Tecnoglass Reports First Quarter 2020 Results

Friday, 08. May 2020 13:00

- Ends Quarter with Strong Liquidity Position And Financial Flexibility -

- Reports Record Backlog of $545.6 million -

- Provides COVID-19 Business Update -

First Quarter 2020 Highlights

  • Total revenues of $87.3 million, impacted by COVID-19 related factors in the second half of March including temporarily suspending production at Colombia facilities on March 23rd to April 13th during initial phase of a nationwide shelter-in-place order by the Colombian government to prevent the spread of the COVID-19 virus
  • Net loss of $18.7 million, or $0.40 loss per diluted share, including a net after tax effect of $22.1 million non-cash FX loss due to a 23% devaluation of the Colombian Peso during the quarter
  • Adjusted net income1 of $4.5 million, or $0.10 per diluted share
  • Gross margin strengthened to 34.9% driven by favorable revenue mix and lower input costs per unit
  • Adjusted EBITDA1 of $20.3 million, representing 23.3% of total revenues
  • Cash flow from operations increased $6.2 million to $0.5 million during seasonally low cash flow first quarter
  • Total liquidity of approximately $95 million, including cash and availability under its existing lines of credit
  • Declared a $0.0275 per share cash dividend
  • Record backlog of $546 million, up 5% year-over-year
  • Construction timing of second float glass plant through St. Gobain JV under review given current market conditions
  • Withdraws full year 2020 outlook due to COVID-19 related demand uncertainty

BARRANQUILLA, Colombia, May 08, 2020 (GLOBE NEWSWIRE) -- Tecnoglass, Inc. (NASDAQ: TGLS) (“Tecnoglass” or the “Company”), a leading manufacturer of architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries, today reported financial results for the first quarter ended March 31, 2020.

José Manuel Daes, Chief Executive Officer of Tecnoglass, commented, “Our thoughts are with all those impacted by the COVID-19 pandemic. In this moment, our top priority is safeguarding our employees, customers, partners and the communities where we operate. All of our operations have been deemed vital and we continue to serve customers safely and responsibly. We were pleased to deliver our highest first quarter gross margin and Adjusted EBITDA margin since 2016, despite the pandemic’s temporary impact on our invoicing and business operations late in the quarter. Since our founding in 1984, we have successfully managed through difficult times, including growing and generating profits during the great recession of 2008. On our now larger and more vertically integrated platform, we are even better positioned to successfully navigate the current environment. We have a strong cash position and the capital resources to face the challenges ahead and situate our business for long-term success as we emerge from this volatile period.”

Christian Daes, Chief Operating Officer of Tecnoglass, stated, “As the COVID-19 crisis continues, we are closely monitoring its impact on the broader macro-environment and tailoring our operations accordingly. Our existing commercial backlog remains strong and many projects are progressing in all markets where construction activity is permitted. That being said, we are also bracing for a slower year as some projects get delayed or temporarily put on hold. We have implemented business continuity measures across our vertically integrated operations to address safety, cost reductions and non-critical spend while protecting existing jobs to the extent possible. In light of the uncertain times ahead, we are focused on maintaining financial flexibility and generating cash flow. We believe that our lean cost structure and diversified geographic presence leave us well prepared to manage through this unprecedented environment.”

First Quarter 2020 Results

Total revenues for the first quarter of 2020 were $87.3 million compared to $107.2 million in the prior year quarter. The decrease was primarily attributable to fewer days of invoicing in the second half of March as a result of the Company’s decision to temporarily suspended plant operations in accordance with shelter-in place guidelines by the Colombian government in response to COVID-19. Revenues in January and February were comparable to the same period in the prior year despite five days of scheduled maintenance in January 2020, which did not occur in the prior year quarter. Changes in foreign currency exchange rates had an adverse impact of $0.8 million on Colombia and total revenues in the quarter. U.S. revenues were $78.8 million compared to $92.0 million in the prior year quarter.

Gross profit for the first quarter of 2020 was $30.5 million, representing a 34.9% gross margin compared to gross profit of $31.9 million, representing a 29.8% gross margin in the prior year quarter. The improvement in gross margin mainly reflected lower raw material costs, a higher mix of revenue from manufacturing vs installation, and greater operating efficiencies from prior automation initiatives. Operating expenses were $17.3 million compared to $17.7 million in the prior year quarter. As a percent of total revenues, operating expenses were 19.8% compared to 16.5% in the prior year quarter, primarily due to lower sales.

