# Tecnoglass Holdings Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Tecnoglass Holdings Inc.](/companies/tgls.md) (CIK 1534675)
- Form: 10-Q
- Filed: 2024-05-09
- Accepted by EDGAR: May 9, 2024, 16:30 ET
- Period: 2024-03-31
- Accession: 0001493152-24-018466
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1534675/000149315224018466/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1534675/000149315224018466/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $192.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $118.0m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $74.7m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $41.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $11.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $29.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.63 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.63 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 46,996,708 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $33.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $9.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $4.2m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2024-03-31 | $135.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $549.6m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $981.6m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $235.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $407.9m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $154.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-31 | $3.3m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-31 | $573.6m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 17,856 characters.

### Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References to “we”, “us” or “our” are to Tecnoglass Inc., except where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report.

### Overview

We are experienced and highly skilled in the vertical integration of architectural glass manufacturing, distribution, and professional fitting. Our expertise extends to the production of top-quality windows, as well as the supply of aluminum, vinyl, and other components. Our dedicated and knowledgeable team serves a diverse range of commercial and residential construction projects worldwide, guaranteeing outstanding products and seamless installation services. With a focus on innovation, combined with providing highly specified products with the highest quality standards at competitive prices, we have earned #1 spot in the Forbe’s list of America’s 100 most successful small-cap companies for 2024, and developed a leadership position in each of our core markets. In the United States, which is our largest market, we were ranked as the third largest glass fabricator serving the United States in 2023 by Glass Magazine. In addition, we believe we are the leading glass transformation company in Colombia. Our customers, which include developers, general contractors or installers for hotels, office buildings, shopping centers, airports, universities, hospitals and multi-family and residential buildings, look to us as a value-added partner based on our product development capabilities, our high-quality products and our unwavering commitment to exceptional service.

With over 40 years of experience in architectural glass and aluminum assembly, we specialize in transforming various glass products. Our offerings include tempered safety glass, double thermo-acoustic glass, and laminated glass. Our wide range of finished glass products are utilized in diverse buildings for floating facades, curtain walls, windows, doors, handrails, as well as interior and bathroom spatial dividers. In addition to glass, we manufacture aluminum and vinyl products such as profiles, rods, bars, plates, and other hardware specifically designed for window manufacturing.

Our products are manufactured in a 5.6 million square foot, state-of-the-art manufacturing complex in Barranquilla, Colombia that provides easy access to North, Central and South America, the Caribbean and the Pacific. Our products can be found on some of the most distinctive buildings in these regions, including 100 Hood Park Drive (Boston), 601 West 29th St (New York). Norwegian Cruise Line Terminal B (Miami), Paramount Miami Worldcenter (Miami), Via 57 West (New York), One65 Main (Cambridge), AE’O Tower (Honolulu), Salesforce Tower (San Francisco), and One Thousand Museum (Miami). Our track record of successfully delivering high profile projects has earned us an increasing number of opportunities across the United States, evidenced by our expanding backlog and overall revenue growth.

Our structural competitive advantage is underpinned by our low-cost manufacturing footprint, vertically integrated business model and geographic location. Our integrated facilities in Colombia and distribution and services operations in Florida provide us with a significant cost advantage in both manufacturing and distribution, and we continue to invest in these operations to expand our operational capabilities. Our lower cost manufacturing footprint allows us to offer competitive prices for our customers, while also providing innovative, high quality and high value-added products, together with consistent and reliable service. We have historically generated high margin organic growth based on our position as a value-added solutions provider for our customers.

We have a strong presence in the Florida market, which represents a substantial portion of our revenue stream and backlog. Our success in Florida has primarily been achieved through sustained organic growth, with further penetration now taking place into other highly populated areas of the United States. As part of our strategy to become a fully vertically integrated company, we have supplemented our organic growth with some acquisitions that have allowed us added control over our supply chain allowed for further vertical integration of our business and will act as a platform for our future expansion in the United States. In 2016, we completed the acquisition of ESW, which gave us control over the distribution of products into the United States from our manufacturing facilities in Colombia. In March 2017, we completed the acquisition of GM&P, a consulting and glazing installation business that was previously our largest installation customer.

