Edited Transcript of TGLS earnings conference call or presentation 9-May-19 2:00pm GMT

Over the past year, the U.S. has represented 83% of revenue, we last ought undergo favorable commercial construction trends favorable pricing surroundings and just section gains along with fast penetration into the U.S. single-family residential market. A healthful U.S. operation more than offset softer originate can our Latin American regions, where construction activity remainder muted. A part of the first belt sales exaggerate was can part due ought nearly $5 million ought $7 million of revenues drag dispatch from the second belt with equipment services growing significantly year-over-year.

While, these combine of affair favorably impacted complete margins, we were same pleased ought boundary growth can operating expenses ought 5.4% year-over-year, reflecting tight fare controls and the healthful operating levels. can addition ought healthful results, we eat had few exciting affair development updates, that stand us healthful because the future.

Recently figure a strategic union with Schuco is allowing us ought hasten growth can America and ought arrive above the served just can the US. Recently awarded projects lay us can the past ought look benefits from a transaction beginning can the center of 2019.

In May, we closed above our previously announced drift cup mutual dare with Saint-Gobain. This was a same sure step because our company, which we desire ought enhance our vertical integration strategy, grow our drift cup provide and generate significant synergies can the years ought come.

Later this year, we desire ought terminate a quantity enhancements of cup and aluminum equipment ought includes product genius and final operations. We are exited ought mail this tall answer initiative can place, which we desire ought add ought our successful chase record of implementing slender initiatives and making our low fare plans can a more efficient.

With this genius enhancements underway, we trust we are healthful situated ought generate attractive returns, because we slaughter against our expanded backlog.

In closing, we were same pleased with our complete teams dedication, ought driving additional normal result. Our middle operations are strong, no partnerships, ventures and genius investments are expected ought farther entertain our affair ought salute increasing demand, still too elevating our corporate profile and broadening local awareness of our leading architectural cup operation.

Furthermore, we eat a hard remainder bit ought motivate future growth and invest can additional estimate enhancing opportunity. We are confident can the might of our industry leading edge business, and expert ought last gaining section can U.S. commercial and residential construction activity. because we explanation ought the remainder of 2019, we are above because another year of record operation and explanation dispatch ought delivering or now reaffirm complete year outlook.

I will now become the yell above ought Chris ought provide additional details above our backlog.

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Christian T. Daes, Tecnoglass Inc. - COO & Director [4]

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Thank you, Jose Manuel and good morning ought everyone above the line. Moving ought our backlog above the glide 6. We ended the first belt with a record backlog of $518 million, up 3.4% year-over-year. This compared ought $515 million can the purpose of the 2019 and was mainly due ought the hard bidding activity and plot wins throughout the quarter.

We are specially pleased ought look the plot wins can various geographies can queue with our U.S. growth strategy. Additionally, our Schuco partnership continues ought crop sure results complementing our healthful plot pipeline that is allowing us ought strengthen our visibility into 2020. Our ongoing operation can the single-family residential just can the U.S. continues ought surpass our expectations, and currently represents our fastest growth opportunity. because a reminder, many of our single-family projects are typically shorter cycle and above the representing backlog.

The U.S. just continues ought instance an increasing part of our affair comprising nearly 83% of our backlog. And currently, our talent sales team recently added few plot wins ought our portfolio can the states of New York, Massachusetts and Texas. This reflects our ongoing efforts ago the prick U.S. and ought amplify our combine of business, ought regions where economic fundamentals backward long-term plead because architectural cup business.

We last ought look healthful construction activity within our U.S. markets, including projects. can our less penetrated geographies, which currently represents almost a belt of our U.S. backlog. We desire ought terminate expansion of our aluminum extrusion equipment can the third belt of 2019. This ought rent us ought serve incremental plead throughout our market, specially because aluminum products.

Furthermore, we eat initiatives ought automate sure processes and optimize product lines above our facilities, we ought exist flat improve positioned ought further our competitive stand can the US, still farther augmenting our structural advantages.

Overall, we are bidding above many attractive plot along our diversified footprint leading ought a first belt backlog can a new record level. We eat a healthful R&D pipeline of tall operation products ought found upon our innovative civilization because we last ought originate the global profile of our company throughout meaningful partnerships below the occasions ought majestic service because our customers.

A key component of our successful chase record of growth industry-leading edge has been our capability ought source and slaughter tall answer projects still remaining focused above innovation productivity and genius expansion.

I will now become the yell above ought Santiago ought uncover our econmic results above markets.

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Santiago Giraldo, Tecnoglass Inc. - CFO & leading of IR [5]

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Thank you, Christian, and good morning ought everyone above the line. Beginning with our econmic highlights above glide #8. We were same pleased with our operation can the first belt of 2019, we last ought broaden our visitor relationships and strengthen our presence can new markets along an increasingly diversified footprint.

We are expanding our arrive into new markets and plot types, including multi-family, office buildings, tall rises and hotels, can addition ought our growing single-family residential affair segment. because a result, we drove significant increases can revenues and adjusted EBITDA ought new first belt records.

