Q2 2024 Tecnoglass Inc Earnings Call

August 8, 2024

Good day and welcome to the Tecnoglass Inc. 2nd Quarter 2024 Earnings Conference Call.

All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions.

Operator: To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note that this event is being recorded.

Operator: To ask a question, you may press star, then 1 on a touch-tone phone.

Operator: To withdraw your question, please press star then 2.

Operator: If you would like to ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Brad Cray from Investor Relations. Please go ahead.

Brad Cray: I would now like to turn the conference over to Brad Cray from Investor Relations. Please go ahead.

Speaker Change: i know

Operator: Please note, this event is being recorded.

Operator: I would now like to turn the conference over to Brad Cray from Investor Relations. Please go ahead.

Brad Cray: Thank you for joining us for Tecnoglass's second quarter 2024 conference call. A copy of the slide presentation to accompany this call may be obtained on the investors section of the Tecnoglass website. Our speakers for today's call are Chief Executive Officer Jose Manuel Daes, Chief Operating Officer Chris Daes, and Chief Financial Officer Santiago Giraldo.

Brad Cray: Thank you for joining us for Tecnoglass's second quarter 2024 conference call. A copy of the slide presentation to accompany this call may be obtained in the investor section of the Tecnoglass website. Our speakers for today's call are Chief Executive Officer Jose Manuel Daes, Chief Operating Officer Chris Daes, and Chief Financial Officer Santiago Giraldo.

Speaker Change: Thank you for joining us for Tecnoglass's second quarter 2024 conference call. A copy of the slide presentation to accompany this call may be obtained on the investors section of the Tecnoglass website.

Operator: Our speakers for today's call are Chief Executive Officer Jose Manuel Daes and Chief Financial Officer Santiago Giraldo. However, actual results may vary in 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 Tecnoglass's business.

Operator: Our speakers for today's call are Chief Executive Officer Jose Manuel Daes, Chief Operating Officer Chris Daes, and Chief Financial Officer Santiago Giraldo.

Brad Cray: I'd like to remind everyone that the 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 Technoglass's current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary in 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 Tecnoglass's business.

Brad Cray: I'd like to remind everyone that the 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 Tecnoglass's current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially 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 Tecnoglass's business. Such risks, uncertainties, and contingencies are indicated from time to time in Tecnoglass's filings with the SEC. The information discussed during the call is presented in light of that.

Brad Cray: These risks on certainties and contingencies are indicated from time to time and, in techno glasses, the information discussed during the call is presented in light of such. Further, investors should keep in mind that Tecnoglass's financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions, or otherwise.

Brad Cray: Further, investors should keep in mind that Tecnoglass's financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions, or otherwise. Finally, as previously announced on June 25, 2024, Tecnoglass' Board of Directors is conducting a review of strategic alternatives with the assistance of outside financial and legal advisors.

Speaker Change: 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.

Operator: including statements regarding future financial performance, future growth, and future acquisitions.

Operator: These statements are based on Tecnoglass's 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 or regulatory factors.

Operator: and other risks and uncertainties affecting the operation of Tecnoglass' business.

Operator: These risks, uncertainties, and contingencies are indicated from time to time in Tecnoglass's filings with the SEC.

Operator: The information discussed during the call is presented in light of such risks.

Operator: Further, investors should keep in mind that Tecnoglass's financial results in any particular period may not be indicative of future results.

Operator: Tecnoglass is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions, or otherwise.

Brad Cray: There is no deadline or definitive timetable set for completion of the review process, and there can be no assurance that this process will result in the company pursuing a transaction or any other particular outcome. The company does not intend to make any further public comment regarding its review until the Board of Directors has approved a specific course of action or the company determines that additional disclosure is appropriate or necessary. I will now turn the call over to Jose Manuel, beginning on slide number four.

Brad Cray: Finally, as previously announced on June 25, 2024, Tecnoglass's Board of Directors is conducting a review of strategic alternatives with the assistance of outside financial and legal advisors. There is no deadline or definitive timetable set for completion of the review process, and there can be no assurance that this process will result in the company pursuing a transaction or any other particular outcome. The company does not intend to make any further public comment regarding its review until the Board of Directors has approved a specific course of action or the company determines that additional disclosure is appropriate or necessary. I will now turn the call over to Jose Manuel, beginning on slide number 4.

Operator: Finally, as previously announced on June 25, 2024, Tecnoglass' Board of Directors is conducting a review of strategic alternatives with the assistance of outside financial and legal advisors.

Operator: There is no deadline or definitive timetable set for completion of the review process and there can be no assurance that this process will result in the company pursuing a transaction or any other particular outcome.

Operator: The company does not intend to make any further public comment regarding its review until the Board of Directors has approved a specific course of action or the company determines that additional disclosure is appropriate or necessary.

Speaker Change: I will now turn the call over to Jose Manuel, beginning on slide number four.

Jose Manuel Daes: Thank you, Brad, and thank you, everyone, for participating in today's call. We achieved record single-family residential revenues of $95.7 million and our second-highest total revenue of $219.7 million. Single-family residential revenues reached a quarterly record of $95.7 million, 10.1% year-over-year. The solid growth in our residential business reflects our ability to capitalize on the strong demand we saw at the end of the quarter, as well as improving market trends. We also continue to expect vinyl orders to contribute more meaningfully during the second half of the year.

Jose Manuel Daes: Thank you Brad and thank you everyone for participating on today's call. We are pleased to report another quarter of strong results to close out the first half of the year. We achieved record single-family residential revenues of $95.7 million and our second-highest total revenue of $219.7 million. This demonstrates the resilience and adaptability of our business model in a complex macroeconomic landscape. These accomplishments reflect the strong demand and level of orders we saw towards the end of the first quarter.

Jose Manuel Daes: Thank you, Bob, and thank you everyone for participating in today's call. We are pleased to report another quarter of strong results to close out the first half of the year. We achieved record single-family residential revenues of $95.7 million and our second-highest total revenue of $219.7 million. This demonstrates the resilience and adaptability of our business model in a complex macroeconomic landscape. These accomplishments reflect the strong demand and level of orders we saw towards the end of the first quarter.

Speaker Change: thank you bar and thank you all have a particip of today's call

Jose Manuel Daes: We are pleased to report another quarter of strong results to close out the first half of the year.

Jose Manuel Daes: We achieved record single family residential revenues of $95.7 million and our second highest total revenue of $219.7 million.

Speaker Change: this demonstrates the senians and the ability of our business model in a complex miccoeconomic landscape

Jose Manuel Daes: These accomplishments reflect the strong demand and level of orders we saw towards the end of the first quarter.

Jose Manuel Daes: We remain confident in our ability to capitalize on attractive opportunities and to gain market share despite certain challenges related to inflation and higher interest rates. Record single-family residential revenues reached a quarterly record of $95.7 million, 10.1% year-over-year.

Jose Manuel Daes: We remain confident in our ability to capitalize on attractive opportunities and to gain market share despite certain challenges related to inflation and higher interest rates.

Jose Manuel Daes: Record single family residential revenues reached a quarterly record of $95.7 million, up 10.1% year-over-year.

Jose Manuel Daes: The solid growth in our residential business reflects our ability to capitalize on the strong demand we saw at the end of the quarter, as well as improving market trends, which led to a record level of orders in the second quarter of the year. We also continue to expect vinyl orders to contribute more meaningfully during the second half of the year. Our multifamily commercial business saw sequential improvement, but it was impacted by higher interest and mortgage rates during the second quarter. Despite this trend, we are seeing a substantial amount of new activity, especially in the high-rise market, as evidenced by yet another record level of backlog.

Jose Manuel Daes: The solid growth in our residential business reflects our ability to capitalize on the strong demand we saw at the end of the quarter, as well as improving market trends.

Jose Manuel Daes: which led to a record level of orders in the second quarter of the year.

Jose Manuel Daes: We also continue to expect vinyl orders to contribute more meaningfully during the second half of the year.

Speaker Change: our mulpfam commercial business s equation improvement

Jose Manuel Daes: but was impacted by higher interest and mortgage rates during the second quarter.

Jose Manuel Daes: Despite this trend, we are seeing a substantial amount of new activity, especially in the high-rise market, as evidenced by yet another record level of backlog, providing visibility through 2025 and building into 2026, to our shared reports and videos. I will now turn the call over to Chris to provide additional operating highlights.

Jose Manuel Daes: Despite this trend, we are seeing a substantial amount of new activity, especially on the high-rise market, as evidenced by yet another record level of backlog.

Jose Manuel Daes: We anticipate this positive trend to continue through the second half of the year. Our forward-looking optimism is supported by the significant level of awareness we received in June, with residential owners up over 60% year-over-year, contributing to a record backlog of approximately $1 billion at quarter end. As a reminder, our backlog reflects the pipeline of multifamily commercial activity and firm single-family residential orders in our key geography, providing visibility through 2025 and building into 2026.

Jose Manuel Daes: We anticipate this positive trend to continue through the second half of the year. Our forward-looking optimism is supported by the significant level of orders we received in June, with residential owners up over 60% year-over-year, contributing to a record backlog of approximately $1 billion at quarter end. As a reminder, our backlog reflects the pipeline of multifamily commercial activity and firm single-family residential orders in our key geography, providing visibility through 2025 and building into 2026.

Chris: we anticipate this positive trend to continue through the second half of the year

Chris: Our forward-looking optimism is supported by the significant level of audience we received in June .

Chris: with residential owners up over 60% year-over-year, contributing to a record backlog of approximately $1 billion at quarter end.

Chris: As a reminder, our backlog reflects the pipeline of multifamily commercial activity and firm single-family residential orders in our key geographies.

Chris: providing visibility through 2025 and building into 2026.

Jose Manuel Daes: Despite some year-over-year headwinds, including unfavorable foreign exchange impacts, we were pleased to see a sequential increase in gross margin and adjusted dividend margin. The sequential improvement in profitability and the relative stability in exchange rates over the past several quarters support our positive outlook. Our improved profitability also gives us confidence in our ability to navigate the evolving market landscape and continue to create value for our shareholders. The solid growth in our shorter cash cycle single-family residential business and careful work in capital management resulted in robust cash flow generation of $34.5 million.

Jose Manuel Daes: Despite some year-over-year headwinds, including unfavorable foreign exchange impacts, we were pleased to see a sequential increase in gross margin and adjusted EBITDA margin. The sequential improvement in profitability and the relative stability in exchange rates over the past several quarters support our positive outlook. Our improved profitability also gives us confidence in our ability to navigate the evolving market landscape and continue to create value for our shareholders. The solid growth in our shorter cash cycle single-family residential business and careful work in capital management resulted in robust cash flow generation of $34.5 million. Impressively, this was achieved even with the timing of seasonal tax payments during the quarter. Our Sonics.

Chris: Despite some year-over-year headwinds, including unfavorable foreign exchange impacts, we were pleased to see a sequential increase in gross margin and adjusted EBITDA margin.

Chris: The sequential improvement in profitability and the relative stability in exchange rates over the past several quarters support our positive outlook.

Chris: Our improved profitability also gives us confidence in our ability to navigate the evolving market landscape and continue to create value for our shareholders.

Chris: The solid growth in our shorter cash cycle single-family residential business and careful work in capital management resulted in robust cash flow generation of $34.5 million.

Jose Manuel Daes: Impressively, this was achieved even with the timing of seasonal tax payments during the quarter. I was falling... Cash Generation continues to provide us with additional flexibility to return value to our shareholders. Our cash flow has also allowed us to enhance our operational flexibility and balance sheet through another $15 million voluntary repayment of our term loan during the quarter, totaling $30 million of debt repayment here today.

Chris: Impressively, this was achieved even with the timing of seasonal tax payments during the quarter.

Jose Manuel Daes: Cash Generation continues to provide us with additional flexibility to return value to our shareholders, to our shared reports and videos. Our cash flow has also allowed us to enhance our operational flexibility and balance it through another $15 million voluntary repayment of our term loan during the quarter, totaling $30 million of debt repayment here today. Bye-bye.

Chris: Our solid cash generation continues to provide us with additional flexibility to return value to our shareholders through our share repurchases and dividends.

