Tecnoglass Inc.
Aug 8, 2018

Tecnoglass Reports Second Quarter 2018 Results

-  Total Revenues Increase 10% to a Record $89.0 million -

- Adjusted EBITDA1 Increases 36% to $18.3 Million -

-  Backlog of $497 million; Up 2.1% Year-over-Year -

- Reaffirms Full Year 2018 Outlook -

Second Quarter 2018 Highlights                                                                                            

BARRANQUILLA, Colombia, Aug. 08, 2018 (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 second quarter ended June 30, 2018.

José Manuel Daes, Chief Executive Officer of Tecnoglass, commented, "We were pleased with our second quarter 2018 results, which marked another record top line quarter with continued improvement in our business, resulting in double-digit growth in revenues and Adjusted EBITDA. U.S. revenues increased approximately 16% to almost $70 million, representing 79% of total Q2 2018 revenues. This expansion of our business in the U.S. markets helped compensate for relatively stable results in Colombia. Activity in Colombia was tempered in the quarter by uncertainty associated with the country´s run-off presidential election, which preceded the favorable outcome of what we see as an incoming pro-business administration that we believe will be very positive for the economy in years to come. To that point, for the month of June 2018, Colombia recorded its highest commercial confidence reading since 2012. Overall, and as previously indicated, we look forward to delivering a full year of record levels of invoicing and Adjusted EBITDA in 2018, primarily driven by U.S. growth. As such, we are encouraged by the strong line up of projects in backlog and remain committed to delivering attractive returns to our shareholders."

Christian Daes, Chief Operating Officer of Tecnoglass, added, "Heading into the second half of the year, we continue to have a very strong backlog with attractive project wins fully replacing four consecutive quarters of record invoicing, while having some additional contracts in the pipeline not yet closed by quarter end. This continues to primarily reflect strong demand in the U.S. Beyond this book of business, we look forward to several additional catalysts, including the completed integration of GM&P providing opportunities for operating efficiencies, the recently elected Colombian president determined to prolong a favorable business climate and a stronger pricing environment in the U.S. following the recently enacted tariffs on aluminum imports. We are excited to continue expanding our business and confident that we are poised for additional success with our cutting-edge product portfolio, growing reputation in the architectural glass industry and unique vertically-integrated operations."

Second Quarter 2018 Results

Total revenues for the second quarter of 2018 increased 10% to $89.0 million compared to $81.0 million in the prior year quarter. A favorable foreign currency impact for the quarter resulted in a marginal benefit to total revenues compared to the prior year quarter. U.S. revenues grew 15.8% to $69.9 million compared to $60.3 million in the prior year quarter, primarily due to continued healthy commercial and residential construction activity and the timely execution of our strong backlog.

Colombia revenue, a majority of which is represented by long-term contracts priced in Colombian Pesos but indexed to the U.S. Dollar, increased slightly to $15.6 million compared to $15.5 million in the prior year quarter. Excluding foreign currency, Colombia revenues declined 2.5%. This was primarily due to tempered activity in  the quarter, attributable to uncertainty associated with the country´s run-off presidential election, which subsequently resulted in what the Company expects to be a positive outcome from the continuation of a favorable business climate promoted by the incoming presidential administration. For the month of June 2018, both the Colombia Commercial and Industrial Confidence Indexes increased compared to previous months, with the commercial index registering its highest reading since 2012, according to Fedesarrollo, one of the leading economic studies organizations in  Latin America.

Gross profit increased 9.3% to $24.6 million, representing a 27.7% gross margin, compared to $22.5 million, representing a 27.8% gross margin, in the prior year quarter. Gross margin in the second quarter 2018 would have increased to 31.8% year-over-year, excluding a non-recurring acquisition transition expense of approximately $3.6 million related to an overhaul of GM&P's supply chain for certain projects and other business optimization costs, which are now complete. Operating expenses were $17.0 million compared to $17.1 million in the prior year quarter. As a percent of total revenues, operating expenses were 19.1% compared to 21.2% in the prior year quarter, primarily due to higher sales. Operating income increased 40.7% to $7.6 million compared to $5.4 million in the prior year quarter. 

