. We've made our business to our high return automation initiatives.
as well as a higher portion of revenues in single-family residential, which is more a credit to margins, given the higher mix of manufacturing revenues versus lower margin installation work.
Additionally, we continue to experience the benefits of operating leverage from our higher revenues on fixed and semi-fixed calls.
which has more than obsessed higher depreciation, labor, and other indirect manufacturing costs. We expect our growth margins to normalize in the high 40th range for the full year 2023 based on our current expected mix of commercial or residential revenues. The substantial improvement in our cash flow generation prepared the CPSoPhoneF3 or dynamic industry and to help with purpose- huh new mutual support short later?
We have also significantly reduced our day sale of standards.
driven by our improved collation efforts and the benefits from our higher makes of single-family residential revenues, varieties of price, targets of high paying surplus and those of high paying Syrian
Our impressive past generation has provided us with financial flexibility to drive additional value for shareholders.
through the 15% increase to our dividend in November , and the funding of our investment to increase production capacity by over 35% by the end of the second quarter of 2023, compared to the end of 2021. Overall,
We are very pleased with all of our efforts to enhance our cash generation capabilities, which in turn has provided us with multiple members to create additional value in our company.
Based on our structural improve operations and ongoing value and enhancing initiatives, we expect strong cash flow for the fully of 2023.
which we expect to be backloaded based in the timing of tax payments for our Colombian subsidiaries. Before we turn to our outlook.
I would like to take a moment to discuss the evolution of our revenue and adjust the EBDA on slide number 15. It's becoming a public company in 2013.
Our top and bottom line results have grown tremendously, particularly in the past three years, as we have realized the benefits of prior, accrued growth investments in addition to momentum in our single family residential business. Our focus penetration into this market.
through an expanded cell for.
And track record successfully delivery on high-to-5 projects in maintaining superb lead times, health drives are significant growth over the past few years.
are innovative product portfolios, strong industry relationships.
and structural competitive advantages have also allowed us to capitalize on solid commercial activity, which is reflected in our expanding backlog of multi-family and commercial projects.
As we look to 2023, we are confident in achieving another year of exceptional growth. Now moving to our outlook on slide number 60.
Based on the positive momentum in our business through our 2022.
and a solid star in the first quarter of 2023. We are confident in our ability to achieve another year of record growth in the revenue and adjusted EBDA for the full year of 2020.
We are introducing our outlook for full year 2023 revenue to be in the range of 790 million to 830 million.
This outlook represents our organic growth of 13% at the midpoint. Based on these sales outlook, our anticipated mix of revenues and our expectations for cost and expenses.
We expect fully-eared adjusted EBITDA to be in the range of 300 million to 320 million, representing a 17% growth at the midpoint of the range. We expect gross margins to be in the high 40s range for 2023, mainly attributable to operating leverage on higher sales.
Structural advantages from our very clean and degraded operations are slowly offset by an increase in the mix of inflation versus product revenue for the year.
In summary, 2022 was another transformative year for Pegnavox. We continue to also form within our industry and offset headwinds from macro pressures to our highly efficient cost structure, targeting investments and strategic geographic positioning in attractive US markets.
As we moved to 2023, we believe we are well positioned at an industry leader in architectural glass, with a high-facil generating profile and multiple avenues to drive additional value in our business. With that, we will be happy to answer your questions.
Operator, please open the line for questions. Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time.
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Once again, that is Star 1 to register a question at this time. Our first question today is coming from Brent Fieldman of the A.D. Please go ahead.
Once again, that is Star One to register a question at this time. Our first question today is coming from Brent's Thielman of the AD gave us in please go ahead.
Hey, how are you? Hello. Good. Just regarding your backlog, can you discuss the sequencing of the burn and backlog over the next few years and how much to expect to deliver in 2023 versus the out years? The expectation is for the backlog to continue growing. So when you're talking about backlog burn, we don't expect the backlog to decrease despite what we're projecting.
Okay. And can you remind us of the status of your repurchase program? What's the remaining, you know, regarding that $50 million availability? I don't think he's open-ended. That's aette in Editing.
I mean, it's open evidence. You didn't have a specific time in place. So we're evaluating all avenues to return past to shareholders on a long-go in basis.
