Good day, and welcome to the Tecnoglass, Inc. First Quarter 2024 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Brad Cray, IR. Please go ahead.

Thank you for joining us for Tecnoglass' First 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. 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, 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 in a material nature 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 SEC. The information discussed during the call is presented 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, changes in assumptions, or otherwise.

Thank you, Brad, and thank you, everyone, for participating in today's call. I am proud of our team's resilience to start off 2024. Despite a challenging macroeconomic environment, we maintained a steady course. We executed against a record multifamily commercial backlog while navigating end market pressures in a single-family residential sales channel. This resulted in revenues of $192.6 million. Multifamily commercial revenues met our expectations and continue to look healthy based on continued backlog and pipeline growth in our main markets. Growth in this business helped to partly cushion softer single-family residential demand, which is now trending much better based on the level of orders seen during the last couple of months. Our record backlog of $916 million reflects growing demand for our product and healthy commercial activity in our key geographies, with visibility into 2025. While single-family residential performance lagged due to inflationary constraints on consumer spending, regular order trends in March and April were up over 12% compared to the same period in 2023, indicating an upward trajectory in this business. Additionally, our strategic entry into the vinyl window market is showing promising early results, as quoting activity is surpassing our expectations. We anticipate that vinyl orders will accelerate and become a more significant contributor to our results in the latter half of the year. Our commitment to efficient working capital management was evident in our strong cash flow from operations of $33 million in the first quarter. This strong cash generation, coupled with an expected reduction in capital expenditures, yielded free cash flow of $24 million during the quarter. This was achieved despite facing headwinds from currency fluctuations and an unfavorable revenue mix. Furthermore, our solid capital position has provided us with the financial flexibility necessary to support our growth initiatives, which included ramping up production of vinyl windows and further enhancing our low net leverage profile. I am particularly pleased to report that we improved our net debt to adjusted EBITDA ratio to a record low of 0.1x as of March 31, 2024. Looking ahead, we remain optimistic about the underlying drivers of our business. The attractiveness of the vinyl window market, combined with strengthened customer relationships and geographic diversification, positions us well to capture additional value. Despite the broader macro challenges affecting our industry, our robust pipeline of projects continues to support healthy activity across our end markets. We look forward to delivering stronger results as we move through 2024. I will now turn the call over to Chris to provide additional operating highlights.

Thank you, Jose Manuel. Moving to Slide #5. Our performance in the first quarter reflects our adaptability amidst a dynamic operating landscape. We ended the quarter with another record backlog of $916 million. This represented 1.8x our LTM multifamily and commercial revenues. Our backlog remains a key element of our growth strategy, providing us with a multiyear view of projects in our pipeline on the multifamily commercial portion of our revenues. This side of our business is historically less sensitive to higher interest rates. We continue to experience solid levels of multifamily and commercial quoting and bidding activity as well as favorable demographic trends in Florida and the Southeast U.S. in the first quarter. This reinforces our confidence in our overall growth trajectory. Notably, within the Miami, Fort Lauderdale, and Palm Beach areas alone, Tecnoglass has substantial market share in approximately 750 ongoing and planned projects. This positions us well to capitalize on the secular demand within these key U.S. markets. Turning our attention to our product lines. Customers' response to our vinyl offering has been exceptionally positive. The quoting activity of these products is surpassing our expectations, and we are on track to increase deliveries in the latter half of 2024. Our strategic move into the vinyl market, combined with the expansion of our showroom network, is poised to drive organic growth and significantly expand our addressable market. Moving to Slide #6. 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 maintain a strong book-to-bill ratio, which stood at 1.2x as of the first quarter of 2024. This adds to our track record of maintaining a book-to-bill ratio above 1.1x over the past 13 consecutive quarters. Historically, roughly two-thirds of our reported backlog are invoiced over the following 12 months. With virtually no project cancellations historically, even the late-stage installation of windows into largely completed buildings, we believe that this ratio provides strong visibility on invoicing despite the fact that certain external factors can cause temporary delays in deliveries. Looking at the favorable demographic trends we see in our key regions on Slide #7. Despite a mixed outlook for the U.S. housing market overall, our core markets in the Southern states are benefiting from positive demographic trends. Both multifamily and single-family housing starts are on an upward trajectory, driven by population growth and a pronounced housing shortage. While we mostly serve R&R channels today, these favorable demographics are expected to sustain robust activity in our primary markets through 2024 and 2025. I will now turn the call over to Santiago to discuss our financial results and outlook for 2024.

