Q3 2023 Tecnoglass Inc Earnings Call
Greetings and welcome to the technical as third quarter 2023 earnings Conference call.
At this time all participants are in a listen only mode.
Great question and answer session will follow the formal presentation.
If anyone should require operator on the topic.
They were on your telephone keypad.
As a reminder, this conference is being recorded.
Copy of the slide presentation to accompany this call may be obtained on the investors section of the techno glass website.
Our speakers for today's call are Chief Executive Officer, Jose Manuel <unk>, Chief operating Officer, Chris Diet.
<unk> financial Officer Santiago good al.
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 Securities Litigation Reform Act of 1995.
Including statements regarding future financial performance future growth and future acquisitions.
These statements are based on technical athletes 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 <unk> regulatory factors and other risks and uncertainties affecting the operation of technical asking business.
These risks uncertainties and contingencies are indicated from time to time and techno glasses filings with the FCC.
The information discussed during the call is presented in light of such risks.
Further investors should keep in mind, the technical actually its financial results in any particular period may not be in the future.
As a result.
And under no obligation 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, Brian and thank you everyone for participating on today's call.
Our Big news to report there.
This quarter was 12 years old.
Well the scoring the resiliency of our business you gave all of the macroeconomic environment.
Oh really news injuries to a third quarter record of 237 million.
Oh, it was just straight quarter with thoroughly organic year over year growth.
Oh My God.
Hershey business was again the main driver although top line growth.
It's been 6% year over year to 22.9 million you behave like 12 year over a year ago.
So back to the third quarter. They just go to.
Q1.
Multifamily commercial revenue increased by seven 2%.
We continue to see.
Commercial demand so a bulls eye.
And for our board and increased commercial activity, even though key geographies.
This drove an increase in backlog to a record.
Hum.
36 million.
Quarter end.
So although highly melodies. She can suddenly residential dogs grew 2% year over year to a record of 80 showed 40 billion.
We gained market share in key geographies. Despite adult club in the Toyota Europe here you.
Overall, Charlie do microeconomic conditions.
Well go to Doug do you want to.
You'll probably lose your actual revenues increased 48%.
Look you know the bottom line results, we produced an industry, leading adjusted EBITDA margin above 30%.
Which we attribute to our do you believe goes towards those.
Previously implemented high returning for a human being.
Year over year, our margins were impacted by that.
Noncash effect related to the appreciation.
The Colombian peso.
What does your house partially reversed.
She was the end of the call.
Oh brilliant working capital matters.
One of the confusing grows even shorter cash cycle.
Probably residential business.
So over a strong third quarter cash flow from operations.
Q1 2 billion.
We've just general thoughts you have there.
We executed approximately 40% of our 50 million share repurchase program.
Mid year.
Mhm in line with our commitment to return value to shareholders.
Our strong capital position.
So neither of those do you really need to look up your life when they talk to their stores did you close opportunities.
So just so is it do you know jameson mutually relying on Windows Mike.
We expect this move to.
Was it the reach of already booked.
Total formula.
And provide a high return on investment.
We have already very good.
He can pose yourself do you pay the topics required.
The original three.
300 million do not dwell wherever it is to our business in the couple of years.
In summary, we are proud of our strong track record over returns.
Nice talking to you about server you know.
Our ability to continue delivering above market performing well.
Generating robust cash flow and value to our shareholders.
I will now turn the call over to Greece to provide additional operating highlights.
Thank you Jose Manuel moving to slide number five in October we were pleased to announce the relocation of our headquarters to Miami, Florida.
You just don't move aligns with our 95% of our revenues.
Charged from the U S and it aligns with our long term rates dropping it to become an even more U S centric company as we continue our organic geographical penetration into these Mike.
These moves.
Has been very well received so far by customers employees and other stakeholders.
Forward to fostering long term partnerships in the U S will continue to fuel our growth strategy.
Looking at our results during the quarter, we saw positive momentum in our multifamily commercial business.
