Tecnoglass reports second quarter 2016 results

José M. Daes, Chief Executive Officer of Tecnoglass, commented, "We continued to outpace industry growth in our primary U.S. and Colombian markets to deliver strong growth in net sales and adjusted EBITDA. We were especially pleased to grow our backlog to a record $398 million, which reinforces the strength of our strategy, product diversity and widening relationships with new and existing customers. In the US, we gained additional market share with revenues up 36.4% year-over-year, and we expect this positive momentum to continue into the second half of the year. We ended the quarter with good visibility on our multi-year project pipeline and we are actively pursuing new projects to grow our business."

Christian Daes, Chief Operating Officer of Tecnoglass, added, "We continue to experience improving demand as evidenced by growth in revenue and backlog. Our activity remains healthy in key markets, including our largest US presence in South Florida, and we are expanding into new regions where economic fundamentals support long-term demand for our high-end windows and architectural glass systems. Our new soft coat low-E glass manufacturing line is up and running and fully supplying our internal soft coat production needs. In the second quarter, we successfully launched our TecnoAir product line using a new technology to produce the thinnest safety architectural glass in the world. This is a great time for our Company and we are firmly situated to strengthen our market leading positions in the US and Latin America."

Second Quarter 2016 Results

Total revenues for the second quarter 2016 increased 33.5% to $77.5 million from $58.1 million in the prior year quarter. Total revenues increased 43.1% on a constant currency basis, excluding a $5.6 million impact from unfavorable foreign currency in Peso denominated sales in the second quarter 2016. US revenues rose 36.4% to $45.5 million compared to the prior year quarter. Colombia revenues, a majority of which are represented by long-term contracts priced in Colombian Pesos (COP), increased 54.9% on a local currency basis in the second quarter 2016. Unfavorable foreign currency resulted in reported Colombia revenues up 29.4% to $28.3 million compared to the prior year quarter.

Gross profit was $26.5 million, representing a gross margin of 34.1%, compared to $20.9 million, or a gross margin of 36.0%, in the prior year quarter. The gross margin difference was primarily due to incremental electric and gas consumption costs related to unusually warm weather caused by El Niño. Operating expenses were $14.0 million compared $11.6 million in the prior year quarter. As a percent of total revenue, operating expenses improved to 18.1% compared to 19.9% in the prior year quarter, mainly due to higher revenues which more than offset an increase in shipping expense to serve more distant markets and to support lean manufacturing initiatives. Operating income rose to $12.5 million compared to $9.3 million in the prior year quarter.

Net income was $14.4 million, or $0.47 per diluted share, compared to a net loss of $21.0 million, or a $0.84 loss per diluted share in the prior year quarter. Adjusted net income1, excluding the impact of warrants and earn-out shares as reconciled in the table below, was $4.3 million, or $0.14 per diluted share, compared to $5.0 million, or $0.20 per diluted share, in the prior year quarter. This difference in adjusted net income1 was primarily due to higher operating income which was more than offset by higher interest expense and foreign currency losses in the second quarter 2016 compared to the prior year quarter.

Adjusted EBITDA2 increased 25.2% to $17.1 million to a historical record quarter, helped by higher revenues on the Company's low-cost, efficient operations. Adjusted EBITDA2 excludes the impact of warrants, earn-out shares and foreign exchange gains and losses as reconciled in the table below.

1 Adjusted net income in both periods excludes the non-cash impact associated with the change in the fair market values of the exchanged and remaining warrants and of the earn-out shares during each respective period, as reconciled in the table below. The respective fair values of the warrants and earn-out shares change in response to market factors not directly controlled by the Company such as the market price of the Company's shares of common stock and the volatility index of comparable companies.

2 Adjusted EBITDA excludes the impact of warrants and earn-out shares and further excludes foreign exchange gains and losses related to the effect on foreign exchange rates on monetary balance sheet accounts, as reconciled in the table below.

Financial Operations

The Company is committed to further strengthening its financial operations. In June 2016, the Company hired Deloitte & Touche Ltda. as its external consultant for US GAAP accounting, SEC reporting, SOX compliance implementation and other accounting and SEC related matters. The company continues to expand its finance team with the addition of seasoned professionals with US GAAP accounting and SEC reporting expertise. In the second half of 2016, the Company will continue to focus on improving its financial operations, including the design and operating effectiveness testing for external financial reporting and SOX controls. The Company will continue deepening its bench of experienced finance professionals and investing in relevant information technology.

Full Year 2016 Outlook

Based on improving commercial construction markets, continued market share gains and improving operating efficiencies, for the full year 2016, the Company continues to expect revenues to grow approximately 20% to $288 million compared to the prior year. The Company now expects Adjusted EBITDA to increase to a range of $70 to $75 million, implying roughly 32% growth at the midpoint, compared to $55 million in 2015 excluding foreign currency transaction gain and losses.

José M. Daes concluded, "First half 2016 net sales increased 25.7% year-over-year and are trending in line with plan. Adjusted EBITDA increased at a stronger 33.3% rate to $32.4 million over that same time reflecting the benefits of our low cost operations. That said, we believe our revised Adjusted EBITDA outlook represents a more prudent outlook based on our current mix of project activity in backlog, additional investments to support growth and better visibility on our margin profile into the back half of 2016, as compared to our initial full year 2016 expectations, introduced in mid-2015. The entire Tecnoglass team is committed to delivering another year of double-digit growth in sales and Adjusted EBITDA."