Q2 2019 Earnings Call
Greetings and welcome to the techno glass incorporated second quarter 2019 earnings Conference call. At this time all participants are in listen only mode. A question answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I would now turn the conference over to your host Rodny Nacier.
Investor Relations Mr. <unk> you may begin.
Thank you for joining us for Tecnoglass, its second quarter 2019 conference call.
A copy of the slide presentation to accompany this call may be obtained on the Investor section of the Tecnoglass website.
Our speakers for today's call are Chief Executive Officer, Jose Manuel Dias, Chief Operating Officer, Chris dies, and Chief Financial Officer Santiago Giraldo.
I'd like to remind everyone that matters discussed on 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 current expedited 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 indoor regulatory factors.
And other risks and uncertainties affecting the operation of Tecnoglass is business.
These risks uncertainties and contingencies are indicated from time to time in TEGNA blesses filings with the Securities and Exchange Commission.
The information discussed during the call as presented in light of such risks.
Further investors should keep in mind that TEGNA glasses financial result in any particular period may not be indicative of future results Tecnoglass is under no obligation to and expressly disclaims any obligation to update or alter its forward looking statements, whether as a result of new information future events changes in assumptions or otherwise.
I will now turn the call over to Jose Manuel beginning on slide number four.
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We grew adjusted the rebuild about 41% to 25.8.
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Merge with <unk> Gleevec.
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The joint venture is a vertical drew will result.
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Our joint ventures, one of them, but we were up three years, Bobby bug lover himself.
And we're supposed to a strong demand.
We were also pleased to go blue you're exposed a little more aluminum extrusion religious in July .
There is more than a third of the old facility will help both to more infusion for sure.
The incremental aluminum demand slowed or merger.
Well no <unk> vertical Burberry repos is really does yours.
Oh, no high return investments.
Although my view abrasions on several of our glass and aluminum wheels. You lived is remain on drug to be completed by year.
We expect these good things should be open grades to increase their physical world operations and Burbles, usually those to generate attractive returns how should we execute it drives or bugs.
Local approach.
Overall, we're very pleased with the positive momentum.
Combined with our growing bug little words proposals with slow ball does your visibility.
We are going to live in this trends of our business mix, but to go do do they usually use commercial and residential construction.
We are energized by our year for your very broad Ruth.
Which supports our agreements with your own look for revenue and adjusted EBITDA.
I will now turn the call over progress two provides a visual due bills or backlog.
Thank you so much.
Turning to our local next slide six.
For the quarter were attractive.
Decision.
Project growing number of markets, our second quarter backlog.
I think it's 6%.
Year over year to a record level of 555 million.
There's room for.
I'm divorced dropping broke diversity broadening customer relationship.
Each completed project elevates our reputation for excellence on our behalf.
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So.
Second order backlog level to represent more than 1.3 times.
Our last 12 month revenue, which is very encouraging.
The U.S. market continues to represent an increasing portion of our business.
Comprising approximately 84% of our backlog.
This compares to 79% in the second quarter of 2018.
We continue to experience they were residential and commercial construction conditions in the U.S.
Our experience so Steve recently, several project wins to our portfolio in the state of New York. Thanks.
This reflects.
I think we are forced to diversify our geographic presence.
Product mix.
Markets.
Solid economic fundamentals throughout the U.S.
Additionally, our alliance with show count, allowing us to further extend the rate growth.
The worst markets.
We were recently awarded several exciting projects will show called <unk> in the northeast, which are reflected in <unk>.
Our topic for brain penetration into the Russian market.
Dr. <unk> has continued to support our agreement.
To capitalize on the strong <unk>.
I said, we sold our revenues are reflecting record an evergreen boys in our industry leading margins.
Additionally, the continued outperformance in our key operating metrics on a break even by our focus on innovation throughout our high return projects, Darren So steam and strategic partnerships I didn't drill.
Our performance in the residential market in the U.S. conveniences of possible applications I support our upwardly revised growth outlook for 2019.
As a reminder, many of our single family problems are typically shorter cycle and <unk> are under represented in backlog.
In conclusion, we are very pleased with our results today.
19.
We continue to target new cost of our relationships our leverage our why didn't mean U.S. footprint.
We are actively in EM.
The quality of our projects to expand our business in a disciplined manner.
Joan our strong pipeline of business.