D D D D V D a.
Our backlog grew 20% year over year to a regular old they hung around $36 million.
These washout generation in grocery in the second quarter of 2023.
Despite the high interest rate environment, we continue to see favorable trends in our key markets.
In the South Eastern U S.
New business wins.
And there are driving that acceleration of our backlog.
As a reminder, our brochure body two thirds of our backlogs is mainly composed of medium and high rise residential building.
Which are currently outperforming most all the commercial sectors.
The last one third is related to a wide variety of commercial projects where demand remained sound.
Our single family residential growth trajectory is not fully captured in our backlog, even the shorter time spot ration of projects.
The strong bidding activity. We are seeing also seen those attractive for all you do.
Many of these in the near future.
Helping to maintain our positive book to Bill ratio above one one times over the past 11 consecutive quarters.
Our strong book to Bill of one three times at quarter end and our demonstrated ability to convert backlog to revenue is contributing to our expectation for another year of double digit growth in 2024.
Our pipeline you've got a b C D lithium projects into 2025, we also see additional avenues for growth.
Family residential business through our showrooms expansion and recent entrants into the vinyl windows market, which represent an estimated <unk> <unk>.
60% of the 26 billion argued picture Windows margin.
Moving to slide number six.
N D into vinyl windows and the expansion of our showrooms should help us generate additional organic growth I think.
It's fun our addressable market.
These factors.
Function without growing backlog give us confidence in our ability to grow share.
Our accomplishments during the quarter and the strategic moves we have taken reflect our commitment to value creation strengthening our customer relationships.
Aligning our operations to generate meaningful returns for all our stakeholders.
I would now turn the call over to Santiago to discuss our results and updated outlook for 'twenty to 'twenty three.
Thank you Christian.
Turning to slide number seven.
During the third quarter, we achieved record single family residential revenues, which grew organically by two 4% year over year and by 47.7% compared to the third quarter of 2021.
Our ability to grow single family revenues on a difficult prior year comparison, while navigating a complex microenvironment.
He is a testament to the resilience of our very clean integrated business model.
<unk> located operations.
We are also benefiting from the favorable secular trend of population migration into the southern U S.
Where we conduct a significant portion of our business.
These factors are helping to differentiate our business, despite higher interest rates and a broader macro pressures.
As we've highlighted in recent quarters, we see market share upside through our single family revenues from our broadening dealer base driven by the interest in our low lead times and new product introductions.
We are expanding geographically throughout the highly attractive as long as that market, adding showrooms in other geographies and our new vinyl initially provide significant avenues for revenue growth and end market diversification.
To that point on slide number eight.
I would like to highlight a few key points from our recent strategic entry into vinyl Windows Jose Manuel increase.
Just on our <unk>.
During the quarter.
We were thrilled to announce our entry into the vinyl window market, which represents an estimated 60% of the.
The 26 billion architectural window market.
Solid advice, our position as an industry leader.
We have already made a significant portion of the anticipated capex investments.
What an incremental 300 million annual revenues in the coming years, providing a strong foundation to grow our vinyl prices.
Our entry into the vinyl window market is expected to provide a range of benefits to take no glass and our customers. These strategic moves more than doubles, our addressable market.
Geographical expansion easier given the end customer preference for vinyl products in many U S regions.
Leverages, our current distribution base.
That many existing dealers already sell both aluminum and vinyl windows.
Creates a more efficient thermal performance aligning well with ongoing sustainability trends and increased demand for energy efficient products.
And we have the technical expertise to produce vinyl products and capture an attractive margin on incremental revenue.
Production will commence in a couple of weeks or the first orders to be the lever by year end and we already have orders for 2024 with many other customers requesting samples and product demos.
This early traction with existing customers validates our strategic entry into these mark.
We are excited by the reception so far.
A man's growth opportunities, we've seen this and mark.
Turning to the drivers of revenue on slide number 10.