Thank you, Christian. Turning to single-family residential on Slide #8. During the first quarter, we generated single-family residential revenues of $73 million compared to $84 million in the prior year quarter. The year-over-year change was primarily due to slower sequential and year-over-year activity resulting from much higher interest and mortgage rates. As mentioned by Jose Manuel, however, this trend has reversed significantly based on the level of orders for March and April, which came in at a record level, up over 12% year-over-year. While higher interest rates drove weakness during the quarter, we continue to see organic growth opportunities in our single-family residential business through a variety of tailwinds unique to Tecnoglass, namely, a widened dealer base enabled by short lead times, innovative product development, and demand for energy-saving products, geographic expansion in Florida, and growing brand recognition throughout the U.S. through showroom openings in key markets such as New York, Charleston, and Houston. Also, our recent entry into the vinyl market significantly expanded our addressable market and provides a huge runway for revenue growth and product diversification once the business ramps up to full operating capacity. On Slide #9, I would like to reiterate a few key points from our recent strategic entry into vinyl windows. The enthusiasm and interest from our customers have been overwhelmingly positive, as evidenced by the high level of quoting activity. The favorable response from our customers reinforces our confidence in this strategic decision and underscores our potential for long-term success in this attractive market. Our showrooms now feature both our legacy aluminum window lines and our new vinyl designs. Additionally, we have successfully onboarded new distributors in Northern Florida since our last update, further solidifying our market presence. The opportunities we see within vinyl are incredibly promising given the vast size of the addressable market across the U.S. Turning to drivers of revenue on Slide #11. Total revenues for the first quarter decreased 4.9% year-over-year to $192.6 million, in line with our expectations. Due to lower single-family residential revenues and downtime related to maintenance in January, our multifamily and commercial business continued to perform in line with internal expectations as we executed on our growing backlog. Looking at the profit drivers on Slide #12. Adjusted EBITDA for the first quarter of 2024 was $51 million, representing an adjusted EBITDA margin of 26.5%. SG&A was $33.6 million compared to $34.1 million in the prior year quarter, with the decrease attributable to lower shipping and commission expenses, partially offset by higher personnel expenses due to annual salary adjustments that took place at the beginning of the year. As a percentage of total revenues, SG&A for the first quarter was 17.5% of revenue compared to 16.8% of revenue in the prior year quarter. The increase in SG&A as a percentage of revenue was primarily due to lower revenues year-over-year. First quarter gross profit was $74.7 million, representing a 38.8% gross margin compared to gross profit of $107.8 million, representing a 53.2% gross margin in the prior year quarter. The year-over-year change in gross margin is primarily related to four main factors. First, we had an unfavorable FX impact of nearly 800 basis points, related to a noncash accounting effect on inventory with the peso as functional currency and the effect on peso-denominated costs and expenses against a steep revaluation of approximately 18% year-over-year. Excluding the FX impact, on a constant currency basis with the prior year quarter, gross margin would have been 46.3%. Second, we saw a 200 basis point impact from temporary promotional activity implemented in the fourth quarter that was subsequently invoiced in the first quarter on certain single-family residential products, which has mostly concluded. Third, we had an unfavorable revenue mix that included more installation and standalone product sales. Fourth, softer revenues resulted in lower operating leverage. To a lesser extent, gross margin was also impacted by a temporary increase in energy costs due to dry weather conditions in Colombia. As a reminder, we estimate that each movement of 5% in FX equates to approximately 150 basis points in operating margins. While the year-over-year FX impact was pronounced, given the relative stability of the currencies over the last several months, the sequential impact from FX was much lower, with an estimated 150 basis points impact to margins from a 4% to 5% appreciation in the peso from the fourth quarter of 2023 to the first quarter of 2024. Other factors impacting our sequential gross margin compared to 42.6% last quarter included a decrease in operating leverage given lower revenues; the temporary promotional activity in residential; higher operating costs for personnel, given higher salary costs from company-wide annual salary increases, and a temporary increase in energy costs. Looking at our strong cash flow and improved leverage on Slide #13. The first quarter showcased another period of solid operating cash