We look forward to several additional govdelivery promoter scores partnerships on the high return investments.
Yes sure.
Support all really seemed to continue growing our business, while providing excellent service I want the architectural glass products to our customers.
I will now turn the call over to Santiago.
This quarter, our financial result, I'm markets.
Thank you Christian beginning with our financial highlights on slide number eight.
In the second quarter, we substantially improved our results across nearly all metrics, including sales adjusted EBITA margins and adjusted net income.
We accomplished this while continuing to rapidly penetrate the U.S. market.
Especially in residential where sales more than doubled compared to the prior year quarter.
We spent 10.1 million on Capex in the second quarter.
Most of it geared towards opportunistic high return investments and efficiency initiatives.
Operating cash flow performance in the quarter of 14 million reflects our efforts to improve our management of working capital.
And a higher mix of residential revenues, which typically carry a shorter collection cycle.
We ended the quarter with a strong cash position of 48 million in a net leverage ratio of 2.4 times down from 2.8 times last year.
These balance sheet strength supports our growth initiatives and operational enhancements as we move forward.
Looking at the drivers of revenue on slide number nine.
We reported our ninth straight quarter of record revenues, which were up 28% to 113.9 million for the second quarter.
Continued outperformance in the U.S. drove the strength in second quarter sales with the U.S., increasing by 42.2% year over year to 99.3 million.
They U.S., primarily reflected stronger residential invoicing.
Healthy commercial construction activity.
Market share gains in some price and mix improvement.
So I'll leave you as momentum is more than offsetting the softer demand environment in our lifetime regions.
In fact with the significant shift.
In our business to the U.S. during the five past few years, the United States States actually represents a higher percentage of Tecnoglass revenue mix as compared to the percentage mix of revenue generated in the United States by most of our U.S. base building product peers.
Or not trailing 12 month basis as of the second quarter of 2019, the U.S. represented approximately 85% of Tecnoglass total revenues.
This compares to an average of 79% for the U.S. bays and building products peer group. This is an impressive accomplishment for TEGNA glass and further establish us as the Premier you at least that building products company.
Looking at the drivers of adjusted EBITDA on Slide number 10.
Adjusted EBITDA increased 41.1% to a record 25.8 million from the prior year quarter.
This produced an adjusted EBITDA margin of 22.6%.
Gross profit increased 57.6% to a record 38.8 million in the second quarter, representing a 34.1% gross margin.
This compared to a gross margin of 27.7% in the prior year quarter.
Our improvement in gross margin, primarily reflected a greater operating efficiencies and a favorable mix of higher margin products across our footprint.
Excluding nonrecurring cost of approximately 3.6 million in the prior year quarter gross margin improved approximately 240 basis points year over year.
Our as part of our structural competitive advantages raw material cost increases and labor constrains affecting some of our U.S. based peers.
Have still not had a material impact on our manufacturing cost.
We were especially pleased to improve our operating expenses as a percent of revenue.
By 100 basis points year over year to 18.1% in the second quarter.
This reflected higher revenues tight cost controls and strong operating leverage on personnel and professional fees.
Excluding one time items operating expenses would have been 70.8% as a percentage of total revenues compared to 18.9% in the prior year quarter.
Looking at our continued expansion into residential market on slide number 12.
I saw a note.
We refer to you as single family residential as our residential business, we classify all other sales, including medium and high rise condos as commercial.
In 2017, we entered the U.S. single family market and how rapidly scaled that business.
These expansion has far exceeded our initial expectations, representing 16% of our U.S revenues in the last 12 months.
So for the second quarter of 2019.
This is up from 3% of you as revenues in just two years ago.
Second quarter residential sales more than doubled from prior year quarter.
New product introductions expanded customer relationships and our proven ability to execute without quality first approach have led to continued share gains in this segment of our business.
In the U.S., we still only represent a fraction of the approximately 30 billion architectural glass and aluminum industry.
With an estimated two thirds of the market opportunity into residential and segment.
We believe that our collective efforts in the residential segment along with our more established commercial reputation will allow us to continue to grow faster than the national average with this in mind, we see significant upside in our business to capture a rising share of residential and overall market share in the U.S.
Moving to our high return investments on slide number 13.
In may.
We were excited to complete our flow gloves in joint venture with San Gabon, which reinforces our vertically integration strategy.
The JV is strategic from an operational standpoint, and will drive significant synergies overtime.