Total revenues increased four 4% year over year to $210 7 million for the third quarter.
This increase was led by growth in our multifamily and commercial activity as well as growth in single family residential revenues, largely reflecting additional market share gains.
Looking at the profit drivers on slide number 11 and 12.
Adjusted EBITDA for the third quarter of 2023 was $71 3 million or 33.8% of revenues compared to $78 5 million or 38, 9% of revenues in the prior year quarter.
The change was primarily attributable to a noncash foreign exchange impact on gross margins related to the peso as functional currency, but partially offset by lower SG&A dollars.
SG&A was $29 5 million compared to $35 2 million in the prior year quarter with the decrease attributable to lower shipping and commission expenses and a nonrecurring settlement charge in the third quarter of 2022.
Partially offset by increased corporate cost to support a large outbreak.
As a percentage of total revenues SG&A for the third quarter improved 340 basis points to 14%.
Third quarter gross profit was $90 5 million representing.
Representing up 43% gross margin.
These compared to gross profit.
$105 3 million, representing a 52.2% gross margin in the prior year quarter.
The year over year change in gross margin.
Mainly reflected a noncash 660 basis point unfavorable FX impact.
This was due to the markup of inventory in our functional currency attributable to the significant and rapid depreciation of the Colombian peso.
Specifically inventories purchased during the second quarter of 2023, and a weaker Colombian peso ran through the P&L during the third quarter of 2023.
Much stronger Colombian peso.
These accounting dynamics related to the currency translation from the functional currency and had no cash flow effect.
The boat the actual inventory purchase and the subsequent sale took place in U S dollars.
Separately, approximately 25% of our cost and expenses do get paid and the Colombian peso shut their recent currency revaluation.
You have an additional margin impact of 150 to 200 basis points year over year.
Looking forward the majority of the impact that inventory has been worked down and FX rates on an average a partially reversed course since quarter end.
That should allow for less accounted variability we sold through <unk>.
We expect to produce gross margins around normalized levels through the remainder of the year with no significant FX volatility outside from the 150 to 200 basis point effect from peso denominated cost and expenses against similar too.
22, FX comparable through year end.
Therefore, we now expect gross margins will be in the range of 47% to 49% for the full year 2023.
In the third quarter, we deliver exceptional cash flow generation of $51 3 million.
Bringing our trailing 12 month operating cash flow to a record level of 144 million.
During the quarter, we had capital expenditures of $24 3 million, which included payments for previously purchased land for future potential capacity expansion.
Capex also included a significant portion of the previously disclosed investments in facilities and operational infrastructure, who entered the vinyl window market.
We expect strong free cash flow to continue through year end, largely given an expected decrease in capital expenditures in the fourth quarter.
Our impressive cash generation has been made possible by our careful working capital management.
More favorable mix of revenues.
Profitability and reduced interest expense, providing us with significant financial flexibility to drive additional value in our business.
This includes our recent investments to enter into the highly attractive vinyl window market and share repurchases.
In total we returned $4 three meal getting cash dividends and $8 9 million in share repurchases during the quarter and.
And repurchased an additional $11 2 million of shares after the quarter ended with approximately 30 million remaining.
The current repurchase authorization as of November six 2023.
At quarter end.
Our leverage ratio remained near a record low level of 0.2 times net debt to LTM adjusted EBITDA.
Down from 0.6 times in the prior year quarter.
As of September 30th.
We had a cash balance of 119 million and availability under our committed revolving credit facilities of 170 million.
Resulting in total liquidity of approximately 289 million, giving us significant financial flexibility to execute growth in there.
In our business and return cash to shareholders.
On slide number 14, I would like to reiterate our success in generating strong returns for our shareholders.
On average over the past three years or so.
Stronger profitability and meaningful step up in cash flow generation.
Have driven significant average returns.
When comparing our Aro <unk> Aro I see metrics with both of you guys building product peers their returns on reinvestment into our business plus dividends.
