Tecnoglass Inc. — FY2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021; filed March 16, 2022. This is an annual report, not a standalone fourth-quarter report. Figures below are in U.S. dollars unless stated otherwise.
Business context
Tecnoglass manufactures, supplies and installs architectural glass, windows and aluminum products, primarily from its vertically integrated facilities in Barranquilla, Colombia. The United States generated 92% of 2021 revenue; Florida remained its largest U.S. market. The company reported one operating segment.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | $496.8 million | $376.6 million | Up 31.9% |
| Gross profit / margin | $202.6 million / 40.8% | $139.4 million / 37.0% | Margin up 380 basis points |
| Operating income / margin | $117.0 million / 23.5% | $65.7 million / 17.4% | Margin improved |
| Net income | $68.4 million | $23.8 million | Parent-attributable income was $68.2 million versus $23.9 million; EPS was $1.43 versus $0.51 |
| Cash from operations | $117.3 million | $71.7 million | Higher operating cash generation |
| Capital expenditures | $53.3 million | $20.6 million | Investment in capacity, automation and facilities |
| Cash and equivalents | $85.0 million | $67.7 million | At year-end |
| Debt | $199.1 million carrying amount | $224.5 million carrying amount | After repayment of senior notes and voluntary term-loan prepayment |
Revenue growth was led by U.S. sales, which rose 34.0% to $456.3 million. U.S. single-family residential sales increased 151.1% to $177.3 million, or 35.7% of total sales. Windows and architectural systems revenue was $420.7 million; glass and framing components revenue was $76.1 million. The 2021 effective tax rate was 29.4%, compared with 35.3% in 2020.
Current assets were $326.3 million and current liabilities were $155.0 million at year-end. The company generated operating cash of $117.3 million, while investing activities used $50.8 million and financing activities used $43.8 million. Management said working capital was expected to remain a net cash-flow benefit and liquidity was adequate to service obligations over the next 12 months.
Material changes and unusual items
- Gross-margin improvement reflected a higher manufacturing mix, operating efficiencies from automation and leverage on higher sales. Operating expenses rose 16.1%, slower than revenue growth, though shipping costs and sales commissions increased.
- Interest expense and deferred financing costs fell to $9.9 million from $21.7 million, following refinancing. The company redeemed $210 million of 8.2% senior notes in January 2021 and recorded a $10.7 million debt-extinguishment loss, primarily including an $8.6 million call premium.
- In November 2021, the company amended its secured credit facility: total facility capacity increased to as much as $350 million, including a $150 million revolving line; the term loan was resized to $200 million; pricing was reduced; and initial maturity was extended to year-end 2026. The stated effective rate, including deferred costs, was 2.81%. Debt is secured by company assets.
- Foreign-currency transaction losses were $4.3 million in 2021, excluding an $8.5 million non-cash intercompany-loan remeasurement loss reclassified to other comprehensive income. Currency translation reduced comprehensive income by $25.1 million.
- Tecnoglass acquired 95% of Panama distributor Ventanas Solar in December 2021 for $4.0 million through capitalization of receivables; the filing states the remaining 5% was expected to be contributed in 2022 without further consideration.
- Remaining performance obligations were $248.1 million at year-end; the company expected to recognize $232.7 million in 2022 and $15.4 million in 2023. Management expected near-term capital expenditures to step down after 2021 investments, with additional capacity projects becoming operational in January and February 2022.
Outlook, risks and contingencies
The filing provides no specific numerical revenue or earnings guidance. Management cited strong U.S. residential and commercial activity, an expanding backlog and opportunities to grow outside Florida. These are forward-looking statements, not assurances of future results.
Key risks include dependence on a principal manufacturing complex in Colombia; concentration in U.S. and Florida demand; competition and pricing pressure; volatility or shortages in glass, aluminum and other inputs; shipping costs and supply-chain disruption; construction-market cyclicality; foreign-exchange movements and Colombian political, tax and economic conditions. The filing also discusses COVID-19 and, as of its March 2022 filing date, potential supply-chain, commodity and currency effects from the Russia-Ukraine conflict.
Other considerations include product warranties and quality claims, customer credit and project execution, and the estimation of costs to complete fixed-price contracts. Product-warranty costs were $1.3 million in 2021, versus $0.7 million in 2020. The auditor identified revenue recognition and estimated costs to complete fixed-price contracts as a critical audit matter; fixed-price contracts represented $77.4 million of 2021 revenue. The company reported no legal matters expected to have a material adverse effect based on information then available, and no material off-balance-sheet arrangements.
Related-party dealings include construction purchases from a company affiliated with the CEO and COO, and other transactions with affiliated entities. Energy Holding Corporation, controlled by the Daes family, beneficially owned approximately 54.8% of outstanding shares. The board declared a quarterly dividend of $0.065 per share, or $0.26 annualized; future dividends remain discretionary and subject to debt restrictions. The independent auditor gave an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective.
Investor verification priorities
- Confirm revenue growth, margins and cash conversion, including the impact of customer advances, payables and receivables on operating cash flow.
- Review the $248.1 million backlog, expected 2022 recognition and fixed-price contract cost estimates; assess project delays, cost overruns and collection risk.
- Verify outstanding debt, the facility’s variable-rate terms and covenants, collateral, and the substantial debt maturity scheduled for 2026.
- Assess exposure to U.S./Florida construction demand, raw-material and freight inflation, and Colombian peso movements and policy changes.
- Review related-party transactions, the Ventanas Solar acquisition and the planned Saint-Gobain joint-venture plant, including funding needs and execution risks.