The JV secure float glass supply and improved purchasing economics, while elevating our global profile with customers suppliers architects and other industry participants.
In terms of financial contribution the JV sales slowed blasted TEGNA glass and third parties, which allow us to report our pro rata share of profits in net income and adjusted EBITDA.
During the second quarter, the JV I'd, approximately 1 million two adjusted EBITA, representing about two months of activity from the early may close of the transaction through the end of the second quarter.
Beyond the existing JV operation, we continue to expect to start the construction of a second state of the our plant nearby our headquarters in butter and Kenya by the end of 2019.
Separately in July of 2019, we brought online our expanded aluminum production capacity.
This is expected to increase our aluminum production capacity by 25% within certain new lines in response to strong customer demand for aluminum products.
Our other investments in automation, our glass and aluminum facilities remain on track to be completed by the end of 2019.
As of June 32019, we have deployed approximately 60% out of the total anticipated capital investments of approximately 20 million per day capacity automation on expansion.
We intend to fund the remaining portion with cash on hand or existing debt capital resources.
Moving to our 2019 outlook on slide number 15.
We continue to expect strong top and bottom line growth in full year 2019.
Based on solid execution year to date, better end market VC, Billy and continued confidence in the execution of our strategy. We are raising our outlook for full year 2019 revenues to grow to a range of $415 million to $430 million.
We anticipate the majority of revenue growth to come from the U.S.
Hello, partially by innovative new products project types geographic expansion and single family residential.
I was explained on prior calls they implied year over year percentage growth in the first half is higher compared to the back half year over year growth based on the anticipated timing of invoicing in 2019 compared to 2018.
Q1, 2019 revenue was abnormally high in that quarter is typically our seasonally smallest quarter. So the first half hot easier comps.
Based on our increased sales outlook and anticipated mix of revenues, we're raising our full year adjusted EBITDA outlook to be in the range of $90 million to $98 million.
This outlook assumes favorable operating leverage on higher revenues.
And a higher mix of sales from manufacturing operations.
Additionally, the outlook incorporates our unchanged share of adjusted EBITDA from the saying go buying joint venture, which began contributing to our results in the second quarter of 2019, that's contemplated in our original outlook.
Furthermore, we expect lower as DNA as a percentage of sales based on incremental revenues and leverage that pain with ongoing cost control efforts.
In closing.
We are well situated to achieve another strong year of growth and improvement in our business.
Our high return investments vertically integrated low cost operations, new partnerships and our proven ability to execute in the U.S. all give us confidence in our ability to meet our revised growth objectives, while maintaining our industry leading margins.
We thank you for your continued support of Tecnoglass.
We will be happy to answer your questions. Operator, Please open the line for questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone wouldn't Caitlin. It's in the question queue. You May Press Star two if you elect to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before present. This turkey's one moment, please while we pull for questions.
Our first question comes from.
Tim watches Baird.
Please proceed with your question.
Hey, everybody good morning, nice the nice job on the results. Good morning, Tim Thanks, you Andrew.
So maybe just starting on residential could you maybe just talk us through the drivers of the strengths that you've seen year to date, because I know you are maybe a little bit more cautiously optimistic on that business entering the year. So I guess kind of where we were six months ago versus where we are today.
What what's been that the upside driver to that business relative to your expectations.
Uh Huh dream to host a bunch here.
Well.
Well do the market, we'd be really the residential only for the love the three years.
And our broader Bahamas hub.
A really good acceptance where people.
Uses on broader go burdens or competition.
Hello.
Mmm, Hello grocery provisioning high rises.
And a lot of homeowners are embraced the pro lumber quality there's movement.
The quality of their lunch.
And that's why we're growing low grade.
But that doesn't mean, the weaker global growing a 150% or will you have done a very good you grow really from.
Ben or we're gonna grow we booked obviously.
Yeah, We hope about baseball Oh things will remain replacements already presented to you.
Okay is it is it new.
Are you signing more distributors and you're seeing kind of an expanded distribution or is it.
You know really the sell through through your current distribution is really what's driving that.
It is both we are expanding distribution and also we are.
The actual distributors that we have a growing themselves because.
Yeah, we are all the time, we're delivering a great program.
And like I told you I mean, the homeowner buys over the approval and the neighborhood from zoos U.S approval loves it and then they buy in a word of mouth.
