Good morning and welcome to the Tecnoglass' Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Brad Cray, Investor Relations. Please go ahead.

Thank you for joining us for Tecnoglass' third 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. I will now turn the call over to Jose Manuel beginning on Slide Number 4.

Thank you, Brad, and thank you, everyone, for participating on today's call. We are proud to report another quarter of exceptional results that showcase our ability to consistently outperform in our markets. Our third quarter performance included record revenues of $238.3 million, achieved entirely through organic growth. This impressive performance demonstrates our continued success in capturing market share, especially in regions that are doing better than the broader U.S. market. Our vertically-integrated business model remains a key differentiator, allowing us to enforce strong cost controls and quickly adapt to evolving market dynamics. In our single-family residential business, revenues reached a new quarterly record of $109.7 million, representing robust growth of 25% year-over-year. This strong performance reflects both stabilizing market conditions and growing demand for our innovative product portfolio. Our multi-family and commercial business delivered revenue growth of 4.6% year-over-year to $128.6 million, marking our second highest revenue quarter for this segment. This momentum has carried into the fourth quarter with October achieving record monthly invoicing for the company as a whole. We maintained a positive outlook for our multi-family and commercial business, supported by our record backlog and robust quoting and bidding activity. Our strategic investments in automation and advanced manufacturing continue to generate substantial returns. We had a strong year-over-year growth in both gross profit and adjusted EBITDA. These results show our ability to maintain industry-leading margins while growing the business. We remain confident in our ability to sustain leading profitability through enhanced operational efficiency and the benefit of relatively stable exchange rates over the past year. Our strong financial position provides significant flexibility to pursue growth initiatives while returning capital to shareholders. We generated a strong operating cash flow of $41.5 million this quarter. This was driven by growth in our shorter cash cycle residential business and disciplined working capital management. This targeted cash generation fortified our Board's decision to announce today a 36% increase in the dividend to $0.15 per share. In conclusion, we are strategically positioned to capitalize on the substantial growth opportunities we see across both our residential and commercial markets. Our record backlog, which extends well into 2026, demonstrates the strong demand for our products and validates our market leadership. This visibility, combined with our operational excellence and innovative portfolio, gives us the confidence in our ability to continue delivering above market growth and industry-leading margins. The strong momentum in our project pipeline continues into October, which saw record invoicing. This supports our strengthened outlook for 2024 and reinforces our long-term growth trajectory. With our vertically-integrated model, robust balance sheet and proven ability to execute, we believe Tecnoglass is uniquely positioned to create lasting value for our shareholders. I will now turn the call over to Chris to provide additional operating highlights.