Chris: Our cash flow has also allowed us to enhance our operational flexibility and balance sheet through another $15 million voluntary repayment of our term loan during the quarter, totaling $30 million of their repayments here today.

Jose Manuel Daes: Overall... We are pleased with the improvement we see in our business, and we remain encouraged by recovering demand trends in our end market. As we look to the remainder of the year, our positive growth outlook is supported by a strong customer relationship, record backlog, and innovative product portfolio. I will now turn the call over to Chris to provide additional operating highlights.

Jose Manuel Daes: We are pleased with the improvement we see in our business, and we remain encouraged by recovering demand trends in our end market. As we look to the remainder of the year, our positive growth outlook is supported by a strong customer relationship, Record Matlock, and an Innovative Product Portfolio. I will now turn the call over to Chris to provide additional operating highlights.

Jose Manuel Daes: Bye-bye.

Chris: We are pleased with the improvement we see in our business and we remain encouraged by recovering demand trends in our end markets.

Chris: As we look to the remainder of the year, our positive growth outlook is supported by our strong customer relationships, record backlog, and innovative product portfolio.

greece: and we now turn the call over to greece to provide additional operating highlights

Chris Daes: Thank you, Jose Manuel. Moving to slide number five. Our second quarter results reflect our focus on the growth initiatives in our business and our ability to generate solid cash flow. Our single-family residential business continues its strong trajectory, with revenues increasing 10% year-over-year to a record $95.7 million. This growth reflects improving market trends along with the benefit of some demand pulled forward related to the recent expiration of a Florida window sales tax exemption in June.

Chris: thank you semanwell moving to a side number five our second quarter results reflect our focus execution on the growth initiatives in our business and our ability to generate solid cash flow

Chris: our single family resial business continu its strong trajectory with revenues increasingin ten percent year-over year to a record ninety-five point seven million revenues

Chris: This growth reflects improving market trends along with the benefit of some demand pull forward related to the recent expiration of a Florida windows sales tax exemption in June .

Chris: Our demand momentum, along with the favorable demographic trends we see in Florida and in the Southeast, positions us for strong single-family residential revenues through year-end.

Chris Daes: Our demand momentum, along with the favorable demographic trends we see in Florida and in the Southeast, positions us for strong single-family residential revenues through year-end. As it relates to our vinyl products, quoting activity remains strong, and we remain on a schedule to increase deliveries in the second half of 2024. In our multifamily commercial business, at quarter end, we were pleased to report another record multi-year backlog of approximately $1 billion. Our backlog growth reflects an expanding pipeline of projects with visibility through 2025 and now building into 2026.

Chris: our demand momentum along with the fveral demographic trends we see in floriaa and in the southedisast positions asked for a strong single family residential revenues through year-end

Chris: As it relates to our vinyl products, quoting activity remains strong and will remain on a schedule to increase deliveries in the second half of 2024.

Chris: In our multi-family commercial business, at quarter end, we were pleased to report another record multi-year backlog of approximately $1 billion.

Chris: Our backlog growth reflects an expanding pipeline of projects with visibility through 2025 and now building into 2026.

Chris Daes: This robust backlog represents 2.1 times our LTM multifamily commercial business, providing us with a multi-year view on the multifamily commercial portion of our revenue. In our multifamily commercial business, we saw sequential growth in the second quarter of 2024, including a strong level of orders for light commercial projects. Revenues decreased compared to the prior year quarter due to record activity during the second quarter of 2023 and higher interest rates and mortgage rates during 2024. That said, we were encouraged by the improving trends and expect continuous positive momentum in the second half of the year. Moving to slide number six.

Chris Daes: These robust backlog represents 2.1 times our LTM multifamily commercial business, providing us with a multi-year view on the multifamily commercial portion of our revenue. In our multifamily commercial business, we saw sequential growth in the second quarter of 2024, including a strong level of orders for light commercial projects. Revenues decreased compared to the prior year quarter, giving record activity during the second quarter of 2023 and higher interest rates and mortgage rates during 2024. That said, we were encouraged by the improving trends and expect continuous positive momentum in the second half of the year. Moving to slide number six.

Chris: This robust backlog represents 2.1 times our LTM multifamily commercial business, providing us with a multi-year view on the multifamily commercial portion of our revenues.

Chris: in our mulultifamily commercial business we saw sequential growth in the second quarter of two thousand and twenty four including a strong level of orders for light commercial projects

Speaker Change: revenues decreaseed compared to the prior year quarter given record activity during the second quarter of two thousand and twenty three and higher interest rate and mortgage rates during two thousand and twenty-four

Chris: That said, we were encouraged by the improving trends and expect continuous positive momentum in the second half of the year.

Chris Daes: Our backlog has seen consistent sequential growth in each quarter since 2021. We expect this momentum in our project pipeline and the strong bidding activity we are seeing will help us keep a strong book to bill ratio, which stood at 1.5 times as of quarter two, 2024. This adds to our track record of maintaining a book-to-bill ratio above 1.1 times over the past 14 consecutive quarters. Historically, roughly two-thirds of reported backlog is invoiced over the following 12 months.

Chris: Moving to slide number six. Our backlog has seen consistent sequential growth in each quarter since 2021.

Chris: we expect this momentum in our project pipeline and the strong being activity we are seeing will help us keep a strong book to bill ratio which is stood at one point five times as of quarter two two thousand and twenty four

Chris: This adds to our track record of maintaining a book-to-bill ratio above 1.1 times over the past 14 consecutive quarters.

Chris: Historically, roughly two-thirds of reported backlog are invoiced over the following 12 months.

Chris Daes: Historically, there have been virtually no project cancellations given the late stage installation of Windows into largely completed buildings. Therefore, we believe that this ratio provides strong visibility on invoicing despite the fact that certain external factors can cause temporary delays in delivery. I will now turn the call over to Santiago to discuss our financial results and outlook for 2024.

Chris: Historically, there are virtually no project cancellations given the late-stage installation of windows into largely completed buildings.

Chris: therefore we believe that this racio provides a strong visibility on inboing despite the fact that certain external factors can cause temporary delays in deliveries

sango: i will now turn the call over to sango to discus our financial results and nowout look for two thousand and twenty-four

Santiago Giraldo: Turning to single-family residential on slide number 7, we generated record single-family residential revenues of $95.7 million in the second quarter compared to $86.9 million in the prior year quarter. The year-over-year increase was primarily due to improving market trends and what we estimate to be a partial pull-forward effect related to the Florida sales tax waiver Christian mentioned. Additionally, we were thrilled to see second quarter residential orders up over 60% year over year, reflecting solid traction in this business and supporting our expectation for solid single-family growth in the back half of the year.

Chris: Thank you Christian. Turning to single family residential on slide number seven.

Chris: We generated record single-family residential revenues of $95.7 million in the second quarter, compared to $86.9 million in the prior year quarter. The year-over-year increase was primarily due to improving market trends and what we estimate to be a partial pull-forward effect related to the Florida Sales Tax Waiver Christian mentioned. Second, ongoing geographic expansion in Florida and increasing brand recognition across the U.S., supported by new showroom openings in Kmart. And lastly, our strategic entry into the vinyl market. Turning to drivers of revenue on slide number nine, the decrease was primarily due to lower multifamily and commercial revenues partially offset by growth in single-family residences.

Chris: We generated record single-family residential revenues of 95.7 million in the second quarter compared to 86.9 million in the prior year quarter.

Christian: the year overa year increase was primarily due to improving market trends and more we estimate to be a partial full puol forward effect related to the florida sales tax waiver christian ment

Chris: Additionally, we were thrilled to see second quarter residential orders up over 60% year over year, reflecting solid traction in this business and supporting our expectation for solid single family growth in the back half of the year.

Santiago Giraldo: Looking ahead, we continue to see organic growth opportunities in our single-family residential business through several Tecnoglass-specific tailwinds. First, our expanding dealer base driven by short lead times, innovative products, and demand for impact-resistant and energy efficient solutions. Second, ongoing geographic expansion in Florida and increasing brand recognition across the U.S., supported by new showroom openings in Kmart.

Santiago Giraldo: Looking ahead, we continue to see organic growth opportunities in our single-family residential business through several Tecnoglass-specific tailwinds. First, our expanding dealer base driven by short lead times, innovative products, and demand for impact-resistant and energy-efficient solutions. Second, ongoing geographic expansion in Florida and increasing brand recognition across the U.S., supported by new showroom openings in Kmart.

Chris: looking ahead we continue to see organic growth opportunities in our single family residential business through several technogl specific tailwinds

Chris: First, our expanding dealer base driven by short lead times, innovative products, and demand for impact resistant and energy efficient solutions.

Chris: Second, ongoing geographic expansion in Florida and increasing brand recognition across the U.S.

Santiago Giraldo: And lastly, our strategic entry into the vinyl market, which has significantly expanded our addressable market and provided substantial runway for revenue growth and product diversification. Customer enthusiasm for our vinyl products remains strong, with solid quoting activity, which we expect to translate into a ramp-up of deliveries as we move through the second half of the year. The overall enthusiasm for our vinyl offering strengthens our conviction in this strategic expansion and underscores the significant long-term opportunities we see in this category.

Santiago Giraldo: And lastly, our strategic entry into the vinyl market, which has significantly expanded our addressable market and provided substantial runway for revenue growth and product diversification. Customer enthusiasm for our vinyl products remains strong, with solid quoting activity, which we expect to translate into a ramp-up of deliveries as we move through the second half of the year. The overall enthusiasm for a vinyl offering strengthens our conviction in this strategic expansion and underscores the significant long-term opportunities we see in this category.

Chris: supported by new showroom openings in key markets

Chris: And lastly, our strategic entry into the vinyl market, which has significantly expanded our addressable market and provides substantial runway for revenue growth and product diversification.

Chris: Customer enthusiasm for our vinyl products remains strong, with solid quoting activity, which we expect to translate into a ramp up of deliveries as we move through the second half of the year.

Chris: The overall enthusiasm for a vinyl offering strengthens our conviction in this strategic expansion and underscores the significant long-term opportunities we see in this category.

Santiago Giraldo: Turning to drivers of revenue on slide number nine, total revenues for the second quarter decreased 2.5% year-over-year to $219.7 million. This represents our second-highest revenue quarter in the company's history. The decrease was primarily due to lower multifamily and commercial revenues partially offset by growth in single-family residences. Looking at the profit drivers on slide number two.

Chris: turning to drivers of revenue on slide number none

Chris: Total revenues for the second quarter decreased two and a half percent year over year to two hundred and nineteen point seven million. This represents our second highest revenue quarter in the company's history.

Chris: The decrease was primarily due to lower multifamily and commercial revenues partially offset by growth in single-family residential.

Santiago Giraldo: Looking at the profit drivers on slide number, adjusted EBITDA for the second quarter was $64.1 million, representing an adjusted EBITDA margin of 29.2%. SG&A was $38.4 million compared to $35.2 million in the prior year quarter, with the increase primarily attributable to higher personnel expenses from annual salary adjustments that took place at the beginning of the year. As a percentage of total revenues, SG&A was 17.5%, up from 15.6% in the prior year quarter due to lower revenues and the aforementioned salary adjustments.

Santiago Giraldo: Adjusted EBITDA for the second quarter was $64.1 million, representing an adjusted EBITDA margin of 29.2%. SG&A was $38.4 million compared to $35.2 million in the prior year quarter, with the increase primarily attributable to higher personnel expenses from annual salary adjustments that took place at the beginning of the year. As a percentage of total revenues, SG&A was 17.5%, up from 15.6% in the prior year quarter due to lower revenues and the aforementioned salary adjustments.

Chris: Looking at the profit drivers on slide number 10.

Chris: adjusted ebitda for the second quarter was sixty-four point one million representing an adjusted ebita margin of twenty-nine point two percent

Chris: SG&A was $38.4 million compared to $35.2 million in the prior year quarter, with the increase primarily attributable to higher personnel expenses from annual salary adjustments that took place at the beginning of the year.

