Tecnoglass Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Tecnoglass manufactures and installs architectural glass, windows, and aluminum products. It reports one operating segment. Unless stated otherwise, amounts below are U.S. dollars in millions.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $134.5 | $111.6 | +20.6% |
| Gross profit / margin | $60.3 / 44.8% | $45.3 / 40.6% | Margin +4.2 percentage points |
| Operating income | $34.0 | $25.4 | +33.5% |
| Net income | $21.0 | $8.3 | +153.0% |
| Net income attributable to parent / diluted EPS | $20.9 / $0.44 | $8.2 / $0.17 | — |
| Cash from operations | $27.1 | $28.7 | −5.3% |
| Capital expenditures, including assets acquired on credit | $11.9 | $6.4 | Higher investment |
Gross-margin improvement reflected a higher share of manufacturing versus installation revenue, automation-related efficiencies, and operating leverage. U.S. residential sales rose 155.1% to $59.7 million and represented 44.3% of sales; commercial sales declined 15.1% to $74.9 million, while Latin American sales fell 30% to $7.6 million. The United States generated $127.0 million of revenue.
Liquidity, debt, and balance sheet
- Cash and cash equivalents were $84.4 million at March 31, down from $85.0 million at year-end. Current assets were $344.8 million and current liabilities $159.5 million, implying working capital of about $185.3 million.
- Debt obligations were $183.9 million, including $6.0 million of deferred financing costs; balance-sheet long-term debt was $183.4 million. Debt maturities are concentrated in 2027, when $154.3 million is scheduled. The company prepaid $15 million of principal in March.
- The amended credit facility provides a $150 million revolving line, with maturity extended to the end of 2026. The filing says the principal-rate spread was expected to step down to 1.5% after submission of the March compliance certificate. Weighted-average borrowing rate was 2.75%.
- Inventory increased to $104.5 million from $85.0 million at year-end. Operating cash flow was supported by $6.1 million from receivables, but inventory used $13.5 million.
- Shareholders’ equity was $278.8 million, up from $244.7 million at year-end, including favorable foreign-currency translation and derivative fair-value changes.
Material changes, outlook, and risks
- Operating expenses rose 32.7% to $26.4 million, including $2.7 million of non-recurring professional fees and other costs associated with a Special Committee assessment following a short-seller report. Shipping expense also rose $1.9 million amid higher volume, rates, and U.S. sales mix.
- Foreign-currency transaction losses were $2.9 million, versus less than $0.1 million in Q1 2021. Interest expense and deferred financing costs fell to $1.5 million from $3.5 million. Q1 2021 included an $11.1 million debt-extinguishment loss, including an $8.6 million call premium.
- Remaining performance obligations were $317.6 million; management expected $241.5 million to be recognized during 2022 and $76.0 million in 2023 or later. The filing does not provide formal full-year revenue or earnings guidance. Management expected working capital to be a net cash-flow benefit for 2022 and said current liquidity provided flexibility to meet obligations over the next 12 months.
- Risks include variable interest rates, Colombian-peso exposure, and volatile aluminum costs. The company estimated a 100-basis-point interest-rate increase would reduce annual net earnings by about $0.6 million after hedging; a 5% peso appreciation would reduce earnings by about $1.6 million based on the prior 12 months. Management stated it could not reliably quantify the earnings effect of a 1% aluminum-cost change.
- The company held 16 interest-rate swaps covering $125 million of debt through November 2026; their March 31 fair value was a $2.6 million asset. A possible additional contribution of approximately $12.5 million to the Vidrio Andino joint venture may be required for its planned glass plant.
- Related-party balances and transactions include purchases from Vidrio Andino and construction spending with A Construir, whose owners are affiliated with the CEO and COO. The filing describes ordinary-course legal matters and says management did not believe them material, while noting outcomes cannot be assured.
- After quarter-end, the company announced a transfer from Nasdaq to the NYSE; trading on the NYSE under TGLS began May 9, 2022. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether the residential-sales growth and $317.6 million order obligations convert to revenue and cash as projected, and how commercial demand performs.
- Whether inventory growth, capital investment, and working-capital needs affect cash conversion and the stated liquidity outlook.
- Actual debt pricing after the expected spread step-down, future interest-rate exposure, and refinancing of the 2027 maturity concentration.
- Ongoing foreign-exchange and aluminum-cost effects, as well as the nature and recurrence of Special Committee-related costs.
- Related-party transaction terms and the timing or amount of any additional Vidrio Andino contribution. Also verify the dividend payment date: the filing states April 29, 2021, although the dividend was declared in March 2022.