Tecnoglass, Inc. Q3 FY2024 earnings call

Key Points

• Record revenues of $238.3 million achieved through organic growth in the third quarter.
• Single-family residential business had a 25% year-over-year revenue increase to a new quarterly record of $109.7 million.
• Multi-family and commercial business had 4.6% year-over-year revenue growth to $128.6 million, with a record backlog of approximately $1.04 billion at quarter end.
• Adjusted EBITDA for the third quarter was $81.4 million, with an adjusted EBITDA margin of 34.2%. Gross profit was $109.2 million with a 45.8% gross margin.
• Generated $41.5 million in operating cash flow, increased dividend by 36% to $0.15 per share, and expanded share repurchase program to $100 million.
• Board concluded strategic review and decided to continue executing on ongoing business strategy.

The company has two main product segments. The single-family residential business had revenues of $109.7 million in the third quarter, a 25% year-over-year increase, representing 46% of total revenues ($238.3 million). The multi-family and commercial business had revenues of $128.6 million, a 4.6% year-over-year increase, representing 54% of total revenues.

Forward-Looking Statements

• Updated full-year 2024 revenue outlook to $880 million to $900 million (7% organic growth at midpoint).
• Updated adjusted EBITDA target to $270 million to $280 million.
• Gross margins for 2024 expected in low to mid-40s, with margins expected to continue trending up in 2025 as growth continues.
• Expect continued momentum in vinyl-related revenues and stable activity in short-term and small commercial projects.

Risks

• Potential impact of port strikes on shipping and ability to satisfy demand in Florida and Southeast. However, there are alternative ports available with similar costs.
• Uncertainties related to future tariffs on imports, which could impact costs and pricing, though tariffs on aluminum were largely passed through to customers and later reversed.
• Dependence on market conditions and economic factors affecting the broader U.S. market and specific regions where the company operates.

Q: What's the company's valuation in private vs public markets and plans for share repurchases?

A: The Board determined continuing organic growth is the best path. Share repurchases will be opportunistic based on cash flow.

Q: First look at 2025 sales, gross margin, and EBITDA margins?

A: Too early to tell exact 2025 figures, but margins expected to trend up with growth.

Q: Impact of potential port strikes in January?

A: Can use alternative ports with similar costs, and have good inventory of products.

Q: Quantify pull-forward effect related to Florida sales tax waiver expiration?

A: Approximately $10 million to $15 million in Q3 was related to the pull forward.

Q: Backlog burn rate and vinyl contribution in 2025?

A: Two thirds of backlog typically executed in first 12 months, but composition may vary. Vinyl expected to contribute more in 2025 as full line is available.

Q: Relationship with Saint Gobain and margin contribution?

A: Expect to purchase glass at a discount, potentially contributing to higher margins, but details to be provided in future guidance.