Santiago Giraldo: As a percentage of total revenues, SG&A was 17.5%, up from 15.6% in the prior year quarter due to lower revenues and the aforementioned salary adjustments. This compared to gross profit of $109.7 million and a 48.7% gross margin in the prior year quarter. Similar to recently reported quarters, the year-over-year change in gross margin primarily reflects an unfavorable FX impact of nearly 340 basis points.

Santiago Giraldo: As a percentage of total revenues, SG&A was 17.5%, up from 15.6% in the prior year quarter due to lower revenues and the aforementioned salary adjustment.

Santiago Giraldo: Second quarter gross profit was $89.6 million, representing a 40.8% gross margin. This compared to gross profit of $109.7 million and a 48.7% gross margin in the prior year quarter. Similar to recently reported quarters, the year-over-year change in gross margin primarily reflects an unfavorable FX impact of nearly 340 basis points, as well as reduced operating leverage on lower revenues and higher salary expenses. On a sequential basis, gross margin improved by 200 basis points compared to 38.8% in the first quarter of 2020. The unfavorable FX comparisons seen in the last few quarters should largely dissipate given the relative stability in currencies during the last 12 months and expectations through year-end.

Santiago Giraldo: Second quarter gross profit was $89.6 million, representing a 40.8% gross margin.

Santiago Giraldo: This compared to gross profit of $109.7 million and a 48.7% gross margin in the prior year quarter.

Santiago Giraldo: Similar to recently reported quarters, the year-over-year change in gross margin primarily reflects an unfavorable FX impact of nearly 340 basis points. Reduce operating leverage on lower revenues and higher salary expenses.

Santiago Giraldo: On a sequential basis, gross margin improved by 200 basis points compared to 38.8% in the first quarter of 2020. Now, look at our strong cash flow and improved leverage on slide number 11. We generated strong operating cash flow of $34.5 million in the second quarter. We were pleased to continue our track record of returning capital to shareholders through our recently increased cash dividend payment during the period at quarter end. We also made 15 million in voluntary prepayments on our syndicated term loan during the quarter, with 30 million in debt prepayments year to date, driving our net leverage ratio to a record low near zero, net debt to LTM adjusted EBITDA.

Santiago Giraldo: On a sequential basis, gross margin improved by 200 basis points compared to 38.8% in the first quarter of 2024.

Santiago Giraldo: the unfavorable efx comparisons seen in the last few quarters should largely dissiate given the relative stability in currencies during the last twelve months and expectations through year-end

Santiago Giraldo: Now, looking at our strong cash flow and improved leverage on slide number 11. We generated strong operating cash flow of $34.5 million in the second quarter, primarily driven by our disciplined working capital model. Our capital expenditures of $20.3 million include payments for previously purchased land for future potential capacity expansion, as well as a down payment for our new Miami headquarters, which will include a new flagship showroom to help us drive incremental business activity.

Santiago Giraldo: Now, looking at our strong cash flow and improved leverage on slide number 11. We generated strong operating cash flow of $34.5 million in the second quarter, primarily driven by our disciplined working capital management. Our capital expenditures of $20.3 million include payments for previously purchased land for future potential capacity expansion, as well as a down payment for our new Miami headquarters, which will include a new flagship showroom to help us drive incremental business activity.

Santiago Giraldo: Now, looking at our strong cash flow and improved leverage on slide number 11.

Santiago Giraldo: We generated strong operating cash flow of $34.5 million in the second quarter, primarily driven by our disciplined working capital management.

Santiago Giraldo: Our capital expenditures of $20.3 million include payments for previously purchased land for future potential capacity expansion, as well as a down payment for our new Miami headquarters.

Santiago Giraldo: which will include a new flagship showroom to help us drive incremental business activity.

Santiago Giraldo: We were pleased to continue our track record of returning capital to shareholders through our recently increased cash dividend payment during the period. At quarter end, we also had approximately $26 million remaining in our share repurchase authorization. We also made 15 million in voluntary prepayments on our syndicated term loan during the quarter, with 30 million in debt prepayments year to date, driving our net leverage ratio to a record low near zero, net debt to LTM adjusted EBIT, compared to 0.2 times in the prior year.

Santiago Giraldo: We were pleased to continue our track record of returning capital to shareholders through our recently increased cash dividend payment during the period. At quarter end, we also had approximately $26 million remaining in our share repurchase authority. We also made 15 million in voluntary prepayments on our syndicated term loan during the quarter, with 30 million in debt repayments year to date, driving our net leverage ratio to a record low near zero, net debt to LTM adjusted EBIT, compared to 0.2 times in the prior year.

Santiago Giraldo: we were pleased to continue our track record of returning capital to shareholders through our recently increaseed cash divid end payment during the period

Santiago Giraldo: at quarter end we also had approximately twenty-six million remaining in our share repurchase authoritiessa

Santiago Giraldo: We also made $15 million of voluntary prepayments on our syndicated term loan during the quarter, with $30 million of debt prepayments year-to-date, driving our net leverage ratio to a record low near zero net debt to LTM-adjusted EBITDA.

Santiago Giraldo: As of June 30, 2024, we have total liquidity of approximately $300 million, including $127 million in cash and $170 million available under our revolving credit facility, giving us financial flexibility to drive additional value in our business. On slide 12, we're proud to showcase our track record of delivering exceptional shareholder value. Over the last three years, our strategic initiatives have consistently yielded returns that surpass industry benchmarks. This outperformance is driven by our robust profitability and significantly improved cash flow generation.

Santiago Giraldo: compared to zero point two times in the prior year

Santiago Giraldo: As of June 30, 2024, we have total liquidity of approximately $300 million, including $127 million in cash and $170 million available under our revolving credit facilities.

Santiago Giraldo: giving us financial flexibility to drive additional value in our business

Santiago Giraldo: On slide number 12, we're proud to showcase our track record of delivering exceptional shareholder value.

Santiago Giraldo: Over the last three years, our strategic initiatives have consistently yielded returns that surpass industry benchmarks.

Santiago Giraldo: this outperformance is driven by our roboust profitability and significantly improved cash flow generates

Santiago Giraldo: The superior returns we've achieved not only benefit our investors but also validate the effectiveness of our multifaceted growth strategy. Now, moving to Outlook on slide number 14, based on the momentum in our business and our visibility into the expected timing of deliveries through year-end in our residential and commercial markets, we are updating our outlook for the full year. We expect full-year 2024 revenue to be in the range of $860 million to $910 million.

Santiago Giraldo: The superior returns we've achieved not only benefit our investors, but also validate the effectiveness of our multifaceted growth strategy.

Santiago Giraldo: On slide number 12, we're proud to showcase our track record of delivering exceptional shareholder value. Now, moving to Outlook on slide number 14, based on the momentum in our business. This full-year outlook is also anchored in our expectations for large multifamily and commercial projects staying within scheduled timetables and for stable activity in short-term small commercial projects. In summary, we are pleased with our results during the first half of the year, which demonstrated the resiliency of our business and our ability to capitalize on market opportunities, given our low leverage profile and numerous avenues for market share expansion. Operator, please open the line for questions.

Santiago Giraldo: Now moving to Outlook on slide number 14.

Santiago Giraldo: based on the momentum in our business and our visibility in the expected timing of deliveries through year-end in our residential and commercial markets we are updating our outlook for the full year

Santiago Giraldo: We expect full year 2024 revenue to be in the range of $860 million to $910 million. This outlook represents entirely organic growth of 6% at the midpoint.

Santiago Giraldo: This outlook represents entirely organic growth of 6% at the midpoint. Based on this sales outlook, our anticipated mix of revenues, and our expectations for cost and expenses. We expect full-year adjusted EBITDA to be in the range of $260 million to $285 million. We also expect gross margins to be in the low to mid-40s range for 2024 and for healthy year-over-year cash flow growth, given most capital expenditures related to facility upgrades and vinyl investments are now complete.

Santiago Giraldo: Based on this sales outlook, our anticipated mix of revenues, and our expectations for costs and expenses, we expect full-year adjusted EBITDA to be in the range of $260 million to $285 million.

Speaker Change: We also expect gross margins to be in the low to mid-40s range for 2024 and for healthy year-over-year cash flow growth, given most capital expenditures related to facility upgrades and vinyl investments are now complete.

Santiago Giraldo: Our outlook is predicated on a few key assumptions. Namely, growth in residential revenues based on the strong orders we received through June, and a ramping up of vinyl-related revenues through the second half of the year, as well as stable FX rates between $3,900 and $4,000.

Santiago Giraldo: Our outlook is predicated on a few key assumptions, namely growth in residential revenues based on the strong orders we received through June, a ramping up of vinyl-related revenues through the second half of the year as well as stable FX rates between $3,900 and $4,000. This full-year outlook is also anchored in our expectations for large multifamily and commercial projects staying within scheduled timetables and for stable activity in short-term small commercial projects. In summary, we are pleased with our results during the first half of the year, which demonstrated the resiliency of our business and our ability to capitalize on market opportunities.

Speaker Change: our outlook is pjuicated for a few key assumptions

Speaker Change: Namely, growth in residential revenues based on the strong orders we received through June .

Speaker Change: our ramp-ping binal-related revenues through the second half of the year as well as stable fx rates between thirthousand-nine hundred and four thousand

Operator: This full-year outlook is also anchored in our expectations for large multifamily and commercial projects staying within scheduled timetables and for stable activity in short-term small commercial projects. In summary, we are pleased with our results during the first half of the year, which demonstrated the resiliency of our business and our ability to capitalize on market opportunities. As we look to the remainder of the year, we remain confident in our ability to continue creating value for stakeholders, given our low leverage profile and numerous avenues for market share expansion. With that, we will be happy to answer your questions. Operator, please open the line for questions.

Santiago Giraldo: This full-year outlook is also anchored in our expectations for large multifamily and commercial projects staying within scheduled timetables and for stable activity in short-term small commercial projects.

Santiago Giraldo: in summary we are pleased with are results during the first half of the year which demonstrated the resiliency of our business and our ability to capitalize on market opportunityities

Santiago Giraldo: As we look to the remainder of the year, we remain confident in our ability to continue creating value for stakeholders, given our low leverage profile and numerous avenues for market share expansion. With that, we will be happy to answer your questions. Operator, please open the line for questions.

Santiago Giraldo: As we look to the remainder of the year, we remain confident in our ability to continue creating value for our stakeholders.

Santiago Giraldo: given our low leverage profile in numerous avenues for market share expansion

Brad Cray: being recorded. I would now like to turn the conference over to Brad Cray from Investor Relations. Please go ahead.

Operator: Certainly. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. At this time, we will pause momentarily to assemble our roster.

Speaker Change: with that we will be happy to answer your questions

Operator: Operator, please open the line for questions.

Operator: Certainly. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then do so. At this time, we will pause momentarily to assemble our roster. The first question comes from Sam Darkatch on Raymond James. Please go ahead.

Speaker Change: certainly thank you we will now begin the question-and-answer session to ask a question you may press star then one on your touch stone phone

Brad Cray: Thank you for joining us for Tecnoglass's second quarter 2024 conference call. A copy of the slide presentation to accompany this call may be obtained on the Investor section of the Tecnoglass website.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.

Brad Cray: Our speakers for today's call are Chief Executive Officer Jose Manuel Diaz, Chief Operating Officer Chris Diaz, and Chief Financial Officer Santiago Giraldo. 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. These statements are based on Tecnoglass's current expectations or beliefs and are subject to uncertainty and changes in circumstances.

Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question comes from Sam Darkatsh from Raymond James. Please go ahead.

Sam Darkatch: Good morning, Jose Manuel, Chris, and Santiago. How are you?

Unnamed Participant: Good morning, Jose Manuel, Chris, and Santiago. How are you?

Sam Darkatsh: Good morning, Jose Manuel, Chris, and Santiago. How are you?

Jose Manuel Daes: Good morning, Tim. Everything OK? Thank you. Thank you. Good.

Speaker Change: Good morning, Jose Manuel, Chris, Santiago. How are you?