flow amounting to $33.4 million, primarily driven by effective working capital management. Our capital expenditures totaled $9.9 million, encompassing investments in land, our entry into the vinyl window market, and past investments in automation and increased operational capacity. With our increased installation capacity, we anticipate a significant reduction in capital expenditures for the remainder of 2024. We were pleased to continue our track record of driving additional value for our shareholders through our cash dividend. We returned capital to shareholders through $4.2 million in dividend payments during the quarter and continue to have roughly $26 million available for share repurchases within our current authorization. Net leverage remained at a record low of 0.1x net debt to LTM-adjusted EBITDA, unchanged from the prior year quarter. As of March 31, we had a cash balance of $136 million and availability under our committed revolver credit facilities of $170 million, resulting in total liquidity of approximately $306 million. This gives us significant financial flexibility to drive additional value in our business. On Slide 14, we highlight our success in generating superior returns for our shareholders, outperforming the industry average. Our profitability and enhanced cash flow generation over the past three years have yielded significant above-average returns, further validating our strategic approach. Now moving to our outlook on Slide #16. The themes we highlighted during our last earnings call remain very consistent with what we are seeing right now, with several updates to certain dynamics. We remain confident in our ability to produce another year of revenue growth based on the visibility from our growing backlog and by the organic growth drivers we highlighted earlier, including our vinyl initiative, showroom openings, and geographical expansion. That being said, given the current lack of clarity on U.S. macroeconomic factors, mainly the trajectory of interest rates going forward, we are providing three different scenarios for how we see our results playing out for the full year. These scenarios are predicated on a few main factors: First, a slower start to the year for single-family residential revenues and the durability of the expected pickup later in the year, given recent record order trends, coupled with the expected ramp-up in vinyl sales in the second half of the year. Second, we anticipate an increased mix of revenues from installation and standalone product sales compared to 2023. Third, a less volatile FX rate since the end of 2023 results in a Colombian peso that is roughly 8% to 12% stronger than the average FX rate for 2023, based on the current and projected 2024 FX levels. And fourth, all scenarios assume the execution of large projects within our multifamily and commercial backlog stay within current scheduled timelines and provide different levels of activity for smaller short-term duration projects, which tend to be more rate-sensitive. In addition, our scenarios incorporate a range of outcomes for U.S. Fed interest rate decisions through year-end. Our base case scenario assumes mid-single-digit revenue growth of 5%, resulting in full year 2024 revenues of approximately $875 million and adjusted EBITDA of $267 million. Based on the range of scenarios we have laid out, we have also factored in both a downside and an upside case. These scenarios assume revenue growth of 2% and up to 9% year-over-year, delivering adjusted EBITDA of $250 million and $285 million, respectively. As mentioned earlier, we have seen a more robust pace of activity in single-family residential, with orders reaching record levels in March and April. While we are optimistic about the strength of our key geographies, the momentum within our new vinyl products and share gain opportunities, we acknowledge that higher interest rates could continue to weigh down on consumer purchasing decisions. Combined with our higher expected growth in installation and standalone product sales, this has had a residual effect on a less favorable mix, which in turn pressures gross margins year-over-year, which we expect to partially or fully offset through operating leverage, depending on the revenue scenario. On a sequential basis, we expect gross margins to step up from the levels seen in the first quarter based on a more stable FX rate and favorable operating leverage from a sequential increase in revenues. Therefore, based on our scenarios, we factor in an expectation for full year gross margin to be in the low to mid-40s range, accounting for a softer-than-expected first quarter. All three scenarios assume healthy free cash flow growth year-over-year, given the majority of capital expenditures related to facility automation, expansion, and vinyl-related investments having been completed. In summary, we remain optimistic about the overall strength of our business. Our growing backlog of multifamily and commercial projects and promising activity in our vinyl business should support market share expansion and value creation in the quarters and years to come. With that, we will be happy to answer your questions. Operator, please open the line for questions.