In the acceptance of the broker is really good we have a.
I believe we have the birds eye frozen during the merger. Furthermore.
Okay, and then and then Santiago I mean relative to the kind of Q2 run rate in residential is there anything.
To to be mindful of in the back half the year why why that current runway run rate wouldn't continue into the second half.
Well actually as you know team that's more of a spot type of business, we like to remain cautious I suppose I'm on religious Joe said in here.
Q2 was you know a very strong quarter in revenue wise, we hope the tendency continues but you know even even at that we're projecting.
For the full year, a growth rate of 30% to 40%. So if he does continue at this rate thatll be upside to that we sold stuff that we're not baking into our projections and in our updated guidance right now.
Okay. So you do you get maybe a little well less contribution in the back half the year in it.
If that continues then there'd be some upside opportunity.
And then I guess, just when we think about the nonresidential backlog in the <unk> in the U.S. part of the business, where I guess, where you see the incremental strength there because you know you're you've actually seen that business accelerate in terms of backlog growth over the last three or four quarters now and so is it.
Is it more the outside of Florida is is it's decelerating or you actually think Florida starts to pick up in the backlog as well.
Well most of the growth.
[noise] school been for most probably it will flow through.
Slowly not slipstream.
Oh, My Lord feel were mcglone.
But every time is less or less before used to be a hold to Brazil.
No believes no its maybe 60%.
We're growing in potential both total New York Uh Huh.
Marilyn even though in the West coast, we have a few jobs in California.
Okay, Okay, and then I'll sneak one last one in just Santiago on on free cash flow any change to kind of how your your prior free cash flow guidance or cadence was let's talk to I think it's supposed to be slightly positive.
For all for free cash this year any any any improvement there just given the EBITDA iris.
Well, yeah, well if you look at what happened in Q2, we focus on working capital management and were very successful at that.
Managing inventory and getting better terms with our suppliers, obviously a yard continues to to be a use of cash when when you're growing.
No higher than 25% year over year.
But if we can continue the trend you know we would expect to two certainly provide free cash flow for the full year. You know, we don't need public guidance on operating cash flow or free cash flow, but based on what we were able to accomplish as of Q2, we would hope the tendency continues for the rest of the year.
Okay, great well good luck on the back half and congrats.
Thanks, Thank you.
Our next question is from Alex Rygiel.
B. Riley FBR and company.
Please proceed with your question.
Good morning, gentlemen, fantastic quarter.
Hi, Alex good morning.
Couple of quick questions I know you kind of referenced or.
The fact that Tecnoglass isn't seeing.
Raw material price inflation like some of the U.S. peers, but are you seeing any of it to where do you see any on the horizon that we should make a note of.
We're not we're not counting on that you know.
The main the main puts obviously aluminum and glass, where we're not seeing any hike on on prices and what we are kind of seeing in the foreseeable future is that we're going to be able to keep them stable and remember that we enter into long term.
Invoicing in long term contracts. So we already have a have matching on the input and how we quote to the clients. So now for the foreseeable future.
Excellent and then I know a couple of quarters ago, you had some.
Inflation and transportation cost that was going through us gionee any update on that in the second quarter here and how we should think about in the second half of the year.
Yeah, that's actually that was actually a tailwind this quarter and we gained some some operating leverage there and there were some things from the logistical perspective that we were able to accomplish.
In in shipping directly to some ports in the northeast I supposed to shipping through Miami, and then trucking to other places so that that's actually helping out and we hope to continue that trend we haven't seen any material increase on marine transportation. So that's that's helping out.
And last question given the success of the residential business can you sort of update us on the breadth of your product line in that category and how it's changed over the last year and your interest in accelerating that growth through M&A.
Yes, well.
We signed two new luxury was last year.
Well it appears to be a leader.
The other one is the per stage.
And we designed the lines.
Hmm.
From what we saw the merger muted.
Because our business is lumpy and a large a few things of the merger was last Q4.
And they have a have a great reception.
Like I said before everybody loves a we feel lower gross deadline because.
After.
Clients was a man who feel it falls in love with it.
It is easier to install the Bernd Leukert, Brazil brother performance.
And we see a lower growth area in the future I mean.
No no. This is really it's a as before but.
He's got a good growing.
[noise].
Thank you very much.
Thanks, Alex.
Our next question is from Josh Wilson Raymond James. Please proceed with your question.