Tim: Good morning, Tim. Good morning. Everything well? Thank you. Thank you. Good. A couple questions. First off, Santiago, could you help us directionally think about third quarter,

Santiago Giraldo: A couple questions. First off, Santiago, could you help us think directionally about the third quarter? Sales, gross margin, and EBITDA expectations. And then the caveat to that, or the addendum to that would be, what are you seeing in single-family orders in July now that the incentives have expired? Yeah, so if you take the ranges, Sam, you're going to get revenues in the neighborhood of $240 to $250 million, depending on where you are, and gross margins picking up probably to the range of 43% in line with what we had discussed earlier as to how you get operating leverage on those incremental sales. And then, in terms of EBITDA, you could be getting into kind of a range of around 75-80 million, depending on where you are in the range as well.

Santiago Giraldo: A couple questions. First off, Santiago, could you help us think directionally about the third quarter? And then the caveat to that, or the addendum to that would be, what are you seeing in single family orders in July now that the incentives have expired? Yeah, so if you take the ranges, Sam, you're going to get revenues in the neighborhood of $240 to $250 million, depending on where you are, and gross margins picking up probably to the range of 43% in line with what we had discussed earlier as to how you get operating leverage on those incremental sales.

Brad Cray: Actual results may vary in a material nature from those expressed or implied by the statements you're in due to changes in economic, business, competitive, and or regulatory factors and other risks and uncertainties affecting the operation of Tecnoglass's business. These risks, uncertainties, and contingencies are indicated from time to time in Tecnoglass's filings with the SEC. The information discussed during the call is presented in light of such risks. Further, investors should keep in mind that Tecnoglass's financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements whether as a result of new information, future events, changes, and assumptions for otherwise.

Speaker Change: Sales, Gross Margin, and EBITDA, Expectations, and then the caveat to that, or the addendum to that would be, what are you seeing in single family orders in July , now that the incentives have expired?

Unnamed Participant: Yeah, so if you take the ranges, Sam, you're going to get to revenues in the neighborhood of $240 to $250 million, depending on where you are.

Chris: and gross margins picking up probably to the range of 43%, in line with what we had discussed, in the range as well. In terms of orders, but August month to date is in line with previous months. So the pull forward that we saw in June was partial in nature. I mean, we're seeing kind of normalized levels of orders.

Chris: and gross margins picking up probably to the range of 43% in line with what we had discussed kind of earlier as to how you get operating leverage on those incremental sales.

Brad Cray: Finally, as previously announced on June 26, 2024, Tecnoglass's Board of Directors is conducting a review of strategic alternatives with the assistance of outside financial and legal advisors. There is no deadline or definitive time table set for completion of the review process and there can be no assurance that this process will result in the company pursuing a transaction or any other particular outcome. The company does not intend to make any further public comment regarding its review until the Board of Directors has approved a specific course of action or the company determines that additional disclosure is appropriate or necessary.

Santiago Giraldo: And then, in terms of EBITDA, you could be getting to kind of a range of around 75, 80 million, depending on where you are in the range as well. In terms of orders. July came in probably at about 75% to 80% of a normal month, but August month to date is in line with previous months. So the pull forward that we saw in June was partial in nature. I mean, we're seeing a kind of normalized level of order.

Chris: and then in terms of ebitda you could be getting to kind of a range of like around seventy-five eighty million depending on where you are in the range as well in terms of orders

Santiago Giraldo: In terms of orders, July came in probably at about 75% to 80% of a normal month. But August, month to date, is in line with previous months. So the pull forward that we saw in June was partial in nature. I mean, we're seeing kind of a normalized level of ordination.

Speaker Change: The July came in probably at about 75% to 80% of a normal month.

Chris: But August month to date is in line with previous months, so the pull forward that we saw in June Was was partial in nature. I mean we're seeing kind of normalized level of orders as of today

Jose Manuel Daes: And then my follow-up question, excuse me. Prevailing aluminum prices look like they're down, I don't know, call it 15, 20%, or so over the past month or two. Are you expecting a favorable impact on gross margins, and what are you expecting for industry pricing as a result?

Sam Darkatsh: And then my follow-up question, excuse me. Prevailing aluminum prices look like they're down, I don't know, call it 15, 20%, or so over the past month or two. Are you expecting a favorable impact on gross margins, and what are you expecting for industry pricing as a result?

Jose Manuel Diaz: I will now turn the call over to Jose Manuel beginning on slide number four. Thank you very much and thank you very much for participating in today's call. We are pleased to report another quarter of the strong results to close how the first half of the year. We achieve record-secret family residential revenues of 95.7 million and our second highest total revenue of 219.7 million. This demonstrates the resilience and adaptability of our business model in a complex microeconomic landscape.

Speaker Change: And then my follow-up question, excuse me.

Speaker Change: Prevailing aluminum prices look like they're down, I don't know, call it 15-20% or so over the past month or two. Are you expecting a favorable impact on gross margins and what are you expecting for industry pricing as a result?

Jose Manuel Daes: Well, this is Jose. I'm... We have bought most of our aluminum at a very favorable price for this year and for next. Ed. Mmmmm. The aluminum went from $2,200... to 25 and then to 2700, but for a very short while, because there was a plant down in Australia. But now the plant is back, and aluminum went back to normal, but we had H before that.

Jose Manuel Daes: Well, this is Jose. I'm... We have bought most of our aluminum at a very favorable price for this year and for next. Ed. E E E E E. The aluminum went from $2,200 to 25 and then to 2700, but for a very short while, because there was a plant down in Australia. But now the plant is back, and aluminum went back to normal, but we had H before that.

Jose Manuel Daes: Well, this is Jose. I'm... to 25 and then to 2700, but for a very short while because there was a plant down in Australia. But now the plant is back, and aluminum went back to normal, but we had H before that.

Speaker Change: well visyou whosayi'm

Speaker Change: We have bought most of our aluminum at a very favorable price for this year and for next.

Jose Manuel Daes: oh

Jose: The aluminum went from $2200

Jose Manuel Diaz: These accomplishments reflect the strong demand and level of orders we saw towards the end of the first quarter. We remain confident in our ability to capitalize on attractive opportunities and to gain market share despite certain challenges related to inflation and higher interest rates. Records' single-family residential revenues reach a quarterly record of 95.7 million, or 10.1% year over year. The solid growth in our residential business reflects our ability to capitalize on the strong demand we saw at the end of the quarter, as well as improving market trends.

Jose: to $25,000 and then to $2,700, but for a very short while.

Jose Manuel Daes: because there was a plant.

Jose Manuel Daes: Brown

Jose: in Australia. But now the plant is back and aluminum went back to normal. But we had H before that.

Santiago Giraldo: And just to follow up on that, Sam, remember that on the residential orders, it's kind of spotty in nature, so you don't get a pickup. Basically, it's a match based on how you quote versus how, you know, the LME behaves. And then on the commercial side, as Jose was saying, we enter into forward contracts to hedge against what is quoted. So it's not necessarily a fact that we're kind of going long or short on inventory.

Speaker Change: and just to follow up on that time remember that on the residential orders is kind of spot in nature so you don't get a pickup basically is a match based on how you quote versus how you know the lmeb haves

Speaker Change: And then on the commercial side, as Jose was saying, we enter into forward contracts to hedge against what was quoted. So not necessarily a fact that we're kind of going long or short on inventory.

Sam Darkatsh: I guess the spirit of my question was your market intelligence in terms of how others that you compete against in the state or that use aluminum, how much they've hedged, and whether the lower aluminum prices of late at least may have influenced pricing, especially in July and August after the incentives expired. No way.

Sam Darkatch: I guess the spirit of my question was your market intelligence in terms of how others that you compete against in the state or that use aluminum, how much they've hedged, and whether the lower aluminum prices of late at least may have influenced pricing, especially in July and August after the incentives expired. Now we...

Jose Manuel Diaz: We select to a record level of orders in the second quarter of the year. We also continued to expect 90 orders to continue more meaningfully during the second half of the year. Our multi-family commercial business saw sequentially improvement but was impacted by higher interest and market rates during the second quarter. Despite this trend, we have seen a substantial amount of new activity, especially on the high-rise market, as evidenced by yet another record level of backlog.

Speaker Change: I guess the spirit of my question was...

Speaker Change: your market intelligence in terms of how others that you compete against in the state or that use aluminum

Speaker Change: how much they've hedged and whether the lower aluminum prices of late at least may have influenence pricing especially in july in august after the after the incentives expired

Jose Manuel Daes: Now we have seen in the last six, seven months of this year that a couple of our competitors have increased prices because of the aluminum tariff more than the LME, and most of them are importing from Turkey and from China and from other places that were hit hard by the tariffs. And also, glass prices are going a little up, and I believe by next year they're going to go a lot up. So... Arrgh! We have very stable pricing, so we're very happy with that.

Jose Manuel Daes: Now we have seen in the last six, seven months of this year that a couple of our competitors have increased prices because of the aluminum tariff more than the LME, and most of them are importing from Turkey and from China and from other places that were hit hard by the tariffs. And also, glass prices are going a little up, and I believe by next year they're going to go a lot up. So... Ohhhh, we have very stable pricing, so we're very happy with that.

Speaker Change: Now we have seen in the last six, seven months of this year that a couple of our competitors have increased prices because of the aluminum tariff more than the LME.

Jose Manuel Diaz: We anticipate this positive trend to continue through the second half of the year. Our former looking optimism is supported by the significant level of orders we received in June, with the residential orders up over 60% year over year. Contributing to a record backlog of approximately 1 million at quarter end. As a reminder, our backlog reflects the pipeline of multi-family commercial activity and firm single-family residential orders in our key geographies, providing visibility through 2025 and building into 2026.

Unnamed Participant: and most of them are imported from Turkey and from China and from other places that were hit hard by the tariffs.

Unnamed Participant: And most of them imported from Turkey and from China and from other places that were hit hard with the tariff.

Unnamed Participant: And also, glass prices are going a little up, and I believe by next year they're going to go a lot up.

Unnamed Participant: So...

Unnamed Participant: We have very stable pricing, so we're very happy with that.

Unnamed Participant: Thank you.

Operator: The next question comes from Alex. Rygiel with Bea Riley. Please go ahead.

Unnamed Participant: Thank you.

Unnamed Participant: The next question comes from Alex.

Unnamed Participant: Rygiel with B Riley, please go ahead.

Alex Rygiel: Good morning, gentlemen. Very nice quarters. Good morning, Alex. Jose, can you provide us with a little bit more color on the new orders and the strength and backlog for the quarter, like geographically where are you seeing the strength come from? Well, mostly it's...

Unnamed Participant: Good morning, gentlemen. Very nice quarters.

Alexander Rygiel: Good morning, gentlemen. Very nice quarters. Good morning, Alex. Thank you. Jose, can you provide us with a little bit more color on the new orders and the strength and backlog for the quarter, like geographically, where are you seeing the strength come from? Well, mostly it is.

Jose Manuel Diaz: Despite some year over year headwinds including on favorable and foreign exchange impacts, we were pleased to see a sequentially increasing growth margin and adjusted in the damage. The sequentially improvement in profitability and the relative stability and exchange rates over the past several quarters support our positive outlook. Our improved profitability also gave us confidence in our ability to navigate the evolving market landscape and continue to create value for our shareholder. The solid growth in our shorter cast cycles in the family residential business, and careful working capital management resulted in robust cash flow generation of 34.5 million.

Unnamed Participant: Good morning, gentlemen. Very nice quarters.

Speaker Change: good more knowledex hoose can you provide us a little bit more color on the neworders and the strength and backlog in a quarter like geographically where you see in the strength come from

Jose Manuel Daes: Well, mostly they're coming from Florida, New York, Boston, and now, since we have some sales in the Carolinas and Virginia, that's where most of the orders are coming from.

Unnamed Participant: Florida And now, since we have some sales in the Carolinas and Virginia, that's...

Unnamed Participant: well mostly is coming from my florida new york

Unnamed Participant: Boston

Unnamed Participant: And now, since we have some sales in the Carolinas and Virginia, that's where most of the orders are coming from.

Jose Manuel Daes: Excellent. And then how should we think about the mix and backlog today between installation and product sales and how that might affect margins over the coming kind of 12-18 months?

Speaker Change: Excellent and then how should we think about the mix and backlog today between installation and product sales and how that might affect margins over the coming kind of 12-18 months?