So it remains to be open and the board will analyze it as we go clearly as we are able to produce more cash flow You know different avenues to return cash to shareholders become more and more available. So will analyze it as we go
I'll help back into the queue. Thank you. Once again, that is Star 1 to register a question at this time. The next question is coming from Sam Darkish, a Bremen James. Please go ahead.
Good morning, everyone. How are you? Good morning, Sam. A couple of questions if I might. You mentioned the strong invoicing, continuing in the first quarter here, based on the fact that I guess you're temporarily still out of capacity. Any reason to think why the first quarter...
Sales, gross margin and EBITDA wouldn't look very similar to Q4. No, I mean typically Q1 is very similar to Q4 from a seasonal perspective. And as far as install capacity is building up gradually, so from where we were at at the end of 22.
we have put in place incremental capacity as of today. But now you have to take into consideration that we are close for winter vacations until the 11th of January . And February is a short month, only has 28 days, and we have carnival in Barranquilla, so we were close.
three days but it will be similar to I mean we believe that we can do a very decent quarter and that's why we are what we are expecting. Gotcha and then related to that you did come in better than you expected as of the initial part of December .
Was that due to less maintenance shutdown than you were anticipating or what was the variance caused by Santiago? Two factors there, mainly. One effects health when we reguided in December 1st.
Since then there was a light evaluation of the peso, so that basically was not baked into that projection at that point in time. And secondly, with this work, a handful of extra days given the year and demand. So yeah, your intuition is right. We actually ended up having less of a shutdown as a result.
and then what is your market expectation that informs that goal? Yeah, so essentially it's kind of slightly higher than Q4 if you kind of do the math and that gets you to you know between 10 to 15 percent depending on where you are in the range.
And that comes from different avenues, right? I mean, we're much more exposed to repair and remodeling, so we continue to be confident that we can continue to outperform there, and then you have the geographical expansion that is taking place. So that's what we're based into these assumptions.
I mean, we're much more exposed to repair and remodeling. So we continue to be, you know, confident that we can continue to outperform there. And then you have the geographical expansion that is taking place. So that's what we make into these assumptions. Thank you. Thank you all.
Sure, thank you. Thank you. The next question is coming from Tim Mojus of Baird. Please go ahead. Hey guys, nice to meet you. We got a couple bigger picture ones and then a specific one. But I guess bigger picture, so you talked about just your lead times and service really driving expanded relationships. Is there really any way to kind of, I guess, expand upon that? Maybe what the backlog composition looks like, you know, from maybe new customers you've added over the last two to three years versus maybe.
because in New Geography going north to the east, going west.
And we believe we can keep this vision. And the volume that way, I mean we see it. We see that the residential side is growing. And also the commercial side is growing unbelievably. It's all flowing, I mean, from down down.
The commercial side is Skyrocket. Okay, okay, I'll follow up with you guys a little bit on that. Then maybe just from a capacity standpoint, I mean, I know.
That this is maybe a little bit more theoretical, but I mean you're still bringing on you know kind of the automation investments to expand capacity in 23 if you continue on this kind of if your business pace kind of continues at this rate. What when would you expect to potentially have to add capacity again? I mean would you would this be kind of an annual type thing and you know guess what type of lead times do you have on the equipment right now? Well Jose Rosen let me talk too much about the capacity but we do have enough capacity build up now to go.
to continue to grow 30-40% a year and we keep adding new capacity and new businesses. So we'll be coming up shortly with some good announcements on new products that we're going to build and this is all being taken into consideration all the time. We keep buying land next to our factory.
We see a lot of future ahead of us. We don't sleep. Okay. And then I guess maybe just the last one, just any sort of like early learnings or feedback from the showrooms in New York and South Carolina. I know they haven't been open that much, but anything you kind of call out there and then just.
You know the margins on those products maybe the ones outside of Florida I guess I would initially thought they'd be lower but you know just more transportation and that type of stuff But I've also heard that the ASP's per unit could be higher on those products So maybe the margins are actually better. So I guess what are the margins of you know I guess the prospective margins of the residential business outside of Florida The margin is much better outside of Florida, we have very strong competitions in many competitors outside of Florida in the higher end residential
the cost of transportation is minimum.
And none of the rest, we are the newcomer. Our prices, we always start with a lower price in order to get a grip of the market. So we spent the cost profit to be around the same or a little more at the beginning and then...