Thanks, Good morning, Jose Manuel Christian Santiago, Thanks for taking my questions and congratulations on the quarter Hey, Thanks.
Theres been several moving parts new side, several tailwinds to gross margin year on year could you give us some quantification as to what the benefits and maybe any headwinds were to gross margin year on year.
Yes, we had certain things here to help out.
We were able to gain operating leverage based on the on the amount of sales that we were able to invoicing to quarter end the mix. So the sales of where we're at completion.
On the manufacturing versus installation site.
But mainly we were able to sale as much with the same kind of <unk>.
Head count.
We were able to reduce installation positive if you'll recall Q2 of 2018, we had one offs.
Related to installation cost on GMP that we were able to streamline.
And the other piece there would be energy costs were basically doing more business with the same energy cost so.
All of those contributed to you know to the operating leverage as part of the growth gross profit goals, there weren't really any any headwinds to talk to speak off in the quarter.
And as we look into the back half of the year.
Any differences between the quarters, So we should watch out for.
No I mean, if you look back.
Aside from the pull forward that we had in Q2, which kind of changes in mix of business.
If you look back at the at the two or three previous quarters before that we're kind of running in the in the meat.
30.
And that would be the expectation going forward.
Okay, very good and everything we need to be aware of and the cadence of the sales here soon.
Well like we said on the call.
The first half of the year was going to see higher growth year over year based on the timing of invoicing and remember that typically the Q1.
Yes.
Normally the lowest one of the year, but this this year was abnormally high for US. So we had always acknowledged that the first half of the year was going to have a higher growth year over year.
With the second half, probably showing you know still 7% or so growth at the midpoint. So.
Still still very very strong grow rate per day for the rest of the year.
But what I'm getting at is no lumpiness between Threeq and Fourq.
No none this term.
And if I could sneak one last one and what are your updated expectations and guidance for the Latin American sales.
We're basically counting on the growth coming from the U.S.
Colombia remains kind of muted everything from a macro perspective east.
Set in place interest rates continued to be low we just need.
Construction activity to pick up and rebound so if that takes place in the in the second half the year that will be an upside to results, but otherwise the growth is going to come from the us.
As he has been the case for the last few quarters.
Got it good luck with the next quarter Alright.
Thanks, Andrew.
Our next question comes from Julio Romero Sidoti and company. Please proceed with your question.
Hey, good morning, everyone. Good morning Julio.
Wanted to piggyback on that last question about.
Colombia.
I understand that your your outlook for the year kind of Embeds, a muted outlook for Colombia through this year.
How are you thinking about that business or maybe.
The next year and beyond that I know last quarter, you gave us an update that some projects that were previously put on hold or being.
Kind of reevaluated youre seeing some stabilization of the election had passed.
So if you could speak to that.
Julio even though the election.
Go.
Let's be the low turmoil.
Bullet pigs was your global internally.
The Brazil used to be.
Could really move the coastal shoulders, London, the great performance.
We hope that appeared to be a little easier, but not so much.
We're not close deals a little hope wholl be remotes.
We do believe the spud to book.
Others equilibrium being a driver for a lot of growth for next year.
Just just to add to that will be I would imagine the U.S. becomes more than 90% of our business by year end and that's really been part of the strategy to continue penetrating the U.S. market. So we'll serve Colombian lot Thomas I see maybe fate, but the driver of growth is going to be the U.S.
Okay, that's helpful and.
You had mentioned that raw material costs.
That are affecting some of your peers in the U.S. are still not necessarily having an impact on cost and thats certainly encouraging.
How about on the demand side I mean, we're hearing rising costs are delaying projects and causing some hesitancy.
Kind of across the construction spectrum. So are you seeing that at all some of your customers and could you speak to that.
No, we're not saying Oh the culture.
We're seeing a slow rebound boom, Florida.
Potentially double.
Mmm West Palm Beach.
I may be so believable doubled over especially for example in the.
Hotels hurt or ignore londell.
Maybe my hobby.
The.
Birds eye frozen rules over you build this.
There's really rebuild the for next year that we are there we are truly the projects.
We hope to increase the bug look.
If we're close or lose half of those books.
Got it maybe my follow up to that is it.
Are these rising material costs that are.
Causing hesitancy to others.
Causing you know maybe an uptick in inquiries on your side.