Net loss was $18.7 million, or $0.40 loss per diluted share in the first quarter of 2020 compared to a net income of $7.3 million, or $0.18 per diluted share in the prior year quarter, including an after-tax non-cash foreign exchange transaction loss of $22.1 million of in the first quarter 2020 and a $2.2 million gain in the first quarter 2019. As with previous periods, these gains and losses are related to the accounting re-measurement of U.S. Dollar denominated assets and liabilities against the Colombian Peso as functional currency. During the first quarter 2020, the Peso devaluated 23% against the U.S. Dollar. Adjusted net income1 was $4.5 million, or $0.10 per diluted share compared to adjusted a net income of $5.9 million, or $0.14 per diluted share in the prior year quarter. Adjusted net income1, as reconciled in the table below, excludes the impact of non-cash foreign exchange transaction gains or losses and other non-core items, along with the tax impact of adjustments at statutory rates, to better reflect core financial performance.

Adjusted EBITDA1, as reconciled in the table below, was $20.3 million, or 23.3% of revenues compared to $21.1 million, or 19.7% of revenues, in the prior year quarter. Adjusted EBITDA1 in the first quarter 2020 included $1.3 million in contribution from the Company’s joint venture with Saint-Gobain.

COVID-19 Business Update

Since the outbreak of the COVID-19 crisis, Tecnoglass has adhered to mandates and other guidance from local governments and global health authorities. The Company’s main priority is the health of its employees and others in the communities where it does business. The Company continues to safely serve customers in all countries, states and regions where construction is considered an essential business and permitted.

The Company temporarily suspended production at its facilities in Colombia from March 23, 2020 to April 13, 2020 during the initial phase of a nationwide shelter-in-place order by the Colombian government to prevent the spread of the COVID-19 virus. While the shelter-in-place order was subsequently extended to May 25, 2020, Tecnoglass resumed full operations at its facilities on April 14, 2020 given its exempted designation as a supplier of critical products to essential business sectors such as infrastructure and construction. The Company is committed to its talented workforce and at this time has retained all of its labor force, of which approximately 60% are contracted through staffing agencies that provide significant contractual flexibility. During the period that production was suspended, vacation days were used to retain eligible employees and the Company used the time to implement broad safety measures before returning to normal operations.

Tecnoglass entered the pandemic with a strong financial position along with the flexibility required to support its global operations during this volatile period. As of March 31, 2020, Tecnoglass had cash of $36.8 million plus an additional $58 million of availability under its existing lines of credit, providing sufficient access to capital. In addition, the Company has implemented strict cost controls, reduced operating expenses and limited all non-critical capital expenditures beyond the completion of initiatives started in 2019. The Company anticipates that working capital will be a net benefit to cash flow for the full year 2020.

The commencement of the Company’s previously announced construction of a second float glass plant through its joint venture with Saint Gobain, which had been scheduled to begin in 2020, has been put on hold at this time, pending better market visibility. The Company will continue to assess additional actions to strengthen its operational and financial position as business visibility improves.

Dividend

The Company declared a quarterly cash dividend of $0.0275 per share for the first quarter of 2020, which was paid on April 30, 2020 to shareholders of record as of the close of business on March 31, 2020.

Business Outlook

Given the uncertain scope and duration of the COVID-19 pandemic, and uncertain timing of a global recovery and economic normalization, the Company is withdrawing its previously communicated full year 2020 revenue and Adjusted EBITDA outlook. The Company has suspended all future financial guidance for the balance of the year.

Most of Tecnoglass’ U.S. and Latin American customers remain operational with many construction projects typically considered by jurisdictions to be essential business activities. However, the Company's sales are dependent on nonresidential construction activity and housing starts. The Company’s backlog has historically provided a high degree of visibility for commercial revenues over a twelve month period. The Company’s prior outlook issued on March 2, 2020, before the COVID-19 pandemic, represented existing projects in backlog plus anticipated demand from the Company’s continued expansion into the single-family residential end market. On the commercial side, net sales for the remainder of 2020 will be influenced by the timing, length or any delays of projects related to the pandemic. In residential, U.S. housing starts are expected to be unfavorably affected by the crisis.

Santiago Giraldo, Chief Financial Officer of Tecnoglass, concluded, “We entered this pandemic operating on a larger scale and with a better capital structure than at any point in our Company’s history. As we move through the uncertain period ahead, we are focused on cost management, delivering strong cash flow and safely serving customers. As of May 1, 2020, our liquidity further improved to approximately $105 million, including cash of approximately $50 million, as a result of proactive measures to build cash. We will continue to monitor and adjust plans for our business that are aligned with our expectation to emerge as a stronger Company when global market conditions begin to improve.”