Driven substantially higher value to our shareholders for their validating our strategic approach to driving returns.
As you can see on slide 16, the upward trajectory of our revenue and adjusted EBITDA remains positive and there is a lot of runway for growth with the recent capacity additions and entrance into the vinyl window market to get us over 1 billion of annual revenue.
We are as confident as ever in our ability to maintain our track record of exceptional growth and above market returns.
Now moving to our outlook on slide 17.
Based on our strong results, so far and the expected timing of deliveries through year end.
Residential and commercial markets, we are adjusting our outlook for revenue.
We now expect full year 2023 revenue to be in the range of 835 to 848 million.
This outlook represents entirely organic growth of 17% at the midpoint.
While our backlog has maintained a strong growth trajectory.
Timing of deliveries for the rest of the year has it been impacted I customer project delays.
So I mean boy, you're seeing into the first half of 2024.
Accounting for the impact of unfavorable foreign currency, mainly in the third quarter and the expectation for a higher mix of installation revenue during the fourth quarter as a result of the aforementioned order delays.
We are updating our expectations for adjusted EBITDA to be in the range of 300 million to 308 million.
Representing a 14% growth at the midpoint of the range I'm.
As I discussed earlier, we expect gross margins to be in the range of 47% to 49% for full year 2023.
As previously discussed.
Cash flow from operations and free cash flow are expected to be strong for the remainder of the year given the majority of capital expenditures related to facility automation expansion and vinyl related investments having being completed.
In summary, we are pleased with our results year to date, our bag love of multifamily and commercial projects as accelerated in our single family residential expansion strategy continues to gain traction.
With our latest round of facility has been completed and the incredible opportunity and vinyl windows, we have confidence in our ability to produce another year of double digit revenue growth with industry, leading margins and significant cash flow generation in 2024 week.
With that we will be happy to answer your questions. Operator, Please open the line for questions.
Thank you we will now conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star King.
Once again, that's far wanted to ask a question at this time.
One moment, while we poll for our first question.
Our first question comes from Alex Rygiel with B Riley. Please proceed.
Thank you Jose Christian very nice quarter.
<unk> tier.
As it relates to 'twenty 'twenty four I understand you're guiding towards double digit growth can you be a little bit more specific here as this revenue or EPS in both.
How do you look at the growth rates are within our residential and commercial.
Hello.
We are looking at a very strong role both or everybody else because the bug local.
Commercial is very high and we know we're going to increase.
Double digits.
Thank you.
And then there was.
Yes.
Sure Kelly.
What do you have a new light.
Okay.
We've been laser line everything is new.
We hope.
Three or four years.
B bar bar with the aluminum.
We are building.
Good grief, because he nasal ecommerce.
Alex just as a follow up the projection is for topline revenue, we haven't drilled down to to get to the EPS level by Youll surely get that after the next call.
Thank you and then secondly, as it relates to the vinyl windows strategy.
Do you expect this to be more of an R&R product or is this are you going after the sort of the new residential market as well and maybe talk about the margin profile of that vinyl product versus your traditional aluminum product.
Okay.
The merger is about the same.
And.
The vial.
It goes everywhere, but we are not today I've been thrilled.
Loved all north.
Most of the sales force.
Michael.
60% of the.
Oh, the cells a window there as well.
Model and all these so you prefer the Louisville.
So we expect a very high growth.
The vital.
And also we expect the HUD Rosenberg.
On the commercial side of the Lulu.
Yeah.
Thank you very much.
Yes.
Sam Your line is live.
Oh Hello. This is Sam dark hatch from Raymond James Jose Manuel Chris Santiago, how are you.
Good on you know.
I'm well thank you.
So a couple of two or three questions if I could.
First the.
Customer project delays that you cited Santiago can you.
Put a little more color on this in terms of quantification.
And sales are what the fourth quarter EBITDA impact of that delay or those delays might be.
And also give a little bit of color as to why is.
Is this gonna be a for Q went to <unk>.