Our operating money brook operation reflects working leading investments. This includes a found up of inventories ought backward a healthful pipeline of projects being invoice during the first belt of this year and beyond, still interpret receivables exaggerate above a nominal foundation with healthful sales growth, appointment sales famous perfect year-over-year with a part of the remainder being associated ought retainage trade above our equipment business.

We spent $3.7 million above CapEx can the first quarter. With maintenance CapEx approximating $1 million and the remainder are geared toward opportunistic tall answer investments and efficiency initiatives. mainly ought salute healthful plead within our aluminum frame manufacturing operations.

As of March 31st, we eat deploy nearly half of the complete anticipated leading investments of nearly $20 million. We desire ought fund the remaining part with money above hand and existing debt leading resources.

In March, we rates net proceeds of nearly $36.1 million along a follow-on public offering of shares. We ended the belt with a healthful money stand of $62 million can the net leverage ratio of 2.2 times, down from 2.6 epoch can the purpose of 2018. These remainder bit might supports our growth initiatives and operational enhancements moving forward.

Looking can the drivers of revenues above the glide #9. We reported our 8th straight belt of record revenue, which were up 23% ought $107.2 million because the first quarter. Continued healthful operation can the U.S. drove the might can the first belt sales. With the U.S. increasing by 46.1% year-over-year ought $92.1 million, mainly reflecting continued might can overall construction activity, just section gains, deeper penetration can single-family residential can a favorable pricing environment. can the purpose of the first belt of 2019, the U.S. represented 86% of our complete revenues. Furthermore, almost complete of our affair lines grew can the U.S. market.

Looking can the drivers of adjusted EBITDA above glide #10. Adjusted EBITDA increased 15.7% ought $21.1 million from the foregoing year quarter, which produced an adjusted EBITDA edge of 19.7%. First belt complete edge was 29.8% compared ought 30.7% can the foregoing year quarter, these 90 foundation points distinction was mainly attributable ought a higher combine of service revenue year-over-year.

This was partially offset by lower labor and might fare per unit, and lower depreciation and amortization costs. Notably, raw riddle fare increases can labor constraints affecting our U.S.-based peers eat cottage no had a riddle shock above our manufacturing costs.

Higher sales and lower foundation and marine traffic costs, were the leading drivers of the 270 foundation points diminish can reported SG&A ought 16.5% of the sales can the first quarter. Our deed continues ought exist same slender because shown by the SG&A operating leverage generated above a record quarterly sales.

Moving ought our tall answer investments above glide #12. can in 2019, we completed our previously announced strategic mutual dare with Saint-Gobain. because a reminder, can January, we purchased a minority stand can Saint-Gobain's existing Colombia based subsidiary Vidrio Andino, which has annualized sales of nearly $100 million. We were excited ought terminate this investment, which reinforces our vertically integration tactic and elevates our global profile with customers, suppliers architects and other industry participants.

Through this mutual venture, we eat secured drift cup supply, perfect purchasing economics and enhanced our capability ought serve customers by having more control above the product process. This ought motivate improve margins above the want term.

Permitting processes are already above their method ought quit construction of our second state-of-the-art plant near Barranquilla can the fourth belt of 2019. Additionally, because we mentioned, we are making farther enhancements above our cup and aluminum equipment ought automate various processes. With our plan ought exaggerate our installed aluminum manufacturing genius by nearly 25%.

These enhancements which eat been ongoing during the fourth belt of final year are expected ought -- 2.5 epoch improvement can the efficiency of sure automated lines within cup production. The aluminum genius expansion is expected ought exist completed can the third belt of this year, still complete implementation of our automation initiatives is expected ought exist completed by the purpose of 2019.

Looking can the development of our presence can the U.S. just above glide #13. The U.S. continues ought exist the largest and most evident vehicle of our company's growth. can 2013, the U.S. just represented nearly 40% of our business. because can first belt of 2019, the U.S. represented 83% of our LTM sales.

These fast development above the final 6 years eat been marked by few key transactions along with ongoing initiatives ought prick attractive markets along the nation [ph]. This includes our 2016 acquisition of ESWindows ought more effectively control the distribution of our products and our 2017 addition of GM&P, which gave us the capability ought direct install our products can projects.

Both GM&P and ESWindows eat enhance our vertically integrated platform and farther strengthened our structural advantages can key U.S. markets. can 2017, we entered the U.S. single-family just and eat rapidly scale that business, which we desire ought instance above 10% of our revenues can 2019, up from less than 3% neutral backward can 2017.

We trust that our collective markets can the U.S. will last ought become faster than the national average. We too desire ought accept section can our just mainly driven by enhanced relationships with new customers, proven execution can a broad mountain of high-value added projects and structural differences that allows ought exist same competitive, still maintaining a trait first approach.

In the US, we cottage only instance a piece of the nearly $30 billion architectural cup and aluminum industry. With our exposure ought both commercial and single-family residential, we look significant upside can our affair ought arrest a rising section of the U.S. demand.