Jose Manuel Daes: Well, it's always around the same. We believe he's around half and half. Harvey Stolz, And half of it, or perhaps 40% is just called Bob.

Jose Manuel Daes: Well, it's always around the same. We believe he's around half and half. Herb is installed. And half of it, or perhaps 40% is just called Bob. We are getting much better margins now at the installation site because we have caught a lot of fat that we had and we have reached much better deals with the installation crews, et cetera.

Speaker Change: Well, it's always around the same.

Jose Manuel Diaz: Impressively, this was achieved even with the timing of seasonal tax payments during the quarter. Our solid gas generation continues to provide us with additional flexibility to return value to our shareholders through our shared reportances and dividends. Our cash flow has also allowed us to enhance our operational flexibility and balance it through another 15 million voluntary payment of our term loan during the quarter. Top of the 30 million voluntary payments here today. Overall, we are pleased with the improvement we see in our business and we remain in courage as recovering the demand trends in our end markets.

Speaker Change: We believe it's around half and half. Half is installed.

Unnamed Participant: And half of it is, or perhaps 40%. It's just called Mom. We had, and we have reached much better deals.

Unnamed Participant: And half of it is, on behalf of 40%, is just proud.

Jose Manuel Daes: We are getting much better margins now in the installation sites because we have caught a lot of fat that we had and we have reached much better deals with the installation crews, et cetera.

Unnamed Participant: We are getting much better margins now in the...

Unnamed Participant: in the installation site because we have caught a lot of fat that we had and we have reached much better deals.

Chris Daes: Remember, Alex, that we're only doing... Oh, go ahead. Go ahead.

Speaker Change: with the installation crews, etc.

Chris Daes: No, finish your talk, please.

Chris Daes: Now, finish your talk, please.

Speaker Change: remember alexommal julings ' buy it

Chris Daes: Now, just as a follow-up, remember that we only do installation on certain commercial projects in Florida. All of the other geographies, we only provide the windows. So, you know, to the extent that we continue growing outside of Florida, the mix there is more favorable as far as doing installation or not.

Speaker Change: Now, finish your thought please.

Speaker Change: Now, just as a follow-up, remember that we only do installation on certain commercial projects in Florida. All of the other geographies, we only provide the windows.

Jose Manuel Diaz: As we look to the remaining of the year, our positive growth outlook is supported by a strong cost to our relationships, record backlogs, and adoptive product portfolio.

Unnamed Participant: um

Speaker Change: So, you know, to the extent that we continue growing outside of Florida, the mix there is more favorable as far as doing installation or not.

Jose Manuel Daes: And lastly, as it relates to vinyl windows, have you started shipping yet, and how might we think about the cadence over the next two quarters and maybe even an early look into a revenue target for 2025? We are shipping already, yes. Peter B.

Chris Diaz: I will now turn the call over to Chris to provide additional operating highlights. Thank you, Jose Manuel. Moving to slide number five, our second quarter results reflect our focus execution on the growth initiatives in our business and our ability to generate solid cash flow. Our single-family residential business continues its strong trajectory with revenues increasing 10% year over year to a record 95.7 million revenues. These growth reflects improving market trends along with the benefit of some demand pool forward related to the recent exploration of a Florida window self-starts extension in June.

Speaker Change: And lastly, as it relates to vinyl windows, have you started shipping yet and how might we think about the cadence over the next two quarters and maybe even an early look into a revenue target for 2025?

Jose Manuel Daes: We are shipping already, yes. And this is slowly coming up. We had a couple of products that we were missing that are going to be in line for next month. And we see that we can increase to maybe 5 million a month, and we hope for next year we can do from 5 to 10 months.

Unnamed Participant: And this is slowly coming up... And we see that we can increase to maybe 5 million a month, and we hope for next year we can do it from 5 to 10 months.

Jose Manuel Daes: We are shipping already, yes. Ehh, this is slowly coming up. We had a couple of products that we were missing that are going to be in line for next month. And we see that we can increase to maybe 5 million a month, and we hope for next year we can do from 5 to 10 months.

Unnamed Participant: We are shipping already, yes. It is slowly coming up.

Unnamed Participant: We had a couple of products that we were missing that are going to be in line for next month. And we see that we can increase.

Unnamed Participant: to maybe five billion mons and we hope for next year we can do from five to ten months

Chris Diaz: Our demand momentum along with the federal demographic trends we see in Florida and in the Saudis positions us for a strong single-family residential revenues through year-end as it relates to our vinyl products, quoting activity remains strong and will remain on a scale to increase deliveries in the second half of 2024.

Unnamed Participant: Thank you very much.

Operator: The next question comes from Julio Romero with Doty and Company. Please go ahead. Good morning.

Operator: The next question comes from Julio Romero with Stodie and Company. Please go ahead. Good morning.

Unnamed Participant: Thank you.

Unnamed Participant: The next question comes from Julio Romero with Stodie and Company. Please go ahead.

Unnamed Participant: Good morning.

Julio Romero: Good morning. This is Alex on for Julio. Thanks for taking questions. Hey, good morning.

Alex: Good morning. This is Alex on for Julio. Thanks for taking questions.

Operator: Good morning. This is Alex on for Julio. Thanks for taking questions. Hey, good morning.

Alex: Good morning, this is Alex on for Julio. Thanks for taking questions.

Operator: First question on CapEx; could you give us a quantified CapEx guide for 2024, and does that include any further capacity expansion?

Julio Romero: First question on CapEx; could you give us a quantified CapEx guide for 2024, and does that include any further capacity expansion?

Speaker Change: Hey, good morning.

Speaker Change: First question on CAPEX, could you give us a quantified CAPEX guide for 2024 and does that include any further capacity expansion?

Chris Diaz: In our multi-family commercial business at quarter-end, we were pleased to report another record multi-year backlog of approximately $1 billion. Our backlog growth reflects an expanding pipeline of projects with visibility through 2025 and now building into 2026. These robots backlog represents 2.1 times our LTM multi-family commercial business providing us with a multi-year view on the multi-family commercial portion of our revenues. In our multi-family commercial business, we saw sequential growth in the second quarter of 2024, including a strong level of orders for light commercial projects.

Santiago Giraldo: Yeah, so we had already kind of provided at the beginning of the year CAPEX guidance of around $40 to $45 million. So if you kind of do the math, it's front-loaded, and it steps down in the third and fourth quarter. That includes investments in land that we had previously made. But there are also some things that are getting done to increase capacity to address the orders for 2025.

Santiago Giraldo: Yeah, so we had already kind of provided at the beginning of the year CAPEX guidance of around $40 to $45 million. So if you kind of do the math, it's front-loaded, and it steps down in the third and fourth quarter. That includes investments in land that we had previously made, but there's also some things that are getting done to increase capacity to address the orders for 2025. Yeah, this is Christian.

Speaker Change: Yeah, so we had already kind of provided at the beginning of the year CAPEX guidance to be around $40 to $45 million.

Christian Daes: in the third and fourth quarter. That includes investments in land that we had previously made, but there are also some things that are getting done to increase capacity to address the orders for 2025. Yeah, this is Christian.

Christian Daes: So if you kind of do the math, it's front-loaded and it steps down in the third and fourth quarter.

Christian Daes: That includes investments in land that we had previously made.

Christian Daes: But there's also some things that are getting done to increase capacity to address.

Christian Daes: This is Christian. We're trying to especially increase capacity in certain areas where we believe that we're going to have a big demand in 2025 and 2026. And instead of waiting until we are there, we're already, especially with the buildings that we need. We're going to have them ready. So when, because we are pretty sure that 2025 is going to be a very busy year for us.

Chris Daes: We're trying to especially increase capacity in certain areas where we believe that we're gonna have a lot of demand in 2025 and 2026. And instead of waiting until we are there, we're already, especially with the buildings that we need, we're gonna have them ready. So when, because we are pretty sure that 2025 is gonna be a very busy year for us.

Christian Daes: We're trying to especially increase capacity in certain areas where we believe that we're going to have a big demand in 2025 and 2026. And instead of waiting until we are there, we're already, especially with the buildings that we need, we're going to have them ready. So when, because we are pretty sure that 2025 is going to be a very busy year for us.

Speaker Change: the ordderers sport two thousand and twenty five

Christian Daes: This is Christian, we're trying to especially...

Christian Daes: increased capacity in certain areas.

Christian Daes: where we believe that we're going to have the big demand in 2025 and 2026. And instead of waiting until we are there, we already, especially with the buildings that we need...

Chris Diaz: Revenue is decreased compared to the prior year quarter giving record activity during the second quarter of 2023, and higher interest rates and mortgage rates during 2024. That said, we were encouraged by the improving trends and expect continuous positive momentum in the second half of the year.

Christian Daes: We're going to have them ready, because we are pretty sure that 2025 is going to be a very busy year for us.

Julio Romero: Thank you; I appreciate the contact. And then one more for me.

Unnamed Participant: Thank you, I appreciate the contact. And then one more for me, we touched on this a little bit earlier in the Q&A. Not for the remainder of the year, I would say, the residual impact was

Operator: Thank you. I appreciate the contact. And then one more for me. We touched on this a little bit earlier in the Q&A.

Santiago Giraldo: We touched on this a little bit earlier in the Q&A. But on the promotional activity from last quarter within single-family residential, did that have an impact at all in the second quarter? And, you know, do you think that there's some residual impact for the remainder of the year? Now, for the remainder of the year, I would say the residual impact was

Chris Diaz: Moving to slide number six, our backlog has seen consistent sequential growth in each quarter since 2021. We expect this momentum in our project pipeline and the strong beating activity we are seeing will help us keep a strong book to build ratio, which is stood at 1.5 times out of quarter to 2024. These acts to our track record of maintaining a book to build ratio above 1.1 times over the past 14 consecutive quarters.

Speaker Change: Thank you. I appreciate the context.

Unnamed Participant: And then one more for me, we touched on this a little bit earlier in the Q&A.

Santiago Giraldo: But on the promotional activity from last quarter within single-family residential, did that have an impact at all in the second quarter? And, you know, do you think that there's some residual impact for the remainder of the year? Now, for the remainder of the year, I would say the residual impact was

Speaker Change: But on the promotional activity from last quarter within single-family residential, did that have an impact at all in the second quarter? And do you think that there's some residual impact for the remainder of the year?

Santiago Giraldo: Not for the remainder of the year, I would say, the residual impact was already felt in Q2, and in line with what you're seeing with the effect of the expiration of the sales tax waiver in Q2, some of those orders were taken ahead of time, so people took advantage of the opportunity to deliver them not only in Q3, but a little bit in Q4. You get that same effect with the promotional stuff at the end of last year, where a lot of it kind of went through in Q1, but a little bit in Q2. The expectation is for that to be completely through, and not have any effects going forward.

Speaker Change: Now, for the remainder of the year, I would say, the residual impact was already taken in Q2.

Speaker Change: And in line with what you're seeing with the effect of the expiration of the sales tax waiver in Q2, some of those orders were taken ahead of time, so people took advantage of the opportunity, not to be delivered only in Q3, but a little bit in Q4.

Chris Diaz: Historically, roughly two-thirds of reported backlog are in voice over the following 12 months. Historically, there are virtually no project cancellations given the state installation of windows into largely completed buildings. Therefore, we believe that this ratio provides a strong visibility on invoicing despite the fact that certain external factors can cause temporary delays in deliveries.

Speaker Change: You get that same effect with the promotional stuff at the end of last year, where a lot of it kind of went through in Q1, but a little bit in Q2. The expectation is for that to be, you know, completely through and not effects going forward.

Speaker Change: Great, thank you.

Santiago Giraldo: I will now turn the call over to Santiago to discuss our financial results and now look for 2024. Thank you, Christian.

Unnamed Participant: Thank you.

Operator: Thank you. The next question is from Tim Wojs with Baird, please go ahead.

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

Unnamed Participant: Thank you. The next question is from Tim Wojcicz with Baird. Please go ahead.

Unnamed Participant: Hey guys, good morning.

Tim Wojs: Hey guys, good morning.