The delay or is it a little bit more protracted than that.
I'll, let Jose peg them the question as to why he's so much closer to the market and then I'll follow up with the numbers and EV that impact if you like.
Hello, Phil.
$1 a month.
And the main reason was because the bugs.
Two four malls wearable lately.
Somehow the.
Open the wells again.
No.
All the projects are going.
And we still have the same bug longer more.
We keep getting lots of work on the table I mean, I believe commercial is good there.
It is really really good next year.
Yeah.
So I'll follow up with the numbers and essentially if you take 20 to 30 million, which was has referring to let's let's take the midpoint of that 25 million the operating leverage that we get on the manufacturing revenues.
Is it equates to about $8 million to $9 million in EBITDA, given the fact that about 30% 35% of our of our cost and expenses are fixed costs.
So if you do the math that equates to about $8 million to $9 million.
That is moving into 'twenty four as far as the timing I would say, but I'll, let jose I reiterate that vast probably revenue that will be realized in the first half of 'twenty four and then as you heard on the call.
Some of that revenue is being replaced by some installation revenue that carries a much lower margin.
So when you were having you know about 10 more million of installation in the mix the impact to EBITDA is about $3 million on that but the brunt of the effect. This is coming from the operating leverage that we're not seen based on those revenues moving into 2024.
Which leads me perfectly into my next question. Thank you Santiago Theres a lot of moving parts in gross margin.
Right now and you you gave some color around expectations for normalization in the fourth quarter can you be a bit more specific though in terms of what you think the actual gross margin might be since the implied guidance range is really wide.
So the implied margin range for the full year equates to 47% to 49% so depending on on where you are in that new guidance that would say that Q4 would be about 45% sequentially better than Q3.
Those revenues that are moving out a quarter or two.
I'm on a run rate basis and for 'twenty for obviously, there's also moving pieces on makes and whatnot.
The normalized gross margins should continue to be kind of in the high 40 type range.
And then my last thank you for that and my last question.
So you compete obviously against P J T and the southeast and in Florida and <unk>.
Not a perfect comparable because they've got different lead times at a different vinyl mix and a different builder versus R&R mix, but.
This quarter I was the first time, you you didn't out comp them.
In Florida and single family could you give some color as to what Youre seeing in the Florida market.
From a market share standpoint, and what your single family orders are looking like right now.
Yes, we are penetrating the market.
We have made a big things no big games cannot be.
20 of the 30% per year, no, but what we're seeing as though we have.
Third we are growing market share.
At least in the South east.
No.
We're going full.
Full speed with the southwest or work or we have made good penetration and then as we go north where we have nothing everything.
Okay.
Yeah.
So essentially I got if you look at your orders all in and single family what what's the what's the year on year growth rate right now look like.
You know since earlier in the year, we have said that on a quarterly basis. The residential revenues were going to be somewhat stable throughout the year and you saw that in Q3 as well.
So based on what we have today I would not expect anything too different than what you saw in Q3.
I would I would say that he is going to be somewhat stable with a pick up more into 2024. Once some of the vinyl product is actually already getting invoiced as you heard earlier that is already in production probably starting next week with the first orders that lever by year end. So you don't get to capture necessarily.
The benefit of that in Q4, but you will start capturing that in Q1 Q2 on its own.
Very helpful. Thank you gentlemen.
Have a good day thank.
Thank you. Our next question comes from Tim and watch with Baird. Please proceed.
Hey, guys good morning.
Maybe just to make sure I'm totally clear on the EBITDA guide. So I think the midpoint of your prior guide versus the midpoint of this guidance.
About $24 million lower so you got about $14 million from the revaluation that.
That hit the gross margins in Q4 about $8 million to $9 million or so from the project push outs and then a couple of million dollars from from some higher installation next year, there's kind of three pieces to kind of bridge that gap.
Or are you sorry, Tim are you talking about versus the previous guidance that we gave during Q2.