Thank you, Jose Manuel. Moving to Slide number 5. Our performance during the third quarter reflects the resilience of our business to outperform broader macroeconomic trends. Our single-family residential business achieved another record quarter with revenues increasing 25% year-over-year to $109.7 million. This exceptional growth reflects strong demand for our innovative high-performance products, which allow us to capture market share. We also benefited from deliveries on products ordered prior to the expiration of Florida's window sales tax exemption at the end of June. Turning to our multi-family and commercial business, our reputation for excellence continues to earn us new opportunities across our key geographies. This resulted in revenues growing to $128.6 million and we achieved another record multi-year backlog of approximately $1.04 billion at quarter end. The pipeline of projects that we expect to sign into backlog provides clear visibility on projects well into 2025 and early 2026. Moving to Slide 6, our backlog has demonstrated consistent sequential growth in each quarter since 2021. The momentum in our project pipeline and strong bidding activity has helped us maintain a book-to-bill ratio of 1.1 times as of quarter three 2024. This extends our track record of maintaining a ratio above 1.1 times for 15 consecutive quarters. Historically, approximately two thirds of our reported backlog is invoiced over the following 12 months. It is worth noting two things. First, we historically have virtually no project cancellations given that our windows are typically installed in largely completed buildings. Second, the majority of our backlog consists of projects that we believe have reduced sensitivity to interest rate fluctuations. While external factors can cause temporary delays in deliveries, we believe our book-to-bill ratio provides strong visibility on future invoicing. 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 number 7. Our single-family residential revenues for the third quarter increased 25% year-over-year to a record $109.7 million, compared to $87.8 million in the prior-year quarter. This strong year-over-year growth primarily reflects improving market trends and the invoicing of orders placed ahead of the June 30th expiration of the Florida sales tax waiver. Looking ahead, our organic growth opportunities in the single-family residential area are driven by our expanding dealer network, geographic growth in the Southeast and our strategic entry into the vinyl market, which has significantly expanded our addressable market. We continue to expand dealer relationships, innovate and generate awareness for our new vinyl products. We continue to quote an incremental number of projects in many of our new high-growth target geographies. We expect deliveries to continue ramping up through year end and anticipate substantial growth in the coming years as we leverage our existing network to meet growing demand for these products. We were also pleased to see our ESWindows pivot door win several high-profile glass industry awards during the quarter, which we expect will help drive additional sales growth in this business. Additionally, we were very pleased to be recognized by Fortune 100 as one of the top 30 fastest-growing public companies in the U.S. and the only company recognized in the Materials segment. This is a testament to our sound strategy and our ability to leverage our competitive advantages. Turning to drivers of revenue on Slide number 9. Total revenues for the third quarter increased 13.1% year-over-year to $238.3 million, our highest revenue quarter in the company's history. The increase was driven by growth in both our single-family residential and multi-family/commercial businesses. Looking at the profit drivers on Slide 10, adjusted EBITDA for the third quarter was $81.4 million, representing an adjusted EBITDA margin of 34.2%. Third quarter gross profit reached $109.2 million, representing a 45.8% gross margin, compared to gross profit of $90.5 million and a 43% gross margin in the prior-year quarter. The year-over-year margin improvement primarily reflects benefits from stronger pricing, stable raw material costs, favorable product mix and steady foreign exchange rates. We incur incremental expenses related to aluminum tariffs on a small number of our products, which have been largely passed through to customers and which were subsequently eliminated based on a negative determination by the International Trade Commission on October 31, as it was determined that these aluminum imports do not present a risk for the U.S. industry. As highlighted last quarter, the unfavorable FX comparisons seen in recent quarters have dissipated given the relative stability in currencies during the last 15 to 18 months, and we expect this stability to continue through year-end. SG&A expenses were $41.5 million, compared to $29.5 million in the prior-year quarter. This increase primarily reflects higher transportation and commission expenses associated with our revenue growth, increased personnel expenses from annual salary adjustments implemented at the beginning of the year, as well as increased headcount to support a larger operation, and certain non-recurring expenses related to our previously announced strategic review. Now, looking at our strong cash flow and improved leverage on Slide number 11. We generated strong third quarter operating cash flow of $41.5 million, driven by increased profitability on higher revenues and efficient working capital management. Our capital expenditures of $23.7 million included approximately $5 million of opportunistic payments for previously purchased land for future potential capacity expansion and equipment sold on their sellers' finance, as well as a discretionary payment for our new Miami headquarters, which will include a new flagship showroom to help us drive incremental business activity. Excluding these proactive payments, capital expenditures decreased quarter-over-quarter in line with our expectations for capital expenditures to decrease sequentially in the back half of the year. During the quarter, we voluntarily prepaid $17.5 million on our syndicated term loan facility. Our net leverage ratio dropped to a record low of 0.01 times, compared to 0.2 times in the prior-year quarter. In addition, we returned capital to shareholders through $5.2 million of cash dividends during the period. As of September 30, 2024, we had total liquidity of approximately $290 million, including $122 million in cash and $170 million available under our revolving credit facilities. This strong liquidity position, combined with robust cash flow generation, provides us with ample financial flexibility to pursue our growth initiatives and other value-enhancing initiatives. On Slide number 12, we showcase our success in generating best-in-class returns for our shareholders, outperforming the broader industry over the last three years. Our focus on enhancing our business through strategic investments continues to be validated through consistently higher returns than our peers. This outperformance is enhanced by our robust profitability and solid track record of cash flow generation. As mentioned in our earnings release today, after careful evaluation, the Board has concluded its review of strategic alternatives and has decided that the best path forward is to continue executing on our ongoing business strategy. Based on our strong business visibility, high return organic growth investments and projected cash flow generation, we believe the best path forward to maximize shareholder value is to continue to expand across the U.S., leveraging our sustainable competitive advantages to gain market share through our broader product offering. Concurrently, the Board has determined that based on the strength of the business and the company's financial flexibility, it will return more cash to shareholders increasing the dividend by 36% and expanding the buyback program to $100 million to execute on share repurchases opportunistically. Now, moving to our outlook on Slide Number 14. Based on our strong execution through the first nine months of 2024 and our momentum into year end, we're updating our full-year 2024 outlook. We now expect full-year revenues to be in the range of $880 million to $900 million, representing entirely organic growth of approximately 7% at the midpoint of the range. Additionally, we're updating our adjusted EBITDA target to a range of $270 million to $280 million. Our outlook is predicated on a few key assumptions. First, it takes into account our delivery timetable for commercial orders through year end and incorporates our strong performance in October alongside ongoing residential orders scheduled for execution in November. We expect continued momentum in our vinyl related revenues and stable activity in short-term and small commercial projects, supported by our strong order activity during the third quarter. This outlook assumes Colombian peso exchange rates remain stable within the current range, and gross margins maintain in the low-to-mid 40 range for the year. Additionally, we anticipate healthy cash flow generation through the remainder of the year, particularly given that the majority of our capital expenditure investments are now complete, with capital expenditures expected to decrease sequentially in the fourth quarter. In conclusion, our third quarter performance demonstrates our ability to outperform even in challenging market conditions while maintaining industry-leading margins and profitability. As we look to the remainder of the year and beyond, our considerable growth in single-family residential, combined with our record backlog, provides us with multiple avenues for continued expansion. With our focus on cost management, strong balance sheet, and robust cash flow generation, we remain well positioned to drive sustainable growth and create additional value for our shareholders into 2025 and beyond. With that, we will be happy to answer your questions.