Santiago Giraldo: Turning to single-family residential on slide number seven. We generated record single-family residential revenues of 95.7 million in the second quarter compared to 86.9 million in the prior year quarter. The year-over-year increase was primarily due to improving market trends and what we estimate to be a partial full-forward effect related to the Florida sales tax waiver, Christian mentioned. Additionally, we were thrilled to see second quarter residential orders up over 60% year-over-year, reflecting solid trash in this business and supporting our expectation for solid single-family growth in the back half of the year.

Tim Wojs: Nice job. Um, maybe just I guess on the first one I just on the backlog piece. Um, yeah, obviously really strong performance this quarter. Um, just given the June kind of uptick in single-family, I mean, did that get captured a little bit in the backlog? And just kind of curious if you can quantify that. And, um, just also wanted to verify if you guys do expect backlog to continue to grow year over year in the back half. Yeah, I'll take that first.

Unnamed Participant: Nice job. Um, maybe just I guess on the first one, I just on the backlog piece, um, yeah, obviously, really strong performance this quarter. Just given the June kind of uptick in single family, I mean, did that get captured a little bit in the backlog? And, um, just wanted to verify if you guys do expect backlog to continue to grow year over year in the back half.

Tim Wojs: Nice job. Um, maybe just I guess on the first one; I just did the backlog piece. Um, obviously, really strong performance this quarter. Um, just given the June kind of uptick in single-family construction, I mean, did that get captured a little bit in the backlog, and just kind of curious if you can quantify that. And, um, just also wanted to verify if you guys do expect backlog to continue to grow year over year in the back half. Yeah, I'll take the first one.

Speaker Change: Hey guys, good morning. Nice job.

Unnamed Participant: Um maybe just I guess on the first one, I was just on the backlog piece, um yeah, obviously really strong performance this quarter.

Speaker Change: Just given the June uptick in single-family, did that get captured a little bit in the backlog? I'm just curious if you can quantify that.

Speaker Change: Just also wanted to verify if you guys do expect backlog to continue to grow year-over-year in the back half of the year.

Santiago Giraldo: I'll take the first one and I'll let Jose speak of the backlog the rest of the year. Yes, there were firm orders that came in in June that get added to the backlog.

Santiago Giraldo: I'll take the first one, and I'll let Jose speak of the backlog for the rest of the year. Yes, there were firm orders that came in in June that will be added to the backlog.

Speaker Change: I'll take the first one and I'll let Jose speak of the backlog the rest of the year. Yes, there were firm orders that came in in June that get added to the backlog.

Jose Manuel Daes: You saw kind of the numbers that we provided. Orders for Q2 were 60% higher than what they were the previous year. So if you take just as a general benchmark, just take the revenues from last year and do the math as to what the orders were, and you probably get to the neighborhood of like 50 to 60 million that is still in in the backlog so despite that there was a lot of pickup on the commercial side as well and I'll kind of like use that as a segue for Jose to tell you what he's seeing in the markets the rest of the way.

Santiago Giraldo: You saw kind of the numbers that we provided. Orders for Q2 were 60% higher than what they were the previous year. So if you take just as a general benchmark, just take the revenues from last year and do the math as to what the orders were, and you probably get to the neighborhood of like 50 to 60 million that is still in in the backlog so despite that there was a lot of pickup on the commercial side as well and I'll kind of like use that as a segue for Jose to tell you what he's seeing in the markets the rest of the way.

Santiago Giraldo: Looking ahead, we continue to see organic growth opportunities in our single-family residential business through several techno-glass-specific tailwinds. First are expanding dealer-based driven by surely kinds, innovative products and demand for impact-resistant and energy efficient solutions. Second, ongoing geographic expansion in Florida and increasing brand recognition across the US. Supported by new showroom openings in key markets. And lastly, our strategic entry into the vinyl market, which has significantly expanded our addressable market and provides substantial wrong way for revenue growth and product diversification.

Speaker Change: You saw kind of the numbers that we provided. Orders for Q2 were 60% higher than what they were the previous year. So if you take just as a general benchmark, just take the revenues from last year and do the math as to what the orders were.

Unnamed Participant: And you probably get to the neighborhood of like 50 to 60 million that is still in the backlog. So despite that, there was a lot of pickup on the commercial side as well. And I'll kind of like use that as a segue for Jose to tell you what he's seeing in the markets the rest of the way.

Jose Manuel Daes: I'm talking about the backlog in commercial. We will see an increase in the next two quarters for sure because every month we invoice... X. We are closing at least to X. It's unbelievable the amount of new buildings that we're getting. It's just crazy.

Unnamed Participant: I'm talking about the backlog in commercial, for sure in the next two quarters, because every month we invoice. It's unbelievable the amount.

Speaker Change: I'm talking about the backlog in commercial.

Speaker Change: We will see an increase.

Speaker Change: in the next two quarters for sure, because...

Santiago Giraldo: Customer enthusiasm for our vinyl products remains strong, with solid quoting activity which we expect to translate into a ramp-up of deliveries as we move through the second half of the year. The overall enthusiasm for our vinyl offering strength and tar combination in this strategic expansion and underscores the significant long-term opportunities we see in this category.

Speaker Change: Every month, we invoice.

Unnamed Participant: X, we are closing at least to X.

Speaker Change: It's unbelievable the amount of new buildings that we're getting. It's just crazy.

Tim Wojs: Okay, okay, that's helpful. And then maybe just on the backlog conversion. So I think historically, as you talked about in the slides, you've converted about two-thirds of your backlog over the next 12 months. And so I know the mix of the backlog has changed a little bit. But if I kind of apply that, you know, kind of same conversion percentage to kind of your trailing 12 month backlog, I have a non-res business that's probably going to be closer to 550 to 600 million over the next, you know, 12 to 18 months versus kind of the 450 million that you're kind of reporting on a run rate basis today. So I just want to kind of verify that the math I'm doing And if there's any kind of change in that, that kind of conversion time.

Unnamed Participant: fga

Unnamed Participant: Okay, okay, that's helpful.

Speaker Change: And then, maybe just on the backlog conversion, so I think historically, you talked about on the slides, you've converted about two-thirds of your backlog over the next 12 months, and so I know the mix of the backlog has changed a little bit, but if I would kind of apply that

Santiago Giraldo: Turning to drivers of revenue on slide number Total revenues for the second quarter decreased 2.5% year-over-year to 219.7 million. This represents our second highest revenue quarter in the company's history. The decrease was primarily due to lower multifamily and commercial revenues partially offset by growth in single-family residential.

Speaker Change: you know, kind of same conversion percentage to kind of your trailing 12 month backlog.

Speaker Change: I have a non-res business that's probably going to be closer to 550 to 600 million over the next, you know, 12 to 18 months, versus kind of the 450 million that you're kind of reporting on a run rate basis today. So I just want to kind of verify that.

Santiago Giraldo: Looking at the profit drivers on slide number 10, adjusted EBDA for the second quarter was 64.1 million, representing an adjusted EBDA margin of 29.2%. LGNA was 38.4 million compared to 35.2 million in the prior year quarter. With the increase, primarily attributable to higher personnel expenses from annual salary adjustments that took place at the beginning of the year. As a percentage of total revenues, LGNA was 17.5% up from 15.6% in the prior year quarter due to lower revenues and the aforementioned salary adjustments.

Speaker Change: the math i'm doing is is kind of okay and if there's any kind of change in that kind of conversion timeline

Unnamed Participant: There are a couple of variables here. The first one is that there are more high-end luxury towers that are multi-year in nature. Right? So you have these high-rises that don't take one year or two years. They sometimes go longer than that, to access the full video summary Description of thepanzee tutorial could be 90 to 105% conversion.

Santiago Giraldo: There are a couple of variables here. The first one is that there are more kinds of high-end luxury towers that are multi-year in nature. Right?

Unnamed Participant: the one there'are a couple of variables here the first one is that there's more kind of a high-end

Santiago Giraldo: So you have these high-rises that don't take one year or two years. They sometimes go longer than that, if you're talking about an 80, 90, or 100 story tower. So you're going to have a little bit more of that mix in there. And the other variable is what assumptions you make for the light commercial that kind of gets booked on a month-to-month basis. But generally, I mean, with the combination of how we're seeing both of those, I think that the 18-month formula still kind of plays out.

Santiago Giraldo: So you have these high-rises that don't take one year or two years. They sometimes go longer than that, if you're talking about like an 80, 90, 100 story tower. So you're going to have a little bit more of that mix in there. And the other variable is what assumptions you make for the light commercial that kind of gets booked on a month-to-month basis. But generally, I mean, I would say with the combination of how we're seeing both of those, you know, I think that the 18-month formula still kind of plays out.

Unnamed Participant: Luxury Towers that are multi-year in nature, so you have these high-rises that don't take one year or two years, they sometimes go longer than that.

Unnamed Participant: If you're talking about like an 80, 90, 100 story tower. So you're going to have a little bit more of that mix in there. And the other variable is what assumptions you make for the light commercial that kind of gets booked on a month-to-month basis.

Santiago Giraldo: Second quarter growth profit was 89.6 million, representing up 40.8% growth margin. This compared to growth profit of 109.7 million in a 48.7% growth margin in the prior year quarter. Similar to recently reported quarters, the year-over-year change in growth margin primarily reflects an unfavorable effects impact of nearly 340 basis points, reduced operating leverage on lower revenues and higher salary expenses. On a sequential basis, growth margin improved by 200 basis points compared to 38.8% in the first quarter of 2024. The unfavorable effects comparisons seen in the last few quarters should largely dissipate, given the relative stability in currencies during the last 12 months and expectations through year-end.

Unnamed Participant: But generally, I mean, I would say with the combination of how we're seeing both of those, you know, I think that the 18-month formula still kind of plays out. We don't see that.

Santiago Giraldo: We don't see that kind of varying too much. If you look at the graph, I think that the range in which that moves could be 90 to 105% conversion. So I would expect that range to hold true still.

Speaker Change: kind of varying too much. If you look at the graph, I think that the range in which that moves could be, you know, 90 to 105 percent conversion. So I would expect that range to hold true still.

Santiago Giraldo: Okay, okay great. And then just the last one for me, on the salary increases that you kind of mentioned in the quarter, I guess were those kind of standard in nature, or were those any sort of special increases? And I guess as you think about the back half of the year, will you get some leverage on that as you just get better volumes?

Speaker Change: Okay, okay great. And then just the last one for me, on the salary increases that you kind of mentioned in the quarter, I guess were those kind of standard in nature or were those any sort of kind of special increases? And I guess as you think about the back half of the year, will you get some leverage on that as you just get better volumes?

Unnamed Participant: Yeah, I know what I mean, and remember we I think we even discussed this in Q1. The way it works in Colombia is that you get salary increases adjusted for inflation at the beginning of the year for the rest of the year. So this was already kind of a headwind in Q1, especially against lower revenue.

Santiago Giraldo: Yeah, I know what I mean, and remember we I think we even discussed this in Q1. The way it works in Colombia is that you get salary increases adjusted for inflation at the beginning of the year for the rest of the year. So this was already kind of a headwind in Q1, especially against lower revenue. But as you ramp up revenue sequentially, you start diluting those salaries more and more, and you get leverage, but it's not like you are to expect incremental salary adjustments the rest of the way. I mean, it was done once, and it plays out for the rest of the year.

Unnamed Participant: Yeah, I know. I mean, and remember, I think we even discussed this in Q1. The way it works in Colombia is that you get salary increases adjusted for inflation at the beginning of the year.

Santiago Giraldo: Now, looking at our strong cash flow and improved leverage on slide number 11. We generated strong operating cash flow of 34.5 million in the second quarter, primarily driven by our discipline working capital management. Our capital expenditures of 20.3 million included payments for previously purchased land for future potential capacity expansion, as well as a down payment for our new Miami headquarters, which will include a new flagship showroom to help us drive incremental business activity.

Unnamed Participant: for the rest of the year so this was already kind of a headwing in q one pecially against lower revenues

Speaker Change: But as you ramp up revenue sequentially, you start diluting those salaries more and more and you get leverage. But it's not like you are to expect incremental salary adjustments the rest of the way. I mean, it was done once and it plays out for the rest of the year.