Yeah. So your prior midpoint would've been $3 28, now it's three or four.
And so I just want to make sure I completely.
Completely understand the moving pieces yeah between those yes.
So not not all of it is from Q4, obviously, because the Q3 results came in below that guidance that we gave up their Q2 as well right.
So you you have to take out they are below our previous guidance. We sold that was mainly resulting from that inventory markup that is non cash right. So if you if you take out the effect of that.
The actual difference between the new guidance from the previous guidance is about 12 to 13 million.
And as I was just mentioning when Sam asked the question. If you do the math on operating leverage for Q4, taking 25 to 30 million of revenues being pushed out.
You get to about 9 million of that 12 13.
And then the remaining is more related to mix than anything else.
Some of that revenue if you look at their revenue their revenue is not coming down as much as they are.
The EBITDA right.
That's because some of some revenue from me some revenue from installation is actually going to hit Q4.
This is essentially about 9 million from operating leverage and 3 million from mix you have you do the math the midpoint now is 63 the previous midpoint was about 75 for Q4, I mean, I think youre looking at it for the full second half of the year, which you have.
The Q3 Mig.
Yeah, Yes, exactly okay, Okay, perfect and then the reevaluation doesn't recur and the push outs you should realize next year right.
Yes, hi.
These are both timing related items is what is kind of what I'm getting at.
Yeah.
It seems we always carry a lot of inventory Oh.
Our tradition.
That's why during Covid.
Ladies and sulfur.
To twin boys, because we had all supplies in house for three four months. Obviously, we bought we had inventory at 4800 pesos and the peso came down to 4000.
20% devaluation, just then and we're still eating some of that.
Our higher priced inventory, but this is all obviously by year end, we will all be cleaned out.
And we'll be at the current rate, which hasn't moved much in the last 45 days, which is good we actually believe that it will rebound and go back Oh, but so far we will clean it up by year end the latest.
Just to follow up Tim It is a timing issue obviously, we wanted to highlight that the inventory.
Effect is completely noncash because you you arches inventories in dollars and you sell I mean, you're just a function of their functional currency being the Colombian peso right. So those inventories.
Were purchased during Q2 are essentially all having been sold already right. So you shouldn't have any more of that in Q4.
And the impact on on the operating leverage is a timing issue as well because those.
Those are projects that are up and go and are ready, they're not getting cancellations is just revenues that are being pushed out into 'twenty four.
It is a timing issue as you said.
Okay. Okay very good and then and then just the last piece on the market.
It does sound like you guys are a little bit more constructive on the market this quarter than maybe you were last quarter.
Is that just because of some of the financing starting to roll through with banks and are you actually seeing better bidding.
Just I guess just kind of curious how you see the market today than maybe three three months ago.
Good prices.
Good for us the polling that we had last quarter was lesbian voisine bicoastal.
$30 million I imagine.
Oh cool first quarter over the next year.
Sure.
And then Oh, what do we know the players.
Pleasure.
The peso revaluation, but the pricing has been this study.
We'll see.
Although the small competition lowering their prices.
It's simply.
The biggest called burgers or P M.
Sure.
They have at those folks who.
Well, we haven't totally crazy.
Sure.
We have oh.
Lower costs in the living room.
So everything should be a good mixture.
Okay.
Okay. Thank you guys.
Thank you Tim.
Our next question comes from Stanley Elliott with Stifel. Please proceed.
Hey, good morning, everyone. Thank you all for the question I apologize. If this got asked before I have to bounce around a little bit can you help us with a build on top line for the double digit revenue growth into next year.
For starters.
Are you talking about the breakdown as to how that's composed stent yep, roughly just trying to get a sense for kind of what are going to be the main drivers to get to that.
To show that the backlog is really sticky and then obviously it gets executed right. So if you do the math and just take about two thirds of that.
Do you come up with what you know the commercial side of things should be for 'twenty 'twenty four right and that gives you a lot of visibility.