Have you been seeing that at all.
No no.
Okay very good thanks very much.
Thank you.
Our next question is from Dan.
Caribbean.
D.A. Davidson. Please proceed with your question.
Hey, Good morning. This is zane on for Brent Congrats on the quarter, Hey, Dan. Thank you.
So first off on the backlog increase I know you kind of touched on it a little earlier, but what segments of the U.S. and Mark are you seeing the most improvement low or made a rise and then on top of that with regard to whether it's through a you know the south South East eyes was the northeast can you quantify any sort of impact you saw there.
We're gonna grow is a law <unk> losses.
Cool.
Remember, though were no I mean, we've been doing business outside of Florida, well, maybe the lust.
Three or four years.
No from the day those are going to Jabil does your figures are very true.
At least two to doing 100 years.
So no the very close to my son's too.
No we perform.
And as we all the time and the quality of the product.
Then we're getting no repeated the more jobs.
For example, the other day.
We were in Chicago.
And we view the whole, though we did a great job with Doe and we went to a customer.
And they're comfortable so I love the windows the same time.
Oh thanks.
There was a little those always those we've done a whole though.
And you know Uh huh.
The train just causes like a couple of meters by the zero here the noise.
The windows or grade the quality of deal with the glass.
So we're growing them because a lot of performance.
And that's why we believe we're going to keep growing outside of Florida.
More than in Florida, because Israel, where you have a lot when you have a lot.
I mean, there's though the most room to grow <unk>, just to summarize and add to that to your question that the northeast is the area of greater growth you know beyond.
Well I wish I was talking about Chicago, Texas on the West Coast.
Yeah. Thank you for that.
And then.
Hi, thinking about sort of the aluminum capacity in particular and when do you expect more meaningful contribution from the expansion.
Well, how long until you get to a full production.
And finally I got to answer the question. Thank you [laughter].
We.
Our fully operational today, we have a new line hiding place studies actually awesome to first of all goes in full production and also new paint line.
So we expect to see our.
He don't read right away because aluminum we had incremental business.
We have plenty of orders for the new line and also I think we are sorting system and everything that we're doing on that side on the aluminum sorting system is coming along.
We expect we also own time bye.
Late September beginning of October warning and I wouldn't bring a lot of efficiencies and.
Actually we are.
I mean.
Doing.
Everything that it takes to Lee and more profitable company.
Even if we stay with the same cells. If we are able to increase centers like we are doing things to do a good job of my brother, we are going to be able to see a lot more benefits for the company in the near future.
Thank you for the color there and congrats and good luck for the next quarter.
Thank you.
Our next question comes from Miguel as Bina.
Compass Group. Please proceed with your question.
Hi, Tim. Thank you for the presentation I would like to know your outlook for free cash flow generation and what are you going to do to improve it.
Just because when I see either died grows a lot about free cash flow continues to be.
Very low. So for example, you have generated close to $50 million you needed that free cash flow has been only.
Being close to $5 million.
Thank you.
Ah. Thanks me out we do not provide guidance on free cash flow, but onto your question. If you look at the growth year over year is b.
Above 25%.
And when you're growing 25% your working capital demands are substantial so when you look at EBITDA, obviously working capital that's not included in there.
However, if you look at what we did in Q2, we were able to greatly improve inventory management and get better terms from suppliers. So we're getting there, but you know growing 25% is it's not an easy proposition. The other thing is that when you're investing in capex to grow your operations have become more profitable you're not going to see that realized right away, but ones that that the investments that you make.
Start getting realized.
So that's that's some color we hope to continue basically the working capital management not sufficiently us as we were able to do it in Q2.
And an increasing profitability, which will drive cash flow in time and.
If if at some point the growth tapers. Then you know you don't have as much more use when they are us as we have in the past.
I think it was talking about but would you say that capex could be lower next next year does it make sense or it could be similar to 220 19, no it wouldn't be significantly lower or unless we find new opportunities.
But if you ask me today it will be for only one quarter of what it was this year.
So we certainly don't expect we even close to half of what we did this year. So.
I would definitely it will be lower.
Thank you.
We have reached the end of the question answer session and I will now turn the call back over to Jose Manwell Dias, Chief Executive Officer for closing remarks.
Thank you everyone for participating in today's call.
We hope to.
Good war game for shareholders.
And the good news called <unk> or <unk>.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.