The first question today is from Sam Darkatsh with Raymond James. Please go ahead.

Good morning, Jose Manuel, Chris, Santiago, how are you?

Good morning.

Good morning, Sam. Thank you.

I have a few questions to start with. First, regarding the conclusion of the strategic review, it seems you might have considered a potential transaction involving the sale of the company. What do you estimate the company's value would be in a private market transaction compared to the current public markets? Additionally, with the increase in share repurchase authorization, do you plan to use repurchase at the current stock prices?

So, on the first one, Sam, when we revealed this to the market, we said that many different options were on the table, not necessarily just a sale of the company. So, continuing the path and growing organically was determined by the Board to be the best option and returns for shareholders. And clearly with that, it's implied that we have a positive view for the organic growth of the company going forward, the avenues for growth and such. So, at the end of the day, it was a determination based on the prospects for the company. What do we think the multiple for the company is warranted? Again, that depends on the view on growth and what we see going forward. Right now, I think it's obviously trading at a premium and we think that's probably warranted based on a better margin profile and a better growth outlook. So, that's obviously for the market to determine and understand what the company's value going forward based on those prospects.

And the repo question, Santiago, I'm sorry.

The repo question is as we said it would be opportunistically and that's going to depend on cash flow mainly. We obviously have opportunities to continue growing organically and as we've discussed before to the extent that we find ways to reinvest in the business, the return on invested capital is obviously the highest. But if we see that there are opportunities to buy when we feel that the stock needs to be supported, we'll definitely be there for that.

Okay. Thank you for that question and answer. The next obvious question is your first look at '25. What's your first guess as to your initial guess as to sales, gross margin and EBITDA margins as we look into 2025?

So, we said gross margins were going to be for 2024 in the low to mid-40s. You saw Q3 actually achieving mid-40s, and you can probably trend up based on what we're seeing for growth in 2025. Too early to tell what we see exactly for 2025. We're going through the budgeting process, and we'll give you guys more color on our next call obviously when we provide 2025 guidance. But generally, with that growth, we expect margins to continue trending up.

And also, I want to add that we have a very good backlog, and we keep closing more jobs than what we invoice every month. So, the backlog keeps growing, and we see a strong market ahead and in different geographies too.

And my final question, there was obviously good news that the East Coast and Southeast ports, the strike was minimal. If however the ports eventually strike in January, if talks break down, what sorts of options are available to you to satisfy demand in Florida and the Southeast? And are you anticipating shipping product ahead of the mid-January potential port situation? Thanks.