The first question comes from Stanley Elliott with Stifel.

Could you provide some details regarding the $875 million midpoint, specifically the division between the commercial and residential segments, as well as any insights into the growth expected in the new guidance?

Yes. I'll take that, Stan. We are baking in commercial being about 57% of the total revenue stream, with residential being 43%. And as you would see in the deck that we put together, that implies that we do about $20 million in vinyl in the second half of the year, and we see some sequential growth based on the schedule of the projects that we have in line on the commercial segment. And then on the legacy business, basically non-vinyl on the legacy business, we assume that we obviously are going to invoice the orders that came in at record levels for March and April, and that's sustainable through June, stepping down to more normalized levels. If we are able to sustain the amount of orders that we're seeing right now, obviously, you get closer to the upside case.

Could you clarify the changes in the full year guidance since February when you expected double-digit growth? It seems there was softer order growth before it improved. Can you outline some of the significant changes affecting the overall top line expectations?

Well, I think the main thing is the change in the outlook on interest rates. I mean back then, we were really talking about definitely three cuts and better overall psychology, whereas right now, we're talking about no cuts or even a hike. So there's clearly been a change in overall macro conditions. That being said, as I just reiterated, April and March orders came in at record levels. So we’ll see if that is definitely a trend reversal and we are able to get to the double-digit growth that we are outlining in the upside case. So we're still saying that, that is a possible case; it just needs to be that certain things are met.

Yes. And you guys had a nice showing at IBS. Curiously, kind of if that's what helped drive some of the strong orders in March and April, or was that more from some of the retail and showrooms that are out there? Just any color there would be great.

Well, let me tell you this. This is Jose. Customers are appreciating the value proposition that we have in our windows. They are better performing, better looking, more modern. And also, all our glass is heat strengthened, and the shows gave a lot of people to see the products that they don't normally see anywhere else. So we're very happy about what happens in those shows, and we're going to increase the amount of space that we're going to get in the next ones.

The next question comes from Sam Darkatsh with Raymond James.

Three quick questions, if I could. The first one would be Santiago, could you provide us with a framework of what to expect for sales, gross margin, and EBITDA for the second quarter?

Yes. So the base case assumes gross margin trending kind of in line with Q4 of last year, and we kind of highlighted the premises for that. Most of that pickup is coming from what we're expecting in terms of operating leverage, given sequential increases in revenues. And that is supported, obviously, by the orders that we discussed earlier, which on the residential side are coming at record levels in the last two months.

So what sort of sequential bump might you expect in sales then in the second quarter?

I would say we're probably modeling around $210 million to $225 million, somewhere around there. I mean that's kind of a broader range. But at this point in time, I think that should be coming towards the higher end of that range.

Got you. I know you have been considering hedging your exposure to the Colombian peso. There is a sensitivity within the peso in relation to the upper and lower limits of your range. Can you share your current thoughts on this matter, either from your team or the Board, regarding hedging the peso to mitigate volatility issues?

Yes. Looking at the volatility, we are clearly up against really tough quarters. Last quarter and this quarter were significant outliers based on the historical foreign exchange relationship of the currencies. We reached an all-time low in Q4 and Q1 of this year. However, if you observe the trend, Q2 has stepped down from 4,700 to 4,400, and Q3 has been averaging at the same level for the last nine months since Q3 of last year. Therefore, it is not expected that this level of volatility will continue; it is clearly an outlier. The comparisons will become much easier as we progress through the year. We don't anticipate any significant fluctuations in the peso for the remainder of the year based on macroeconomic projections.

So, this is Christian Daes. Over the past 15 to 20 years, we have attempted to hedge against aluminum and the dollar. Despite working with top banks in the field, we consistently faced losses. About 70% of the time, our hedging resulted in missing both the upward and downward movements. I mentioned to Santiago yesterday that the rates are stable now. If you look back to 24 months ago, the rates were similar, and when they peaked at 5,000 or 5,300, it was an unusual situation for a few months before returning to normal.

And then my last question. Thank you for that color, Chris. My last question, there was no share repurchase in the quarter. I think there's a reasonable chance that you folks get included within the Russell 2000, at least, if not this quarter, certainly soon. Talk about your near-term capital allocation priorities, especially around share repurchase, knowing that that might be on the horizon, so the stock would act accordingly.

Yes, that's always on the Board's mind and obviously, a topic of discussion in each of them, and we'll definitely be opportunistic. I think there's a great chance to return value to shareholders via not only repurchases but also dividends. In the balance sheet, it is as flexible as it's ever been. So just to answer that, I mean we'll be opportunistic. And obviously, we have more than half of that program still available to us to execute. So we'll see how it plays out. But definitely, there's a lot of value to be created there.

The next question comes from Tim Wojs with Baird.

Jose Manuel, your backlog is growing both sequentially and year-over-year, and you've highlighted a solid pipeline for quoting and bidding. Can you provide more insight into what you're observing on the ground regarding quoting and pricing? Additionally, do you anticipate the backlog will keep growing in the near term?