Santiago Giraldo: But it's not like you are to expect incremental salary adjustments the rest of the way. I mean, it was done once, and it plays out for the rest of the way. Gotcha. Okay, so it's kind of just

Tim Wojs: Gotcha. Okay, so it's kind of just the normal kind of salary increase you see.

Santiago Giraldo: Yeah, yeah, that's right. Okay, great. Well, thanks for the time. Good luck in the back half. Thank you.

Santiago Giraldo: Yes, yes, that's right. Okay, great. Well, thanks for the time. Good luck in the back half. Thank you.

Speaker Change: got ok so it'kind of just in the normal kind of salary increases a yes that's all awesome ok great ation of the time good lu about and thank you yes thank you

Unnamed Participant: Okay, great. Well, thanks for the time. Good luck in the back half. Thank you.

Tim Wojs: Yep, thank you.

Santiago Giraldo: We were pleased to continue our track record of returning capital to shareholders through our recently increased cash dividend payment during the period. At quarter end, we also had approximately 26 million remaining in our share repurchase authorization. We also made 15 million of voluntary prepayments on our syndicated term longer in the quarter with 30 million of debt prepayments year to date. Driving our net leverage ratio to a record low near zero net debt to LTM adjusted EBITDA, compared to 0.2 times in the prior year, here.

Operator: Thank you. Ladies and gentlemen, if you have a question, please press star then 1.

Operator: Thank you. Ladies and gentlemen, if you have a question, please press star then 1. The next question comes from Jean Ramirez with DA Davidson, please go ahead.

Speaker Change: thank you ladies and gentlemen if you have question please first start and one

Operator: Thank you. The next question comes from Jean Ramirez with DA Davidson. Please go ahead.

Operator: The next question comes from Jean Ramirez with DA Davidson. Please go ahead.

Jean Ramirez: Good morning. Thank you for the time.

Jean Ramirez: Good morning. Thank you for the time. Could you help me understand what the bridge looks like between your 3Q guidance and the year end? I mean, at the midpoint, it feels like there's some sort of inflection point that needs to happen to reach your gross margins and that revenue guidance. But your gross margins this quarter, with that 14% quarter over quarter revenue growth, were sort of, you know, kept down at 40.8. Could you, yeah, could you help me understand like what needs to happen for that gross margin growth and, and given, you know, the effects, it's now starting to taper down, or starting to sort of materialize itself out. Yeah, we'll start with that. OK, a couple of more.

Jean Ramirez: Could you help me understand what the bridge looks like between your 3Q guidance and the year-end? I mean, at the midpoint, it feels, and it looks like there's some sort of inflection point that needs to happen to reach your gross margins and that revenue guidance. But your gross margins this quarter, with that 14% quarter over quarter revenue growth, were sort of, you know, kept down at 40.8. Could you Yeah, could you help me understand like what needs to happen for that gross margin growth and, and given, you know, the effects, it's now starting to taper down or starting to sort of materialize itself out. Yeah, I'll start with that. OK, a couple of more.

Speaker Change: Good morning. Thank you for the time. Could you help me understand what the bridge looks like between your 3Q guidance and the year-end?

Santiago Giraldo: As of June 30, 2024, we had total liquidity of our approximately 300 million, including 127 million in cash and 170 million available on their revolving credit facilities, giving us financial flexibility to drive additional value in our business.

Speaker Change: that needs to happen to reach your gross margins and that revenue guidance.

Speaker Change: But your gross margins this quarter with that 14% quarter-over-quarter revenue growth was sort of...

Santiago Giraldo: On slide number 12, we're proud to showcase our track record of delivering exceptional shareholder value. Over the last three years, our strategic initiatives have consistently yielded returns that surpass industry benchmarks.

Speaker Change: you know, kept down at 40.8. Could you, yeah, could you help me understand like what, what needs to happen for that gross margin growth and...

Operator: And given, you know, the effects, it's now starting to paper down or starting to...

Unnamed Participant: But your gross margins this quarter, with that 14% quarter over quarter revenue growth, were sort of. And given, you know, the effects, it's now starting to taper down or starting to sort of materialize itself out. Yeah, I'll start with that.

Santiago Giraldo: This outperformance is driven by our robust profitability and significantly improved cash flow generation. The superior returns we've achieved not only benefit our investors, but also validate the effectiveness of our multifaceted growth strategy.

Santiago Giraldo: Okay, a couple of moving pieces. Just to clarify, sequentially, gross margin didn't tick down; it went up 200 basis points. I don't know if that's what you meant. But in terms of what happens, I mean, the guidance that we're providing is for low to mid 40s for the full year. That vaccine, as I was mentioning earlier in the first question that came up, implies that gross margins get to a range of like 43, 44% or so.

Santiago Giraldo: Okay, a couple of moving pieces. Just to clarify, sequentially, gross margin didn't tick down; it went up 200 basis points. I don't know if that's what you meant. But in terms of what happens, I mean, the guidance that we're providing is for low to mid-40s for the full year. That vaccine, as I was mentioning earlier in the first question that came up, implies that gross margins get to a range of like 43, 44% or so.

Santiago Giraldo: Okay, a couple of moving pieces. Just to clarify, sequentially gross margin didn't go down; it went up 200 basis points. I don't know if that's what you meant. But in terms of what happens, I mean, the guidance that we're providing is for low to mid 40s for the full year. That vaccine, as I was mentioning earlier in the first question that came up, revenues are going up, and you get a substantial amount of operating leverage on that, and what gives us a lot of visibility on revenues is the fact that we already have the orders in place. On the residential side, you know the headline that you read 60% FX was averaging close to 38, 3900 in the first half of the year, now it's closer to 4100.

Santiago Giraldo: serv materialize to help out

Santiago Giraldo: Yeah, I'll start with that.

Santiago Giraldo: Okay, a couple of moving pieces. Just to clarify, sequentially gross margin didn't tick down, it went up 200 basis points. I don't know if that's what you meant. But in terms of what happens, I mean, the guidance that we're providing is for low to mid-40s for the full year.

Santiago Giraldo: Now, moving to outlook on slide number 14. Based on the momentum in our business and our visibility in the expected timing of deliveries through year end, in our residential and commercial markets, we are updating our outlook for the full year. We expect full year 2024 revenue to be in the range of 860 million to 910 million. This outlook represents entirely organic growth of 6% at the midpoint. Based on these sales outlook, our anticipated mix of revenues and our expectations for cost and expenses, we expect full year adjusted EBITA to be in the range of 260 million to 285 million.

Santiago Giraldo: that bseen as i will mention in earlier the first question that came up that that implies that gross margins get to a range of like forty three forty four percent or so

Santiago Giraldo: Where that's coming from is a couple of things. Revenues are going up, and you get a substantial amount of operating leverage on that. And what gives us a lot of visibility on revenues is the fact that we already have the orders in place on the residential side. You know, the headline that you read, 60% higher year over year, gives us a lot of clarity as to what the second half of the year looks like.

Santiago Giraldo: where that's coming from is a couple of things.

Santiago Giraldo: Revenues going up and you get a substantial amount of operating leverage on that.

Santiago Giraldo: And what gives us a lot of visibility on revenues is the fact that we already have the orders in place. On the residential side, you know, the headline that you read, 60 percent.

Santiago Giraldo: Higher year-over-year gives us a lot of clarity as to what the second half of the year looks like and we're already seeing that in July and in August

Santiago Giraldo: And we're already seeing that in July and August. And then you mentioned FX; FX is actually trending in the right way for us. FX was averaging close to 38, 3900 in the first half of the year; now it's closer to 4100. So both of those factors are actually playing a favorable part in what we're projecting for the second half.

Speaker Change: And then you mentioned FX. FX is actually trending in the right way for us.

Santiago Giraldo: We also expect growth margins to be in the low to mid-40s range for 2024 and for healthy year over year cash flow growth, given most capital expenditures related to facility upgrades and vinyl investments are now complete.

Santiago Giraldo: FX was averaging close to $3,800, $3,900 in the first half of the year, now it's closer to $4,100.

Santiago Giraldo: So, both of those factors are actually playing a favorable part in what we're projecting for the second half of the year.

Santiago Giraldo: Our outlook is predicated on a few key assumptions. Namely, growth in residential revenues based on the strong orders we received through June, a ramp up in vinyl related revenues through the second half of the year, as well as stable effects rates between 3,900 and 4,000. This full year outlook is also anchor in our expectations for large multifamily and commercial projects, staying within schedule timetables and for stable activity in short-term small commercial projects.

Jose Manuel Daes: Thank you. And for vinyl, can you provide some color on the shipment trends and invoice trends post 2Q, and do you still expect around $20 million in the second half for vinyl?

Santiago Giraldo: Thank you. And for vinyl, can you provide some color on the shipment trends and invoice trends post-2Q, and do you still expect around $20 million in the second half for vinyl?

Santiago Giraldo: Thank you. And for vinyl, can you provide some color on the shipment trends and invoice trends post 2Q? And do you still expect around $20 million in the second half for vinyl?

Jose Manuel Daes: That looks reasonable. We expect BIDEL to keep growing. I mean, this is a learning curve, it's normal. And I believe it should be around that figure. And next year is going to be much better, much, much better.

Jose Manuel Daes: That looks reasonable. We expect vinyl to keep growing. I mean, this is a learning curve, it's normal. And I believe it should be around that figure. And next year is going to be much better, much, much better.

Speaker Change: And that looks reasonable. We expect my goal to keep growing. I mean, this is a learning curve. It's normal. And I believe it should be around that figure.

Unnamed Participant: And next year is going to be much better, much, much better.

Santiago Giraldo: And just to follow up on that, the contribution from vinyl in the first half was non-material, as we discussed earlier in the year, so all of the pickup and the record level of revenues that you saw on the residential side were still kind of the legacy aluminum product.

Unnamed Participant: And next year is going to be much better, much, much better.

Santiago Giraldo: In summary, we are pleased with our results during the first half of the year, which demonstrated the resiliency of our business and our ability to capitalize on market opportunities. As we look to the remainder of the year, we remain confident in our ability to continue creating value for stakeholders, given our low leverage profile and numerous avenues for market share expansion.

Speaker Change: And just to follow up on that, the contribution from vinyl in the first half was non-material as we discussed earlier in the year, so all of the pickup and the record level of revenues that you saw on the residential side were still kind of the legacy aluminum product.

Jean Ramirez: Thank you. And last one for me, could you please provide some update on that strategic review that was announced earlier in the quarter? Is there anything you can say regarding that? No.

Speaker Change: Thank you. And last one for me, could you, if you could provide some update on that strategic review that was announced earlier in the quarter?

Operator: With that, we will be happy to answer your questions. Operator, please open the line for questions. Certainly, thank you. We will now begin the question-and-answer session to ask If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then do. At this time we will pause momentarily to assemble our roster.

Unnamed Participant: Is there anything you can say regarding that? No.

Santiago Giraldo: No, not at this point in time. We will not provide comments on that, and we will once it's warranted if there is something to announce. Perfect.

Unnamed Participant: No, not at this point in time. We will not provide comments on that, and we will once it's warranted if there is something to announce.

Santiago Giraldo: No, not at this point in time. We will not provide comments on that, and we will once it's warranted if there is something to announce. Perfect.

Unnamed Participant: Is there anything you can say regarding that? No, not at this point in time. We will not provide comments on that and we will once it's warranted, if there is something to announce.

Jean Ramirez: Perfect. I appreciate the time. Thank you.

Speaker Change: Perfect. I appreciate the time. Thank you.

Speaker Change: Thank you.

Jose Manuel Daes: This concludes our question and answer session. I would like to turn the conference back over to CEO Jose Manuel Daes for any closing remarks.

Operator: This concludes our question and answer session. Well, thanks, everybody.

Speaker Change: Thank you.

Operator: this concludes our question and answer session

Speaker Change: I would like to turn the conference back over to CEO Jose Manuel Daes for any closing remarks.

Jose Manuel Daes: Well, thanks everyone for participating on today's call.

Operator: Well, thanks everyone for participating on today's call.