Webcast and Conference Call

Management will host a webcast and conference call on Friday, May 8, 2020 at 9:00 a.m. eastern time (8:00 a.m. Bogota, Colombia time) to review the Company’s results. The conference call will be broadcast live over the Internet. Additionally, a slide presentation will accompany the conference call. To listen to the call and view the slides, please visit the Investor Relations section of Tecnoglass' website at www.tecnoglass.com. Please go to the website at least 15 minutes early to register, download and install any necessary audio software. Due to potential extended wait times to access the conference call via dial-in, the Company encourages use of the webcast. For those unable to access the webcast, the conference call will be accessible by dialing 1-877-705-6003 (domestic) or 1-201-493-6725 (international). Upon dialing in, please request to join the Tecnoglass First Quarter 2020 Earnings Conference Call.

If you are unable to listen live, a replay of the webcast will be archived on the website. You may also access the conference call playback by dialing (844) 512-2921 (Domestic) or (412) 317-6671 (International) and entering pass code: 13702413.

About Tecnoglass

Tecnoglass Inc. is a leading manufacturer of architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries. Tecnoglass is the #1 architectural glass transformation company in Latin America and the second largest glass fabricator serving the United States. Headquartered in Barranquilla, Colombia, the Company operates out of a 2.7 million square foot vertically-integrated, state- of-the-art manufacturing complex that provides easy access to the Americas, the Caribbean, and the Pacific. Tecnoglass supplies over 1000 customers in North, Central and South America, with the United States accounting for more than 80% of revenues. Tecnoglass' tailored, high-end products are found on some of the world's most distinctive properties, including the El Dorado Airport (Bogota), 50 United Nations Plaza (New York), Trump Plaza (Panama), Icon Bay (Miami), and Salesforce Tower (San Francisco). For more information, please visit www.tecnoglass.com or view our corporate video at https://vimeo.com/134429998.

Forward Looking Statements

This press release includes certain 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 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/or regulatory factors, and other risks and uncertainties affecting the operation of Tecnoglass’ business. These risks, uncertainties and contingencies are indicated from time to time in Tecnoglass’ filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Further, investors should keep in mind that Tecnoglass’ 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 and changes in assumptions or otherwise, except as required by law.

[1] Adjusted net income (loss) and Adjusted EBITDA in both periods are reconciled in the table below.

Investor Relations:                                                                                                                        

Santiago Giraldo
CFO
305-503-9062
investorrelations@tecnoglass.com


Tecnoglass Inc. and Subsidiaries
Consolidated Balance Sheets
 (In thousands, except share and per share data)
(Unaudited)

  March 31,  December 31, 
2020 2019 
ASSETS        
Current assets:        
Cash and cash equivalents $36,824   $47,862  
Investments  1,604    2,304  
Trade accounts receivable, net  104,416    110,558  
Due from related parties  8,463    8,057  
Inventories  68,341    82,714  
Contract assets – current portion  36,689    42,014  
Other current assets  27,734    29,340  
Total current assets $284,071   $322,849  
         
Long-term assets:        
Property, plant and equipment, net $128,426   $154,609  
Deferred income taxes  14,573    4,595  
Contract assets – non-current  10,743    7,059  
Due from related parties - long term  1,423    1,786  
Intangible assets  6,098    6,703  
Goodwill  23,561    23,561  
Long-term investments  45,856    45,596  
Other long-term assets  2,611    2,910  
Total long-term assets  233.291    246,819  
Total assets $517.362   $569,668  
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Short-term debt and current portion of long-term debt $15,245   $16,084  
Trade accounts payable and accrued expenses  56,962    61,878  
Accrued interest expense  3,039    7,645  
Due to related parties  3,896    4,415  
Dividends payable  1,305    67  
Contract liability – current portion  13,957    12,459  
Due to equity partners  10,900    10,900  
Other current liabilities  14,278    15,563  
Total current liabilities $119,582   $129,011  
         
Long-term liabilities:        
Deferred income taxes $857   $411  
Long-term payable associated to GM&P acquisition  8,500    8,500  
Long-term liabilities from related parties    628      622  
Contract liability – non-current  148    187  
Long-term debt  243,695    243,727  
Total long-term liabilities  253,828    253,447  
Total liabilities $373,410   $382,458  
         