Well, the ports that we're using are all private, and they will not compromise with the port strike. But there are several ports that we can go through, and the cost is about the same. The difference between shipping to Miami or Savannah is even cheaper to Savannah than to Miami. So, we could still find a way to come in. But we always keep a good inventory of the products that we have, because we are always ahead of our customers. So, at any point in time, for example, today, we have two weeks' deliveries already stored at the port in Miami.

Very helpful. Thank you, gentlemen.

The next question is from Julio Romero with Sidoti & Company. Please go ahead.

Good morning. This is Alex on for Julio. Thank you for taking questions. Just a follow-up, post strategic review, is there any change expected to what avenues you're considering to pursue growth?

Yes. I mean obviously, continuing to take market share and leveraging our advantages is number one, but we're also contemplating opportunistic tuck-in acquisitions to be able to enter some of these new markets more efficiently. So, everything's on the table, obviously has to make sense from a valuation perspective, but our strategy has been strong in gaining market share organically.

Thank you. And one follow-up, in terms of the SG&A increase year-over-year, do you see that continuing to rise at the same pace? And if so, would you attribute the raise to the same drivers mentioned in the press release and on the call?

We do not. If you look sequentially from Q2, the change is not so drastic, and the reason for that like higher SG&A year-over-year is that at the beginning of the year, as we discussed in our previous call, we had salary increases that took effect at the beginning of this year. So, if you look at it sequentially, the change is not that high. Number two, there were some non-recurring expenses associated with the strategic review that were expensed in Q3. And number three, we're incurring some aluminum tariffs that were put in place earlier in the year that were not there last year. And those tariffs were subsequently reversed by a determination of the International Trade Commission. So, we don't expect that going forward as we move through the year.

Thank you very much.

Thank you.

The next question is from Tim Wojs with Baird. Please go ahead.

Hey, guys. Good morning. Nice job.

Hey, Tim.

Good morning.

Maybe, just the first question on the tariffs, Santiago. I guess, first, do you get that back in terms of any tariffs that you've incurred? I mean, does that kind of come back in the fourth quarter? I guess that's the first question. And then, obviously, we're a couple of days from the election, but the President that will be in office has run on a tariff ticket. And so, I know China has been focused, but it could also kind of expand to just any sort of import. So, what type of flexibility do you guys have around any prospective tariffs that could happen just on imports in general?

Yes, and on the first question, the answer is yes. We get that fully returned to us, and that will be reflected in Q4. And I think that was a good test because what happened there is that a lot of those were passed on to clients, and they paid for them without any significant issue. And we saw other competitors doing the same. So, at the end of the day, what you would potentially see with tariffs, given the fact that the U.S. is not self-sufficient, is that imports continue to be required and those are going to be passed on to end clients via pricing. Our expectation is that everybody is probably going to be in the same boat, and that's going to create inflation. I think you're seeing that reflected on the markets today.

Colombia is one of the few countries with either a balance or a deficit in trade with the U.S. Out of the 16 billion in trade with the U.S., 9 billion consists of commodities like oil, coffee, bananas, and flowers that we export. I would expect that a country with a trade deficit with the U.S. would face tariffs, and if that happens, we will pass those costs on to our customers. Regarding aluminum, as Santiago pointed out, we are currently paying a 10% tariff on aluminum, but we are recovering that cost from our customers.

Okay, okay. That's helpful. And then just as you think about backlog conversion, your backlog now is up north of 20%, I think year-to-date. Your commercial U.S. revenue, I think is actually down slightly. And so, should we see a pretty big inflection in the implied U.S. commercial business in 2025 as that backlog starts to convert?

Yes. And I think we discussed this in the last call that some of these projects that are getting booked are some of the larger towers that take longer to get put in place, right? So, it's not necessarily an 18-month conversion but a longer dated conversion. So, we're essentially building into 2026 already, but the expectation generally is that the backlog will continue going as Jose just mentioned. The other thing is that to the extent that residential continues to grow and is taking more and more of the overall revenue stream that doesn't get captured in the backlog, look, right? So, it doesn't necessarily mean that sequential growth is going to reflect what future revenues will be, because a lot of that revenue stream is coming from single-family residential. But to answer your question, the expectation is for the backlog to continue growing through year-end, and obviously, with the backlog composition, the conversion is probably extending more based on the complexity and magnitude of those projects.