And on the other hand, I I'll, let Jose I kind of read a radio opportunity on the single family residential side, but obviously when you have these new vinyl product, where we have no revenues. This year and you have these showrooms now operational for 12 months, where you also have no revenues in 2020 three.
Provides confidence that achieving double digit growth next year, he's very doable I don't know I'll say, if you want to add to that.
Ah yes.
As I said before.
So anything we get next year for very little.
Is oh no.
No I mean, we have we have a lot of people like no, but they're very happy with our progress with our surveys with our relationship.
He doesn't trouble somebody in Orlando I mean, one of the large client base.
So I hope the thousands of dollars a month in aluminum.
Bye.
As a love for vital suppliers.
So we're really he wants to turn everything into one bigger.
And like him maybe maybe maybe.
So we actually have to do.
But very very new for us no on the other hubs, we have normally yours or logo window suddenly do everybody, though so let's.
So bill.
Uh huh.
But my feeling that's only.
In Florida, I know with the murder weekend business.
Let's see.
The thanks of the oldest food.
We see I mean, everybody is really excited about oh right away because we knew it.
Perfect and then kind of pivoting back to the inventory piece understanding it's not cash.
Did something happen Youll from the beginning of August to now to where you had to have the revaluation.
I'm just curious you know since most of it sounds like most of the cost of goods there what were purchased and in the second quarter.
No no nothing happens then we ended up having more inventory that flowed through the Q3 than originally expected.
And again this is more a function of the functional currencies. So I'll give you the exact numbers when when we bought the inventory the peso was at about 4700 per dollar.
When when you cost it out 30, 45, and even you know 60 75 days later.
The average for the quarter was 4000, so all of US all and you have a noncash impact of 15%, 20% just by function of running more dollars through the P&L because the dollar weakened during that period, but it was more a function of of dimension in how much inventory.
It was what was going to impact Q3 and ended up being more than we had expected, but as we said on the call is essentially all kind of worked out in Q4 should have very little of that.
And then lastly, nice to see the repurchase activity you know what are the plans for completing that.
And then should we think about potentially.
Me too.
Board upsizing that at some point, given where the share price is today.
Yeah, we certainly feel that theres, an opportunity there and we still have 60% of that original approval.
<unk> available to us so to the extent that we continue to see opportunities to execute we will as we said our cash flow generation the way that we're projecting and now that a lot of the capex is out of the way should be very strong and we certainly think that this is.
A good way to return cash to shareholder, especially at today's prices.
Perfect. Thanks, so much.
Thank you.
Our next question comes from Julio Romero with Sidoti. Please proceed.
Yeah.
Hey, Hey, good morning.
Thanks, Hey, Hey, good morning, I guess my first question is just for Jose Manuel.
Yeah on the order delays what are your customers, saying in terms of maybe why the bank stopped lending in why the financing dried up for a little bit and are are those project delays you know at least partially driven by by customer hesitation customers reworking projects or changing their project scope at all.
No new Anjali.
The main reason for them to leave.
They increased the percentage the bugs in Greece the percentage.
There are two really good ones before.
Sure.
2008 was 20.
20% to 30%.
After 2009, it was 50%.
Ask them for 60% to 75% so all the projects.
On the commercial side for condominium so on apartments with total rental.
It seems that the interest rate.
There are more careful to the numbers moved.
The demand and the payment for interest.
So all Doug I Havent been clear.
The two most of the project.
Uh huh.
We have indeed.
We have postponed postponement and everything looks good.
For next year.
Both sides are going to be moving.
Yeah.
That's good color there I appreciate it there and.
So it sounds like higher lending standards from the banks and I guess, just really what I'm trying to get at is are.
Are the customers are are the higher rates and higher hurdle rates, I guess, causing customers to have any sort of hesitation or.
Or any sort of second thoughts are or reworking or anything of that nature in terms of their projects. You mentioned no cancellations, which is good but just a little more color on the on the demand front if I could.