Net loss of $3.9 million, or ($0.11) per diluted share, compared to a net loss of $3.5 million, or ($0.10) per diluted share in the prior year quarter, including non-cash FX losses in both periods.  Adjusted net income1 improved to $7.3 million, or $0.20 per diluted share, compared to adjusted net income of $2.6 million, or $0.07 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 gains or losses, other non-core items and the tax impact of adjustments at statutory rates, to better reflect core financial performance.

Adjusted EBITDA1, as reconciled in the table below, increased 36.0% to $18.3 million, compared to $13.4 million in the prior year quarter, primarily attributable to sales growth, higher gross profit excluding non-recurring items and lower operating expenses as a percent of total revenues.

Dividend

The Company declared a regular quarterly dividend of $0.14 per share for the second quarter 2018, which was paid on July 31, 2018 to shareholders of record as of the close of business on June 29, 2018, in the form of cash or ordinary shares, at the option of shareholders.

Full Year 2018 Outlook

The Company continues to anticipate growth in commercial construction end markets and additional market share gains for the full year 2018. The Company reiterates its expectation for full year 2018 revenues to grow to a range of $345 to $365 million and generate Adjusted EBITDA in the range of $71 million to $81 million.

Conference Call

Management will host a conference call on Wednesday, August 8, 2018 at 10:00 a.m. eastern time (9:00 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. To participate by telephone, please dial:

If you are unable to listen live, a replay of the conference call 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: 13681222.          

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 900 customers in North, Central and South America, with the United States accounting for more than 70% 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 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)

  June 30, 2018   December 31, 2017 
ASSETS        
Current assets:        
Cash and cash equivalents $29,925   $  40,923  
Investments  2,061      1,680  
Trade accounts receivable, net  87,432      110,464  
Due from related parties  7,428      8,500  
Inventories  79,903      71,656  
Unbilled receivables on uncompleted contracts    -       9,996  
Contract assets - current portion  46,677      -   
Other current assets  18,486       18,679  
Total current assets $271,912    $  261,898   
         
Long term assets:        
Property, plant and equipment, net $167,647   $  168,701  
Deferred taxes  -      103  
Contract assets - non-current    925      -   
Intangible Assets  10,583      11,517  
Goodwill  23,561      23,130  
Other long term assets  3,008      2,651  
Total long term assets   205,724      206,102   
Total assets $477,636   $  468,000   
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:         
Short-term debt and current portion of long term debt $  11,498    $  3,260  
Trade accounts payable and accrued expenses    59,440      55,182  
Accrued interest expense    7,450      7,392  
Due to related parties    1,002      975  
Payable associated to GM&P acquisition    8,500      29,000  
Dividends payable    734      585  
Current portion of customer advances on uncompleted contracts    -       11,429  
Contract liability - current portion    16,079      -   
Other current liabilities     3,890      13,626  
Total current liabilities $108,593   $  121,449   
         
Long term liabilities:        
Deferred income taxes $  3,246   $  2,317  
Customer advances on uncompleted contracts    -       1,571  
Contract liability - non-current    1,586      -   
Long term debt    220,392      220,998  
Total Long Term Liabilities    225,224       224,886   
Total liabilities $  333,817    $  346,335   
COMMITMENTS AND CONTINGENCIES        
         
SHAREHOLDERS' EQUITY        
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2018 and December 31, 2017 respectively  $  -    $  -   
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 37,041,669 and 34,836,575 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively    4      3  
Legal Reserves    1,367      1,367  
Additional paid-in capital    148,375       125,317  
Retained earnings    19,029      22,212  
Accumulated other comprehensive (loss)    (26,089)     (28,651) 
Shareholders' equity attributable to controlling interest    142,686        120,248   
Shareholders' equity attributable to non-controlling interest    1,133       1,417   
Total shareholders' equity    143,819       121,665   
Total liabilities and shareholders' equity  $  477,636    $  468,000   