Jose Manuel Daes: Well, thanks everyone for participating on today's call.

Operator: Well, thanks everyone for participating on today's call.

Sam Darkatsh: The first question comes from Sam Darkach from Raymond James, please go ahead. Good morning Jose Manuel, Chris Santiago, how are you? Good morning Sam.

Operator: And as I said, the last day...

Speaker Change: The best is yet to come. We are doing great and we see a very favorable future for the company, our shareholders.

Operator: and our employees. Thank you.

Santiago Giraldo: Santiago, could you help us directionally think about third quarter sales, gross margin and EBITDA expectations and then the caveat to that or the addendum to that would be, what are you seeing in single family orders in July now that the incentives have expired? If you take the ranges, you are going to get to revenues in the neighborhood of $242.50 million depending on where you are and gross margins picking up probably to the range of 43% in line with what we had discussed earlier as to how you get operating leverage on those incremental sales.

Speaker Change: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Santiago Giraldo: And then in terms of EBITDA you could be getting to kind of a range of like around 75, 80 million depending on where you are in the range as well. In terms of orders the July came in probably at about 75 to 80% of a normal month but August month to date is in line with previous months so they pull forward that we saw in June was partially nature. I mean we're seeing kind of normalized levels of orders as of today.

Jose Manuel Diaz: And then my follow up question, excuse me, prevailing aluminum prices look like they're down, I don't know, call it 15, 20% or so over the past month or two. Are you expecting a favorable impact on gross margins and what are you expecting for industry pricing as a result? Well, this is Jose. We have bought most of our aluminum at a very favorable price for this year and for next. And the aluminum went from 2200 to 25 and then to 2700 but for a very short while because there was a plant down in Australia but now the plant is back and aluminum went back to normal.

Jose Manuel Diaz: And just to follow up on that time, remember that on the residential orders is kind of spot in nature so you don't get a pickup basically is a match based on how you quote versus how you know the LME behaves and then on the commercial side as Jose was saying we enter into forward contracts to to hedge against what was quoted. So not necessarily a fact that we're kind of going long or short on.

Jose Manuel Diaz: I guess the spirit of my question was your market intelligence in terms of how others that you compete against in the state or that use aluminum how much they've hedged and whether the lower aluminum prices of late at least may have influenced pricing, especially in July and August after the incentives expired. Now we have seen in the last 6-7 months of this year that a couple of our competitors have increased prices because of the aluminum price more than the LME and most of them imported from Turkey and from China and from other places that were hit hard with the price. And also in class prices are going a little up and I believe by next year they're going to go a lot up. So we have very stable prices so we're very happy with that.

Sam Darkatsh: Thank you.

Alex Rygiel: The next question comes from Alex Rygiel with B-Rally. Please go ahead. Good morning gentlemen, very nice quarters. Good morning Alex. Can you provide us a little bit more color on the new orders and the strengthen back along in a quarter like geographically where you see and the strength come from? Well mostly it's coming from Florida, New York, Boston, and now since we have some sales in the Carolinas and Virginia, that's where most of the orders are coming from.

Jose Manuel Diaz: Excellent. And then how should we think about the mix and backlog today between installation and product sales and how that might affect margins over the coming kind of 12-18 months? Well it's always around the same, we believe it's around half and half. Half is installed and half of it is about 40% is just product. But we are getting much better margins now in the installation side because we have caught a lot of fat that we had and we have reached much better deals with the installation crews etc. Remember Alex, what are we only doing?

Jose Manuel Diaz: No, just as a follow-up. Remember that we only do installation on certain commercial projects in Florida, all of the other geographies we only provide the windows. So to the extent that we continue growing outside of Florida, the mix there is more favorable as far as doing installation, or not? Sure.

Jose Manuel Diaz: And lastly, as it relates to vinyl windows, he started shipping yet. And how might we think about the cadence over the next two quarters and maybe even an early look into a revenue target for 2025? We are shipping already, yes. This is slowly coming up. We had a couple of problems that we were missing. They're going to be in line for next month. And we see that we can increase to maybe five million months. And we hope for next year we can do from five to ten months.

Alex Rygiel: Thank you very much. Thank you.

Julio Romero: The next question comes from Julio Romero with Dodie and Company. Please go ahead.

Alex on behalf of Julio: Good morning. This is Alex on from Julio. Thanks for taking questions. Thank you. Morning.

Santiago Giraldo: First question on CAPEX. Could you give us a quantified CAPEX guide for 2024? And does that include any further capacity expansion? Yeah. So we had already kind of provided at beginning of the year CAPEX guidance to be around 40 to 45 million. So if you kind of do the math, it's from loaded and steps down in the third and fourth quarter. That includes investments in land that we had previously made. But there's also some things that are getting done to increase capacity to address the orders for 2025.

Christian Daes: This is Christian. We're trying to, especially increase capacity in certain areas where we believe that we're going to have the big demand in 2025 and 2026. And instead of waiting until we are there, we're already especially with the buildings that we need. We're going to have them ready. So when, because we are certainly, we are pretty sure that 2025 is going to be a very busy year for us.

Julio Romero: Thank you. Appreciate the context.

Santiago Giraldo: And then one more for me. We touched on this a little bit earlier in the Q&A. But on the promotional activity from last quarter within single family residential, did that have an impact at all in the second quarter? And do you think that there's some residual impact that I'm injured here? Now for the remainder of the year, I would say the residual impact was already taken in in Q2. And in line with what you're seeing with the effect of the expiration of the sales tax waiver in Q2, some of those orders were taken ahead of time.

Santiago Giraldo: So people took advantage of the opportunity not to be delivered only in Q3 but a little bit in Q4. You get that same effect with the promotional stuff at the end of last year where a lot of it kind of went through in Q1, but a little bit in Q2, in YouTube. The expectation is for that to be completely through and not effects going forward.

Julio Romero: Great, thank you.

Julio Romero: Thank you.

Tim Wojs: The next question is from Tim Wojs with Baird. Please go ahead. Hey guys, good morning.

Santiago Giraldo: Nice job. I guess on the first one, I just on the backlog piece. Yeah, obviously really strong performance this quarter. Just given the June kind of uptick in single family, did that get captured a little bit in the backlog and just kind of curious if you can quantify that. And just also wanted to verify if you guys do expect backlog to continue to grow year over year in the back half of the year.

Santiago Giraldo: Yeah, I'll take the first one and LA Jose speaker of the backlog the rest of the year. Yes, there were firm orders that came in in June that get added to the backlog. You saw kind of the numbers that we provided orders for Q2 were 60% higher than what they were the previous year. So if you take just as a general benchmark, just take the revenues from last year and do the math as to what the orders were.

Santiago Giraldo: And you probably get to the neighborhood of like 50 to 60 million that is still in the backlog. So despite that, there was a lot of pickup on the commercial side as well. And I'll kind of like use that as a way for Jose to tell you what he's seeing in the markets the rest of the way. Talking about the backlog in commercial, we will see an increase in the next two quarters for sure because. Every, every month we voice X. We are closing at least to X. It's unbelievable amount of no buildings are we going to say it's just crazy.

Jose Manuel Diaz: Thank that.

Santiago Giraldo: Okay, okay, that's helpful and then maybe just on the on the backlog conversion. So I think historically, you talked about the slides, you've converted about two thirds of your backlog over the next 12 months. And so I know the mix of the backlog has changed a little bit, but if I would kind of apply that, you know, kind of same conversion percentage to kind of your trillion 12 month backlog. I have a non res business that's probably going to be closer to 550 to 600 million over the next, you know, 12 to 18 months versus kind of the 450 million that you're kind of reporting on a run rate basis today.

Santiago Giraldo: So I just want to kind of verify that the math I'm doing is it's kind of okay. And if there's any kind of change in that kind of conversion timeline. There's a couple of variables here, the first one is that there's more kind of a high end luxury towers that are most a year in nature, right? So you have these high rises that not they don't take one year or two years.

Santiago Giraldo: They sometimes go longer than that, if you're talking about like an 80, 90, 100 story tower. So you're going to have a little bit more of that mix in there. And the other variable is what what assumptions you make for the light commercial that kind of gets on a month to month basis. But generally, I mean, I would say with the combination of how we're seeing both of those, you know, I think that the 18 month formula still kind of plays out.

Santiago Giraldo: So we don't see that kind of varying too much. If you look at the graph, I think that the range in which that moves could be, you know, 90 to 105% conversion. So I would expect that range to hold through still. Okay.

Santiago Giraldo: Great. And then just the last one for me on the salary increases that you kind of mentioned in the quarter. I guess where those kind of standard in nature, or were those any sort of kind of special increases. And I guess as you think about the back half of the year, will you get some leverage on that as you just get better volumes? Yeah. I mean, and remember, we, I think we even discussed this in Q1.

Santiago Giraldo: The way it works in Colombia is that you get salary increases adjusted for inflation at the beginning of the year for the rest of the year. So this was already kind of a headwind in Q1, especially against lower revenues. But as you ramp up revenue sequentially, you start diluting those salaries more and more and you get leverage. But it's not like you are to expect incremental salary adjustments the rest of the way.

Santiago Giraldo: I mean, it was done once and it plays out for the rest of the year. Gotcha. Okay. So it's kind of just the normal kind of salary increases. Yeah. That's right. Awesome. Okay. Great. Thanks for the time. Good luck in the back. Thank you.

Operator: Ladies and gentlemen, if you have a question, please press star then one.

John Ramirez: The next question comes from John Ramirez with DA Davidson. Please go ahead. Good morning. Thank you for the time. Could you help me understand what the bridge looks like between your three Q guidance and the year end? I mean, at the midpoint, it feels it looks like there's some sort of inflection point. That needs to happen to reach your gross margins and that revenue guidance. But your gross margins this quarter with that 14% quarter over quarter revenue growth was sort of, you know, kept down at 40.8. Could you help me understand, like, what needs to happen for that gross margin growth? And given, you know, the D effects, it's now starting to taper down or starting to sort of materialize itself out.

Santiago Giraldo: Yeah, I'll start with that. Okay, a couple of moving pieces. Just to clarify, sequentially gross margin being taked down. He went up to 100 bucks. I don't know if that's what you meant, but in terms of what happens, I mean, the guidance that we're providing is for low to meet 40s for the full year. That makes in, as I was mentioning earlier in the first question that came up, that that implies that gross margins get to a range of like 43, 44 percent or so, where that's coming from is a couple of things.

Santiago Giraldo: Revenues going up and you get a substantial amount of operating leverage on that. And what gives us a lot of visibility on revenues is the fact that we already have the orders in place. On the residential side, you know, the headline that you read 60 percent higher year over year gives us a lot of clarity as to what the second half of the year looks like. And we're already seeing that in July and August.

Santiago Giraldo: And then you mentioned FX. FX is actually trending in the right way for us. FX was averaging close to 38, 3900 in the first half of the year. Now it's closer to 4100. So both of those factors are actually playing a favorable part in what we're projecting for the second half of the year. Thank you.

Santiago Giraldo: And for vinyl, can you provide some color on the shipment trends and invoice trends post to Q. And do you still expect around 20 million in the second half vinyl? That looks reasonable. We expect vinyl to keep growing. I mean, this is a learning curve is normal. And I believe it should be around that figure. And next year is going to be much better, much much better. And just to follow up on that, the contribution from vinyl in the first half was not material as we discussed earlier in the year. So all of the pickup and the record level of revenues that you saw on the residential side were still kind of the legacy aluminum product. Thank you.

John Ramirez: And last one for me, could you, if you could provide some update on that strategic review that you were looking at earlier in the quarter, is there anything you can say we're doing that? No, not at this point in time. We will not provide comments on that. And we will once is warranted if there is something to announce. Perfect. Appreciate the time. Thank you.

Operator: This concludes our question and answer session.

Jose Manuel Diaz: I would like to turn the conference back over to CEO Jose Manuel Diaz for any closing remarks. Well, thanks everyone for participating on today's call. And last I said the last time the best is yet to come. We are doing great. And we see a very favorable future for the company, our shareholders and our employees. Thank you.

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

Q2 2024 Tecnoglass Inc Earnings Call

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