The main Oh, Florida, Oh, I refresh the demand from thumbs buzz or loved although.
Some of the rules are still high.
That does illusions.
Or the postponement.
And we those of most of that work, but to my surprise.
No.
The developers who are very true to who is the largest butter is Mexico and Brazil.
So that's good.
Mexico is coming here before travel to Texas.
Sure.
And on the older home.
<unk> from the truck homebuilders that provokes a lubes.
The hub of the cells.
It holds a perfect gosh.
People retire your Florida hubs, because they don't want it.
8% improvement.
Good story, though I mean, there's 30 or go ahead, though.
Although no one for Brexit.
All three of the hub millions of dollars.
The boat.
That's good.
A lot of windows as it goes.
Good.
Great Great Great color there and then just last one for me is just on SG&A.
SG&A.
Santiago you mentioned SG&A was low to lower shipping and commission expenses as that.
Kind of a one off thing and then how do you expect SG&A to trend in the fourth quarter.
That was part of it and then we made the comparison to nonrecurring settlement charge in Q3 of 2022 Julio. So you have to also incorporate that in there and obviously with more installation the flip side all of the lower gross margin is that you don't have transportation cost of installation.
Right Joe.
The expectation would be that as SG&A for next quarter is much more in line with Q3.
So, we'll we'll be able to offset some of the variables that are impacting gross margin by having lower SG&A, but for modeling purposes. It would be similar to Q3 us us for what Q4 <unk>.
B.
Makes sense I'll pass it on thanks very much.
Alright, thank you.
Our next question comes from John Ramirez with D. A Davidson. Please proceed.
Hi, Thank you for your time, you mentioned that over the 18 months period for backlog to third is commercial can we or how much of the remaining AR.
It's by no and in terms of the cadence of growth.
What is the step up look up look like in Q4, and you know throughout 2024.
Just just to kind.
Can I clarify something to two thirds of the backlog is related to multifamily.
And and not single family residential nor vinyl everything that you see it reflected in the backlog is strict strictly on the commercial side with.
With two thirds of that being multifamily.
Right. So that's the way to look at it so to your second question.
No.
No vinyl these included in that backlog and for that matter No single family residential revenues are included in the backlog because that is very quick and he's very spot in nature. So you'll get an order and I'll do it out the door in four or five weeks. So a lot of it gets worked into our quarter. So all.
What you see from from a backlog perspective is related to that.
The commercial segment.
Sorry, you had a follow up to that.
Could you repeat.
Yeah I was first.
First of all thank you for that clarification I was just.
Focusing on you know on the single family residential product.
I know you already mentioned that its not in there, but what sort of expectations in terms of.
You know for Q4 and into the first half.
And just kind of wanted to get a sense of.
You know what you're seeing in sort of.
What are you what are you expecting in the first half of 'twenty four.
Well, we wouldn't want to going to too many details in 'twenty four until we're able to formally complete our budgeting process. So you'll hear much more details after the Q4 call as far as the Q4 projection for residential as I was saying earlier, we're expecting that to be.
Flattish sequentially.
So for modeling purposes again, if you look at the previous quarters, there being kind of stable quarter over quarter and that's what we would be expecting in Q4 as well again.
Got it.
If I could just ask one more.
Are you are you seeing any are you continuing to see any pricing pressure in the residential.
Yeah.
I'll, let jose to take that.
No we haven't shared before.
Good.
Pardon me this.
Pretty well.
There's a couple of bugs or windows.
They have to reuse the buses, but 5% is all going to go.
Well the ones that we will complete the deal.
Yeah.
Alright, Thank you well I appreciate the time.
Thanks.
Thank you at this time I would like to turn the call back over to Jose Manuel for closing remarks.
Thanks, everyone.
On today's call.
We're very very excited we've got they'll tell you we know what their future Copeland.
Ourself.
Inclusion by the day before a mixture.
We hope to give you much better result.
Yeah.
Thank you. This does concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.