The backlog will continue to grow. I mean it is continuing to grow every day because we invoice much less than the jobs that we're closing. I mean this past month we closed much more than what we invoiced. And we see the trend, I mean flowing. It is booming everywhere. It's not only Miami, it's Fort Lauderdale, Boca Raton, Pompano Beach. West Palm Beach is crazy. Then you go up to Jacksonville, Tampa, we're seeing a lot of activity, and we are very enthusiastic because all the jobs are fully funded. It's not like they're playing games. So we see the backlog growing. And just remember that in the backlog, there is nothing of retail. And retail is coming up, I mean the residential. So we believe that after all the new products align from July on, everything is going to turn around. But we want to be conservative on the outlook. Anyhow, we believe we're going to do well, very well in the second semester.

Got it. That's helpful. Santiago, regarding the residential side, if we estimate the residential sales for the year, we expect something around $375 million. So does that break down to about $20 million in base case vinyl? Would that roughly translate to 6% or 7% from the legacy business? Is that the calculation?

Yes. I mean your math is right on, Tim, based on the percentages that I just gave earlier. And that's a significant pickup from Q1, obviously. And as we mentioned in the presentation, sequential orders were up over 20%, right? So in Q2, we already have really good visibility on what's coming. I think the key ingredient here is whether that continues to be sustainable, and I think that's going to be partially related to what happens with the interest rate and overall psychology, and that's why we wanted to lay out the different cases. But on the base case, your math is right on.

Okay, good. I have one last question. You mentioned smaller commercial projects in the slides. Could you provide some definitional examples of what that entails and clarify how large of a percentage this represents in your commercial business?

Yes. Think about that, Tim. I mean you have your large projects, multifamily that are multiyear projects, but you also will have maybe like a car dealership or something really small, like a street mall or something to that extent. And that comes in a much more spotty nature; I mean that's something that you could get in March and be invoiced in the same year. And typically, that will range between $10 million, $12 million, $10 million, $13 million per month. So depending on where we end up, at what kind of range on light commercial, we end up on the higher end or the lower end of these three different scenarios.

The next question comes from Alex Rygiel with B. Riley FBR.

A couple of questions here. First, could you provide a little bit greater detail as it relates to vinyl windows and the successes to date, maybe either quantify quoting or orders or number of dealers or manufacturing lines? Just a little bit more detail there.

Okay. Let me explain what happened. We launched the line. And since we didn't know everything about the new line, we made a few mistakes and it wasn't a complete line. So when we went to our dealers, they said, 'Oh, yes, I like what you're doing, but you're missing this product. And if you don't have it, I cannot go to a complete line to my customers.' And like that, we had a few hurdles even with the supplier of our extrusions, and we are on the way of redeveloping everything. And like I said in the previous question, we are going to be ready by the end of June with a complete line. And we know and we expect the second semester to be much, much better. And we are being very conservative on the outlook for the second semester, but this is going up tenfold by next year for sure.

That's very helpful. And then as it relates to residential, can you kind of remind us what your mix is there between new construction and R&R and then talk a bit about sales into homebuilders and how that has changed in the outlook?

I'll talk about the breakdown. It is roughly two-thirds repair and remodeling and one-third new home construction, Alex. I'll let Jose talk about the dynamics with homebuilders and such.

Well, we're seeing the new construction is stalling a little bit because of the interest rate. So R&R has taken more of the market. But we believe it should be a mix of 50-50 as soon as the interest rates start coming down.

The next question comes from Julio Romero with Sidoti & Co.

Just to clarify, I wanted to stay on vinyl for a little bit. The shipments of vinyl products in December, they were just samples, or were they actually orders that did translate into revenues in the first quarter?

No, no. In the first quarter, we had minimum shipments because they were real orders. I mean we shipped the samples, don't even account; we give them for free. They were real orders. But every day, we see the orders getting stronger and stronger and coming up more and more.

Just to give you an example. In the month of May, we're going to invoice more than we invoiced in the month of February, March, and April together in vinyl. And in June, we're supposed to invoice more than we did in May, April, March, and February. So it is improving by the minute. But obviously, what Jose tried to explain before is that once we complete the line, we're going to see this exponentially go up, and we're going to be invoicing several million dollars a month. So that's what we're working for. That's what we're shooting for, and we're getting ready for it. We have already installed some windows and some projects, and they look really good. I mean they are comparing to the previous windows they were buying and ours looks stronger, wider, better. So we're really happy, and we see a good future ahead of us in vinyl.