SHAREHOLDERS’ EQUITY        
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2020 and December 31, 2019 respectively $-   $-  
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 46,117,631 and 46,117,631 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively  5    5  
Legal Reserves  1,367    1,367  
Additional paid-in capital  208,390    208,283  
Retained earnings  (3,897)   16,213  
Accumulated other comprehensive (loss)  (62,617)   (39,264) 
Shareholders’ equity attributable to controlling interest  143,248    186,604  
Shareholders’ equity attributable to non-controlling interest  704    606  
Total shareholders’ equity  143,952    187,210  
Total liabilities and shareholders’ equity $517,362   $569,668  

Tecnoglass Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
 (In thousands, except share and per share data)
(Unaudited)

  Three months ended 
March 31,
  2020  2019  
Operating revenues:       
External customers $86,106  $104,808  
Related parties  1,192   2,360  
Total operating revenues  87,298   107,168  
Cost of sales  56,871   75,276  
Gross profit  30,427   31,892  
        
Operating expenses:       
Selling expense  (9,668)  (9,562) 
General and administrative expense  (7,610)  (8,094) 
Total operating expenses  (17,278)  (17,656) 
        
Operating income  13,149   14,236  
        
Non-operating (expenses) income, net  (101)    275  
Equity method income    260     -  
Foreign currency transactions (losses) gains  (32,466)  3,286  
Interest expense and deferred cost of financing  (5,643)  (5,587) 
        
(Loss) Income before taxes  (24,801)  12,210  
        
Income tax benefit (provision)  6,133   (4,879) 
        
Net (loss) income $(18,668) $7,331  
        
(Income) Loss attributable to non-controlling interest  (98)  7  
        
(Loss) Income attributable to parent $(18,766) $7,338  
        
Comprehensive income:       
Net (loss) income $(18,668) $7,331  
Foreign currency translation adjustments  (19,288)  1,770  
Change in fair value derivative contracts  (4,065)    -  
        
Total comprehensive (loss) income  $(42,021) $9,101  
Comprehensive (income) loss attributable to non-controlling interest  (98)  7  
        
Total comprehensive (loss) income attributable to parent $(42,119) $9,108  
        
Basic (loss) income per share $(0.40) $0.18  
        
Diluted (loss) income (loss) per share $(0.40) $0.18  
        
Basic weighted average common shares outstanding  46,117,631   40,295,687  
        
Diluted weighted average common shares outstanding  46,117,631   40,847,547  

Tecnoglass Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 (In thousands)
(Unaudited)

  Three months ended March 31, 
 2020   2019  
       (revised) 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income $(18,668)  $7,331  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:      -  
Provision for bad debts  368    153  
Depreciation and amortization  5,241    5,841  
Deferred income taxes  (9,031)   947  
Equity method income  (260)   -  
Deferred cost of financing  440    393  
Other non-cash adjustments  40    23  
Unrealized currency translation losses (gains)  37,533    (1,792) 
Changes in operating assets and liabilities:      -  
Trade accounts receivables  664    (14,953) 
Inventories  (2,848)   2,870  
Prepaid expenses  69    (820) 
Other assets  (4,940)   (4,613) 
Trade accounts payable and accrued expenses  (6,274)   8,187  
Accrued interest expense  (4,546)   (4,337) 
Taxes payable  3,113    4,724  
Labor liabilities  (1,270)   (603) 
Contract assets and liabilities  2,352    (7,905) 
Related parties  (1,435)   (1,075) 
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $548   $(5,629) 
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Proceeds from sale of investments  193    295  
Purchase of investments  (137)   (307) 
Acquisition of property and equipment  (6,469)   (3,701) 
CASH USED IN INVESTING ACTIVITIES $(6,413)  $(3,713) 
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Cash dividend  -    (760) 
Proceeds from equity offering  -    33,050  
Proceeds from debt  14,353    6,693  
Repayments of debt  (15,073)   (1,349) 
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES $(720)  $37,634  
         
Effect of exchange rate changes on cash and cash equivalents $(4,452)  $380  
         
NET (DECREASE) INCREASE IN CASH  (11,038)   28,672  
CASH - Beginning of period  47,862    33,040  
CASH - End of period $36,824   $61,712  
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION        
Cash paid during the period for:        
Interest $9,282   $9,230  
Income Tax $1,986   $1,840  
         
NON-CASH INVESTING AND FINANCING ACTIVITES:        
Assets acquired under credit or debt $991   $1,468  

Revenues by Region
(Amounts in thousands)
(Unaudited)

 Three months ended
 Mar 31,
2020 2019 % Change
Revenues by Region      
United States  78,798   92,033 -14.4%
Colombia  6,472   12,988 -50.2%
Other Countries  2,028   2,146  -5.5%
Total Revenues by Region   87,298    107,167  -18.5%

Reconciliation of Non-GAAP Performance Measures to GAAP Performance Measures
(In thousands)
(Unaudited)

The Company believes that total revenues with foreign currency held neutral non-GAAP performance measures, which management uses in managing and evaluating the Company's business, may provide users of the Company's financial information with additional meaningful bases for comparing the Company's current results and results in a prior period, as these measures reflect factors that are unique to one period relative to the comparable period. However, these non‑GAAP performance measures should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States.