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

  Three months ended June 30,  Six months ended June 30, 
  2018   2017   2018   2017  
Operating revenues:                
External customers $87,785   $79,885   $173,992   $144,328  
Related parties  1,184    1,091    2,137    2,465  
Total operating revenues  88,969    80,976    176,129    146,793  
Cost of sales  64,327    58,432    124,739    101,997  
Gross Profit  24,642    22,544    51,390    44,796  
                 
Operating expenses:                
Selling expense   (8,567)   (9,528)   (17,704)    (17,417) 
General and administrative expense  (8,453)   (7,600)   (16,074)   (15,101) 
Total Operating Expenses  (17,020)   (17,128)   (33,778)   (32,518) 
                  
Operating income  7,622    5,416    17,612    12,278  
                 
Non-operating income  709    922    1,808     1,949  
Foreign currency transactions gains (losses)  (8,307)   (8,713)   1,666    (6,288) 
Loss on extinguishment of debt  -    (2)   -    (3,161) 
Interest expense and deferred cost of financing  (5,361)   (5,175)   (10,411 )    (10,257) 
                 
(Loss) Income before taxes  (5,337)   (7,552)   10,675     (5,479) 
                 
Income tax benefit (provision)  1,467    4,052    (3,926)    3,010  
                 
Net (loss) income $(3,870)  $(3,500)  $6,749   $(2,469) 
                  
Less: (income) loss attributable to non-controlling interest  212    (60)   284     (72) 
                 
(Loss) Income attributable to parent $(3,685)  $(3,560)  $7,033   $(2,541) 
                 
Comprehensive income:                
Net (loss) income $(3,870)  $(3,500)  $6,749   $(2,469) 
Foreign currency translation adjustments  (6,139)   (5,250)   2,562    (449) 
                 
Total comprehensive (loss) income $(10,009)  $(8,750)  $9,311   $(2,918) 
Less: Comprehensive (income) loss attributable to non-controlling interest  212    (60)   284    (72) 
                 
Total comprehensive (loss) income attributable to parent $(10,797)  $(8,810)  $9,595   $(2,990) 
                 
Basic income per share $(0.11)  $(0.10)  $0.19   $(0.07) 
                 
Diluted income per share $(0.11)  $(0.10)  $0.19   $(0.07) 
                 
Basic weighted average common shares outstanding  35,935,442    35,763,650    35,869,746    35,759,895  
                 
Diluted weighted average common shares outstanding  35,935,442    35,763,650    36,362,493    35,759,895  

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

  Six months ended June 30, 
  2018   2017  
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income $6,749   $(2,541) 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Provision for bad debts  (413)   2,617  
Provision for obsolete inventory  27    58  
Depreciation and amortization  11,458    10,366  
Deferred income taxes  2,126    (6,870) 
Extinguishment of debt  -    2,585  
Director stock compensation  142    142  
Other non-cash adjustments  679    519  
Changes in operating assets and liabilities:        
Trade accounts receivables  (3,952)   5,830  
Inventories  (7,329)   (6,811) 
Prepaid expenses  (425)   83  
Other assets  (91)   1,984  
Trade accounts payable and accrued expenses  (2,274)   8,224  
Accrued interest expense  41    7,175  
Taxes payable  (10,617)   (15,104) 
Labor liabilities  (114)   (130) 
Related parties  1,279    1,784  
Contract assets and liabilities  (3,735)   -  
Customer advances on uncompleted contracts  -    2,283  
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES $(6,449)  $12,194  
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Proceeds from sale of investments  367    358  
Aquisition of businesses  (6,000)   (7,873) 
Purchase of investments  (662)   (727) 
Acquisition of property and equipment  (4,889)   (4,295) 
CASH USED IN INVESTING ACTIVITIES $(11,184)   $(12,537) 
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Proceeds from debt  9,067    20,915  
Cash Dividend  (1,359)   (1,219) 
Proceeds from bond issuance  -    201,716  
Repayments of debt  (1,934)   (203,754) 
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES $5,774   $17,658  
         