Got it. Very helpful. And you talked about the two new distributors signed in, I think, Sarasota, Florida, and then the new distributor in Northern Florida as well. Just talk a bit about what's the early feedback from those distributors. And also, how would you have us think about the ramp of additional distributors throughout the year?

Those distributors are ready to order, but like I said before, we don't have a complete line, and it's difficult for them sometimes to go into a job and then they have nine different products, and we only have seven and the other two are busy. So they'd rather wait until we have the complete line to really ramp up so they can offer only one product and don't have to mix at one house, because it doesn't look good. That's what they said. That's why I've been telling you, and we know and we feel it, that the next two quarters are going to be great. I mean the end of the year 2025 is going to catapult crazy with the vinyl line because people like the look and people like it much better than what we see on the competition. And we have a better glass composition, so it's a win-win situation. We just have to wait a little bit.

Okay. Understood. And then the last question for me is regarding the outlook scenarios you provided for '24 and how to interpret each one. You also shared the vinyl revenue for each scenario. I'm just curious about how much showroom revenue related to your legacy aluminum product is included in those scenarios.

It's kind of in line with what we had originally estimated, Julio, still just kind of ramping up. And the kind of holdup on the ramp-up is the full development of the products for those markets. So we'll be talking maybe around $10 million for the year out of those geographies. But also remember that we're shooting to sell vinyl in some of these other places as well. So it is not exclusively aluminum windows for you to model. Some of that is going to be interchangeable.

Perfect. And then just one more. If you could remind us how much the showroom sales were in '23, just to think about the year-over-year?

No, it's still not material. I mean that's still complete upside year-over-year. Julio, I mean it wasn't more than a couple of million dollars. So if you look at a percentage basis, it's going to look like a huge increase. It's just kind of on a nominal basis, it is still ramping up.

The next question comes from Jean Ramirez with D.A. Davidson.

You have kept gross margin guidance low to mid-40s across all scenarios. Aside from anything or what you've mentioned during this call, what sort of drives the confidence of keeping around this guidance during the second half? I just want to hear some more color around that.

Just to clarify, we're not baking in low to mid-40s in all three scenarios. If you look at the different ones, we're talking about low to mid-40s on the base case, mid-40s on the upside. So I just want to clarify that. And where it's coming from is essentially a lot more operating leverage as you move through the year. As we're ramping up the residential orders that we're seeing in March and April, if that is sustainable, all of that is going to improve the mix as well because it's more manufacturing revenue. So you essentially have operating leverage and a better mix. But again, just to clarify, we are saying mid-40s on the upper upside case, low to mid-40s on the base case. So in any event, based on what we know that is coming as far as revenues, we're seeing a step-up from what you saw in Q1.

And so you said a ramp-up residential. What about commercial? What does the outlook look like there?

We are experiencing growth and have better visibility regarding the schedule of projects we are set to deliver on. Therefore, we should experience less volatility compared to the residential side of the business. We have a schedule of projects lined up for the remainder of the year, and our projections indicate sequential growth through the end of the year.

And just going back to the guidance. The EBITDA bridge sort of indicates around $11 million decline related to mix and price. How much is related to mix and how much is related to price?

Are you referring to Q1? Or are you discussing guidance, as we did not provide an EBITDA bridge for that. On the full year, the main impact is going to be FX. We're projecting 4,000 on average. Last year it was roughly 4,350. So it's an 8% revaluation year-over-year. So you have an impact on negative FX and then the other two factors are mix and operating leverage. And essentially, if you are getting to the upside case, the operating leverage on incremental revenue nets out the mix effect. So in that scenario, your only variance is related to FX. On the base case, you have roughly what we're expecting is probably about 10% to 15% more mix and standalone product sales. Other than that, pricing should not be a factor from here on out because the pricing impacts were only related to a promotional effect that was done in Q4 for Q1 sales, and that's essentially concluded. So it's going to be more of a mix effect.

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

Well, thanks, everyone, for participating in today's call. As I have reiterated, our company is going to do better things, penetrate more markets, and give much better results to our shareholders and everybody. Thank you.

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