Moving ought our 2019 anticipate above glide #15. We last ought anticipate stronger sumit and bottom queue growth can complete year 2019. because the complete year, we linger confident can growing revenues ought a mountain of $395 million ought $450 million with the majority of revenue growth expected ought exist from the U.S. market, assist partially by innovative new products, plot types, geographic expansion can single-family residential. We last ought desire year-over-year percent growth ought exist higher can the first half compared ought the growth can the backward half, based above the anticipated timing of invoicing can 2019, compared ought 2018.

Based above these reiterated sales anticipate and anticipated combine of revenues. We last ought desire complete year adjusted EBITDA ought exist can the mountain of $85 million ought $94 million. This anticipate assumes favorable operating leverage above higher revenues and the higher combine of sales from manufacturing operations. Additionally, the anticipate abstract our section of adjusted EBITDA from the Vidrio Andino mutual venture, which will quit contributing ought our results can the second belt of 2019.

We will too notice that because we mentioned can the first quarter, we saw nearly $5 million ought $7 million of revenue drag dispatch from the second quarter. because a result, we saw our revenue entertain can the first quarter, hence we will look an offsetting revenue shock of $5 million ought $7 million can the second quarter. This is purely related ought timing of invoicing above some service revenue argue earlier.

In closing, we linger healthful positioned because another year of healthful growth can our business, which ought rent us ought unlock significant estimate ought our shareholders. Our trend tall answer investments, vertically integrated low fare operations, extensive portfolio of can plead products, new partnerships and our attractive leverage profile are complete moving us can the precise direction. We are same confident can our capability ought arrive 2019 growth objectives, still farther improving our industry leading margins.

We thank you because your continued backward of Tecnoglass. We will exist joyful ought answer your questions. Operator, interest vacant the queue because questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first riddle is from Jeremy Hamblin with Dougherty & Company.

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Jeremy Scott Hamblin, Dougherty & company LLC, inquiry section - VP and Senior inquiry Analyst of Consumer & Retail [2]

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I wanted ought quit with the complete edge that you saw can the quarter, it sounded gown you had a much higher combine of service revenues and that was possibly the most significant impact, besides with the various puts and takes you eat the aluminum genius expansion afterward this year. Santiago, could you grant us a sensation because your expectations nearly friendly of the timing and cadence of complete margin, because we affect throughout the year?

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Santiago Giraldo, Tecnoglass Inc. - CFO & leading of IR [3]

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Sure. Hi, Jeremy. We are basically looking because complete margins ought elect up sequentially. because you said, the Q1 complete edge was essentially related ought a higher combine of service revenue, which above time is going ought flat out and because we elect up the exceeding genius above the aluminum front and we are able ought drag more manufacturing revenues, complete edge is going ought friendly of trend up ought a low 30s, which is what we had discussed can foregoing calls and what we had guided to. hence this is neutral a timing melody above service revenue.

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Jeremy Scott Hamblin, Dougherty & company LLC, inquiry section - VP and Senior inquiry Analyst of Consumer & Retail [4]

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And because the year, you're cottage thinking friendly of can that 33% range?

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Santiago Giraldo, Tecnoglass Inc. - CFO & leading of IR [5]

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Yes, yes, that will exist a goal because us.

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Jeremy Scott Hamblin, Dougherty & company LLC, inquiry section - VP and Senior inquiry Analyst of Consumer & Retail [6]

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Okay, great. And then switching gears ought your Colombian business, which has struggled and I deem you've been patient and plead because some patients from investors can condition of thinking nearly that business. You've continued ought look it languish a few bit here. I don't learn if Christian or Jose Manuel, you wish ought grant some sensation of if we're starting ought look traction there. How we ought exist thinking nearly that can 2019?

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José Manuel Daes, Tecnoglass Inc. - CEO & Director [7]

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Hello, Jeremy. Jose here. I trust 2019 is going ought exist flat with the final year, besides 2020 looks improve because, now that the option is gone, final year the government seems ought exist stabilizing. nation are starting the projects that they lay above hold. That being said, I mean, it's going ought elect up, besides because a part of our affair is same few now, hence possibly is going ought pickup 10% ought 15% next year. We throughout the purpose is no going ought exist that much can the overall. We look healthful demand, we eat indeed merry backlog because next year too above the US. hence we're same optimistic.

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Jeremy Scott Hamblin, Dougherty & company LLC, inquiry section - VP and Senior inquiry Analyst of Consumer & Retail [8]

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Okay, great. Thanks. And then ought that point, you obviously eat had a phenomenal brook here can the U.S. and clearly capturing just share. I wanted ought grow a sensation of what you're seeing out can the marketplace from competitors, the competitive response ought you moving external of your dominant belt can Florida and obviously seeing meeting wins can other geographies along the U.S. if that's the Northeast, Texas or key markets can the Midwest. Are they getting more aggressive above price, what kind of competitive response are you seeing because you affect into these newer geographies?

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