It will increase as the years go by and people understand that we have a very good problem in the same equal or better than the competition and then we can level the price.
increase as the years go by and people understand that we have a very good problem, the same equal or better than the competition, and then we can level the price.
Okay, good. I'll hand it back over. Thanks guys, good luck. Thank you. Thank you. Thank you. The next question is coming from Julio Romero of Sudote. Please go ahead. Okay. Good morning. What's the matter with Christian? Nice to meet you.
So I wanted to maybe piggyback on Tim's question a bit if I could, you know, staying on the capacity expansion, just theoretically, like what would be the first bottleneck that could begin to limit or slow any additional capacity expansion, you know, in 24, 25, etc. No, we are first of all, we, we, we, the capacity is that we're adding on this year.
say less than we can really do because we don't want to overcome this and only deliver it but
the capacity increase that we're doing at least will go to 2025. Obviously there are new lines that we are adding that don't have anything to do with what we do today. I mean we're going to add new products and those products will need caps but not too much.
That's why we're projecting this year to be around $35 million in Capix so far and we'll keep updating the information like we're going to keep updating the Vibda and the SELF.
Great, Christian, I really appreciate the color there. It sounds like the runway is good to add additional. I don't want to...
I don't want to put words in your mouth about adding additional capacity, but I'm just trying to imagine you mentioned land earlier, right, like, like, fine land next to your factory. Like, what would, what would be an issue that would,
you know theoretically stop you from adding more. Well, I mean, as long as the market continues to be like it is, and we keep expanding into other markets, geographies, different geographies, I mean, we're going to keep, we're going to have to keep adding capacity and the vision is.
The man is very strong. We still getting lots of orders. I mean, we are Getting new lines of products to be made soon You'll hear from us with in the region in the next few months and And that way I think we're gonna that's why I'm buying the land because I'm not sure How far we can get but in case we get very far I want to have a no-blan in hand so we don't have to go by at the last minute
you have in New York City in Charleston and then opening up in a few more Geography in 23. Can you maybe speak to
you know how much if any incremental revenue from the showrooms is embedded in the guidance. It's actually not so far because it's a residential, mostly 100 percent and we cannot put any in the backlog or we can do it.
but this is where not sure if not accounted for lack.
Just to add that, will you if you listen to the question that Sam asked earlier, what we're baking in is essentially a little bit higher than Q4 on a runway basis, right? So if you just assume that and kind of corrode it throughout the year, that's where you get for full ready for 23. So to Jose's point, anything that comes from that is going to be upside to this.
You talked a little bit about garage doors and some other new products and first off what the traction is with garage doors and secondly what are the types of new products that you're looking at?
Like Christian mentioned, we are designing new products for the new markets that are going to come out soon. The garage door is being hit in flow, not only in flow, everywhere that is hit by this, an impact-grading garage door.
It is very well designed and I mean everybody loves it we are selling a lot of that product and we expect to design another garage door, non-impact soon also for the new bikers that we are entering the non-impact
And we're always designing new stuff for the new market, and for the existing market. So that is an ongoing process. Excellent. And then Santiago, as it relates to, you know, the margin headwinds looking out into 2023, as it relates to a mixed shift, how should we think about any other kind of margin headwinds?
associated with bringing a new capacity and so on. Now, we're actually baking in gross margins to go up slightly higher about 100 basis points from what it ended up averaging in 2022. And that basically is coming from operating leverage. And essentially, whatever could come from MIX as commercial continues to ramp up.
is going to be more than offset from the revenue growth that we're projecting for the year. So, no, I mean, if you kind of flow into what we projected and back into it, we're actually having implicit margins going up to higher. So, we're not seeing headwinds on margins next year.
more than offset from the revenue growth that we're projecting for the year. So, no. I mean, if you kind of flow into what we projected and back into it, we're actually having implicit margins going a bit higher. So we're not seeing headwinds on margins next here. Very helpful. Thank you.
Thanks, Alex. Thank you. At this time, I'd like to turn the floor back over to Jose Manuel for closing comments. Thanks, everyone, for participating in the Mesa School. We are very excited that the production for our company, we were really hard to make sure that our shareholders and get the best returns, our employees and our investors. Thank you. And see you soon with Buenos.
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