Tecnoglass(TGLS) - 2024 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended June 30, 2024, reflect decreased revenues and net income, a slight asset reduction, significant liability decrease, and improved operating cash flow Condensed Consolidated Balance Sheets As of June 30, 2024, the balance sheet indicates a slight decrease in total assets to $942.5 million, a more significant reduction in total liabilities to $367.7 million, and an increase in shareholders' equity to $574.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $516,661 | $535,760 | | Total Assets | $942,489 | $962,717 | | Total Current Liabilities | $212,945 | $235,886 | | Total Liabilities | $367,650 | $414,697 | | Total Shareholders' Equity | $574,839 | $548,020 | Condensed Consolidated Statements of Operations and Other Comprehensive Income Tecnoglass reported decreased total operating revenues and net income for both Q2 and the six-month period ended June 30, 2024, with diluted EPS also declining year-over-year Key Performance Indicators (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $219,654 | $225,280 | $412,281 | $427,919 | | Gross Profit | $89,577 | $109,670 | $164,237 | $217,425 | | Operating Income | $51,134 | $74,501 | $92,156 | $148,181 | | Net Income | $35,028 | $52,565 | $64,758 | $100,937 | | Diluted EPS | $0.75 | $1.10 | $1.38 | $2.11 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash from operating activities increased to $67.9 million, while cash used in investing activities decreased and cash used in financing activities significantly increased due to debt repayments and dividends Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $67,945 | $43,214 | | Net Cash used in Investing Activities | ($27,802) | ($38,079) | | Net Cash used in Financing Activities | ($40,327) | ($7,832) | | Net (Decrease) Increase in Cash | ($2,703) | $1,014 | | Cash - End of period | $126,805 | $104,686 | Notes to Condensed Consolidated Financial Statements The notes detail the company's single operating segment, Architectural Glass and Windows, providing breakdowns of revenue by geography, debt structure including prepayments, and commitments related to its joint venture - The company operates in a single reporting segment: Architectural Glass and Windows, which comprises the design, manufacturing, distribution, marketing, and installation of its products[16] Revenue by Geography - Six Months Ended June 30 (in thousands) | Region | 2024 | 2023 | | :--- | :--- | :--- | | United States | $393,701 | $409,565 | | Colombia | $11,069 | $11,702 | | Panama | $528 | $584 | | Other | $6,983 | $6,068 | | Total Revenues | $412,281 | $427,919 | - As of June 30, 2024, the company had $703.4 million of remaining performance obligations (backlog), which it expects to recognize as revenue over the next three years[33] - The company made voluntary prepayments of $30 million ($15 million each on January 19 and May 17, 2024) on its Senior Secured Credit Facility[38] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q2 2024 revenue decline to lower commercial revenues, partially offset by residential growth, with gross margin contracting due to Colombian Peso appreciation, while the company maintains a strong liquidity position Overview Tecnoglass is a leader in architectural glass and windows, leveraging its vertically integrated, low-cost Colombian manufacturing base to serve the US market, with a strategic focus on diversification and residential expansion - The company's structural competitive advantage is based on its low-cost manufacturing in Colombia, a vertically integrated business model, and strategic geographic location[74] - A core component of the company's strategy is the continued diversification of its presence and product portfolio, particularly expanding in the United States outside of Florida and growing its residential window offerings[77] Results of Operations Q2 2024 revenues decreased 2.5% due to commercial declines, partially offset by residential growth, leading to a gross margin contraction to 40.8% primarily from Colombian Peso appreciation, with net income also declining for both Q2 and H1 2024 - Q2 2024 revenue decrease of 2.5% was driven by a $14.4 million (10.4%) drop in commercial revenues, partially offset by an $8.8 million (10.1%) increase in single-family residential revenue[80] - Gross margin for Q2 2024 decreased to 40.8% from 48.7% in Q2 2023, primarily due to an 11.4% appreciation of the Colombian Peso, which increased costs denominated in that currency against predominantly US Dollar revenues[81] - For the six months ended June 30, 2024, gross margin decreased to 39.8% from 50.8% in the prior year period, mainly due to a 14.7% appreciation of the Colombian Peso[87] Liquidity and Capital Resources The company maintains a strong liquidity position with $126.8 million in cash and $170.0 million in credit lines, supported by $67.9 million in operating cash flow, with capital expenditures of $34.8 million focused on capacity expansion - As of June 30, 2024, the company had cash and cash equivalents of $126.8 million and approximately $170.0 million available under different lines of credit[93] - During the first six months of 2024, the company invested $34.8 million in capital expenditures, primarily in building, construction, machinery, and equipment to enhance automation and expand capacity[93][95] - Financing activities in H1 2024 used $40.3 million, which included $31.0 million in debt repayments and $9.4 million in dividend payments[96] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from interest rates, foreign currency exchange rates, and commodity prices, with potential impacts on net earnings from interest rate increases and Colombian Peso appreciation, alongside exposure to aluminum price volatility - Interest Rate Risk: A 100 basis point increase in interest rates would decrease net earnings by approximately $0.2 million, net of hedging effects[97] - Foreign Currency Risk: Approximately 25% of costs are in Colombian Pesos (COP) A 5% appreciation of the COP relative to the USD would result in a $4.0 million decrease to net earnings based on H1 2024 results[98] - Commodity Risk: The company is exposed to volatile aluminum prices but attempts to pass price changes through to customers by basing its pricing on the London Metals Exchange quote plus a premium[102] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of June 30, 2024[104] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[105] Part II. Other Information Item 1. Legal Proceedings The company is involved in ordinary course legal matters, which management believes will not have a material adverse effect on its financial condition or results of operations - The company states that while it is involved in legal matters from time to time in the ordinary course of business, management does not believe any current matters will have a material adverse effect[105] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2024, the company repurchased 100 ordinary shares in June at an average price of $52.90 per share, a transaction not part of its publicly announced buyback program Share Repurchase Activity - Q2 2024 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2024 | 0 | N/A | | May 2024 | 0 | N/A | | June 2024 | 100 | $52.90 | Item 5. Other Information No director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2024 - During Q2 2024, no director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[107] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and financial statements formatted in XBRL