Okay, good. And then just last one, can you just remind us kind of where you are on the vinyl ramp within residential?

Yes. So, a lot of quotes are still coming in, so much slower than expected, but it's encouraging that we're getting very good feedback as we discussed last quarter. The main issue was not having the full line. So, the vinyl doors for instance have been taken care of. We continue to expect that to be a meaningful contributor next year.

Okay, very good. I'll hop back in the queue. Thanks everybody.

Thanks.

The next question is from Alex Rygiel with B. Riley FBR. Please go ahead.

Thank you. Good morning, gentlemen. A couple of quick questions. First, Santiago, can you quantify the pull-forward effect related to the expiration of the Florida sales tax waiver?

Yes. So, if you look at the run rate that we were going with, we were talking about maybe $85 million, $90 million per quarter in Q2. We reached $109 million and that's about right. I mean, if you think about the level of orders on that side as of June, it was up 60%, but not all of it was executed in Q3 as we discussed. The expectation is that some of that is going to be executed in Q4. So, I would say Alex that generally maybe a good $15 million of what we did in Q3 was related to that pull forward. The encouraging thing is that orders have leveled off, right? So, we're just going to have more invoices in Q3 and Q4, but expect with interest rates coming down, hopefully, we expect more business going forward, as well as with this geographic diversification. But yes, I would say $10 million, $15 million was embedded in Q3.

And is there any chance the waiver is reauthorized?

We do not know. Hopefully, that's the case, but it's going to be kind of more on the legislative side to determine that. I think that based on the recent activity of hurricanes is certainly a possibility. I think it is definitely something that should be needed, and hopefully, if it is extended, we will see some tailwinds behind that.

And on that topic of hurricanes, can you sort of remind us how the demand pull-through kind of plays out over the next couple of quarters for repairs and if your new vinyl window product can sort of play into that opportunity at all?

Well, as you know, the insurance claims take a lot of time to assess the damages and accept the claims. There is a lot of movement on that yet. We have seen a slowdown in orders on the West Coast of Florida because of the hurricane. There were like two or three weeks that nobody was doing anything. Now it started to pick up again, and we expect a lot of that work to get done next year.

Thank you.

The next question is from Jean Ramirez with D.A. Davidson. Please go ahead.

Hi, thank you for the time. Yes, this is Jean for Brent Thielman. Thinking about the backlog and in context of the pipeline visibility going into 2026, can you give a little more color as to what the burn rate looks like? Is it more second-half weighted given that you have projects that take a little longer to revenue? Yes, I'll start with that.

Well, I guess the back of the envelope calculation is that two thirds of the backlog get executed within the first 12 months. I think perhaps based on the composition of projects that could change slightly, maybe, call it a 60% getting in the first 12 months. But that's also going to be determined by how many light commercial projects we're able to book from here on out because the backlog composition will have these kinds of large projects that are multi-year, but you also get projects that you book on a spot basis that get delivered within six, nine, or 12 months. So, that's yet to be determined. I mean based on what we have today maybe it gets extended and is not 65% that gets executed over the following 12 months, maybe it's more like 60%. But then to the extent that the light commercial projects continue to pick up, then that's going to change. So, the visibility is more so on the longer dated projects, but we still have light commercial projects that can get booked on a day-to-day basis.

Got it. Thank you. And regarding vinyl, do you guys still think it will be a $5 million to $10 million contribution per month in 2025? Or is there more of a target that you guys have thought of?

Yes. We're expecting to pick up on 2025. We have now the complete line. We're developing a couple of new products to even be better prepared. And we believe maybe, in the first two months, which are the slowest months of the year, no. But from then on, yes.

And just thinking about your relationship with Saint Gobain and the possible discount and contribution to margins, can you provide a little more color into how that might show up in the P&L at least some preliminary expectations?

If you remember, we were asked about next year's gross margin percentages. I believe that we should be around 45% to 46% next year. With operating leverage and the ability to purchase glass at a market discount, that number could potentially be higher. We will provide more details next quarter when we give full guidance, but we haven't quantified this yet because we are currently in the budgeting process.

Thank you. I appreciate the time. I'll hop back in.

Thank you.

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

Thanks everyone for participating in today's call. Please expect better news every quarter. We're doing really good.

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