Effect of exchange rate changes on cash and cash equivalents $861   $(551) 
         
NET (DECREASE) INCREASE IN CASH  (10,998)   16,764  
CASH - Beginning of period  40,923    26,918  
CASH - End of period $29,925   $43,682  
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION         
Cash paid during the period for:        
Interest $9,074   $6,864  
Income Tax $5,517    $15,168  
         
NON-CASH INVESTING AND FINANCING ACTIVITES:        
Assets acquired under capital lease and debt $703   $-  
Gain in extinguishment of GM&P payment settlement $3.606   $-  

Revenues by Region
(Amounts in thousands)
(Unaudited)

  Three months ended June 30, Six months ended June 30, 
  2018  2017 2018  2017  
Colombia $15,557  $15,525  $37,381  $31,953  
United States  69,852   60,342  132,845   106,650  
Panama  1043    830  1,857   2,093  
Other  2,517   4,279  4,046   6,097  
Total Revenues $88,969  $80,976 $176,129  $146,793  

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
 June 30,
2018 2017 % Change
      
Total Revenues with Foreign Currency Held Neutral   88,542   80,976 9.3%
Impact of changes in foreign currency  427  - 0.5%
Total Revenues, As Reported  88,969   80,976  9.9 %

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

 Three months ended  Six months ended
 June 30, June 30,
 2018  2017  2018  2017 
        
Net (loss) income  (3,870)   (3,500)   6,749     (2,469)
Less: Income (loss) attributable to non-controlling interest  212    (60)   284    (72)
 (Loss) Income attributable to parent  (3,658)   (3,560)   7,033     (2,541)
Interest expense and deferred cost of financing  5,361    5,175    10,411    10,257 
Income tax (benefit) provision  (1,467)   (4,052)   3,926     (3,010)
Depreciation & amortization  5,793    5,461    11,458    10,366 
Foreign currency transactions losses (gains)  8,307    8,713    (1,666)   6,288 
Non Recurring expenses (extinguishment of debt, bond issuance costs, provision for bad debt, acquisition related costs and other)  3,866    1,565    5,208    5,670 
Director Stock compensation and provision for obsolete inventory  71    129    142    200 
Adjusted EBITDA  18,273     13,431     36,512     27,230  
        
 Three months ended  Six months ended
 June 30,  June 30,
2018  2017  2018  2017 
         
Net (loss) income  (3,870)   3,500)   6,749     2,469)
Less: Income (loss) attributable to non-controlling interest  212    (60)   284    (72)
 (Loss) Income attributable to parent  (3,658 )   (3,560)   7,033     (2,541)
Foreign currency transactions losses (gains)  8,307    8,713    (1,666)   6,288 
Deferred cost of financing  360    -     706    -  
Non Recurring expenses (extinguishment of debt, bond issuance costs, provision for bad debt, acquisition related costs and other)  3,866    1,565    5,208    5,670 
Tax impact of adjustments at statutory rate  (1,564)   (4,111)   1,502    4,783)
Adjusted net (loss) income  7,312     2,607     12,783     4,634  
        
Basic income (loss) per share  (0.11)   (0.10)   0.19    (0.07)
Diluted income (loss) per share  (0.11)   (0.10)   0.18    (0.07)
        
Diluted Adjusted net income (loss) per share  0.20    0.07    0.35    0.13 
        
Diluted Weighted Average Common Shares Outstanding in thousands  35,935     35,764     36,362     35,760  
Basic weighted average common shares outstanding in thousands  35,935    35,764    35,870    35,760 
Diluted weighted average common shares outstanding in thousands  35,935    35,764    36,362    35,760 

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