 Three months ended
 Mar 31,
 2020   2019 % Change
      
Total Revenues with Foreign Currency Held Neutral$88,121   $107,167  -17.8%
Impact of changes in foreign currency (822)  -  -0.8%
Total Revenues, as Reported$87,298   $107,167  -18.5%

Currency impacts on total revenues for the current quarter have been derived by translating current quarter revenues at the prevailing average foreign currency rates during the prior year quarter, as applicable.

Reconciliation of Adjusted EBITDA and Adjusted net (loss) income to net (loss) income
(In thousands, except share and per share data)
(Unaudited)

Adjusted EBITDA and adjusted net (loss) income are not measures of financial performance under generally accepted accounting principles (“GAAP”). Management believes Adjusted EBITDA and adjusted net (loss) income, in addition to operating profit, net (loss) income and other GAAP measures, is useful to investors to evaluate the Company’s results because it excludes certain items that are not directly related to the Company’s core operating performance. Investors should recognize that Adjusted EBITDA and adjusted net (loss) income might not be comparable to similarly-titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.

Reconciliations of the non-GAAP measures used in this press release are included in the tables attached to this press release, to the extent available without unreasonable effort. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures.

A reconciliation of Adjusted net (loss) income and Adjusted EBITDA to the most directly comparable GAAP measure in accordance with SEC Regulation G follows, with amounts in thousands:

   Three months ended  Twelve months ended
   March 31, March 31,
   2020  2019  2020  2019 
          
Net (loss) income  (18,668) 7,331  (1,730) 5,197 
Less: Income (loss) attributable to non-controlling interest  (98) 7  161  480 
 (Loss) Income attributable to parent  (18,766) 7,338  (1,569) 5,677 
Foreign currency transactions losses (gains)  32,466  (3,286) 36,725  21,148 
Deferred cost of financing  440  393  1,671  1,515 
Non Recurring expenses (extinguishment of debt, bond issuance costs, provision for bad debt, acquisition related costs and other)  895  744  5,501  6,088 
Joint Venture VA (Saint Gobain) adjustments  372  -  1,709  - 
Tax impact of adjustments at statutory rate  (10,935) 688  (14,594) (1,705)
Adjusted net (loss) income  4,472  5,877  29,443  32,723 
          
Basic income (loss) per share  (0.40) (0.12) (0.04) 0.13 
Diluted income (loss) per share  (0.40) (0.12) (0.04) 0.13 
          
Diluted Adjusted net income (loss) per share  0.10  0.25  0.64  0.83 
          
Diluted Weighted Average Common Shares Outstanding in thousands  46,118  41,336  46,118  39,488 
Basic weighted average common shares outstanding in thousands  46,118  41,336  46,118  39,088 
Diluted weighted average common shares outstanding in thousands  46,118  41,336  46,118  39,488 
          
          
   Three months ended Twelve months ended
   March 31, March 31,
   2020  2019  2020  2019 
          
Net (loss) income  (18,668) 7,331  (1,730) 5,197 
Less: Income (loss) attributable to non-controlling interest  (98) 7  161  480 
 (Loss) Income attributable to parent  (18,766) 7,338  (1,569) 5,677 
Interest expense and deferred cost of financing  5,643  5,587  22,862  21,724 
Income tax (benefit) provision  (6,133) 4,879  1,916  5,462 
Depreciation & amortization  5,241  5,841  22,135  23,333 
Foreign currency transactions losses (gains)  32,466  (3,286) 36,725  21,148 
Non Recurring expenses (extinguishment of debt, bond issuance costs, provision for bad debt, acquisition related costs and other)  895  744  5,501  6,088 
Director Stock compensation and provision for obsolete inventory  -  -  -  211 
Joint Venture VA (Saint Gobain) EBITDA adjustments  999  -  4,047  - 
Adjusted EBITDA  20,345  21,103  91,617  83,643 

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