On May 3, 2019, we consummated the joint venture agreement with Saint-Gobain, acquiring a 25.8% minority ownership interest in Vidrio Andino, a Colombia-based subsidiary of Saint-Gobain, solidifying our vertical integration strategy by acquiring an interest in the first stage of our production chain, while securing ample glass supply for our expected production needs. Additionally, in April 2019, we acquired a 70% equity interest in ESMetals, which has been consolidated in our financial statements since. In November 2023, we acquired the remaining 30% equity interest in ESMetals. ESMetals is a Colombian entity that serves as a metalwork contractor to supply us with steel accessories used in the assembly of certain architectural systems as part of our vertical integration strategy.

The continued diversification of the group’s presence and product portfolio is a core component of our strategy. In particular, we are actively seeking to expand our presence in United States outside of Florida. We also launched a residential window offering which, we believe, will help us expand our presence in the United States and generate additional organic growth. We believe that the quality of our products, coupled with our ability to price competitively given our structural advantages on cost, will allow us to generate further growth in the future.

We have focused on working with *The Power of Quality*, always making sure that our vision of sustainability is immersed into every aspect of our business, including social, environmental, economic and governance variables, that help us make decisions and create value for our stakeholders. We carry out a series of initiatives based on our global sustainability strategy, which is supported on three fundamental pillars: promoting an ethical and responsible continuous growth, leading eco-efficiency and innovation, and empowering our environment. As part of this strategy we have voluntarily adhered to UN Global Compact Principles since 2017 and in pursuit of our cooperation with the attainment of the SDGs joined in 2021 a program to dynamize, strengthen and make visible the management of greenhouse gas emissions as a carbon neutral strategy set out by the Colombian government for 2050.

### RESULTS OF OPERATIONS

|  | Three months ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Operating Revenues | $192,627 | $202,639 |
| Cost of sales | (117,967) | (94,884) |
| **Gross profit** | **74,660** | **107,755** |
| Operating expenses | (33,638) | (34,075) |
| **Operating income** | **41,022** | **73,680** |
| Non-operating income and expenses, net | 1,080 | 1,287 |
| Equity method income | 1,046 | 1,449 |
| Foreign currency transactions losses | (153) | (1,100) |
| Interest Expense and deferred cost of financing | (2,106) | (2,273) |
| Income tax provision | (11,159) | (24,671) |
| **Net income** | **29,730** | **48,372** |
| Income attributable to non-controlling interest | - | (137) |
| **Income attributable to parent** | **$29,730** | **$48,235** |

### Comparison of quarterly periods ended March 31, 2024, and 2023

### Revenues

Operating revenues during the quarter ended March 31, 2024, was $192.6 million, compared to $202.6 million during the quarter ended March 31, 2023, a decrease of $10.0 million or 4.9%, year over year. The decrease was driven by seasonally slow single family residential revenues, down $10.4 million, or 12.5% year over year, impacted by high interest and mortgage rates. Despite the aforementioned higher rates, the commercial market actually grew slightly year over year as the Company continues to execute on its growing backlog.

### Gross profit

Gross profit during the three months ended March 31, 2024, was $74.7 million, a decrease of $33.1 million, or 30.7%, from $107.8 million during the three months ended March 31, 2023. The gross profit margin during the three months ended March 31, 2024, of 38.8% was down from 53.2% during the first quarter of 2023, primarily related to a 17.8% appreciation of the Colombian Peso impacting our costs denominated in Colombian Pesos against our predominantly US Dollar revenue stream, accounting for an estimated 308-basis points year over year decrease on margin. Additionally, this unfavorable FX dynamic impacted inventories that were recorded into the balance sheet at a weaker Peso and then accounted for under raw material costs at a much stronger Peso, translating into more US Dollars at the time the revenues are recognized. This effect contributed to a 197-basis point decrease year-over-year when assessing the same effect during the comparable period. Finally, margins were impacted by our revenue mix which included more installation and stand-alone product sales during the current period. Installation revenues increased to 16.9% of total revenue, compared with 14.4% during the prior year quarter, and stand-alone architectural glass and frames sales increased to 10.9% of total sales, in comparison with 8.3%, as a result of recent manufacturing capacity expansion unlocking the opportunity to sell stand-alone product.

### Expenses

Operating expenses decreased $0.4 million, or 1.3%, from $34.1 million to $33.6 million for the quarters ended March 31, 2023, and 2024, respectively. The decrease resulted primarily from $0.8 million decrease in Accounts receivable provision partially offset by mostly flat operating expenses, despite the unfavorable pressure on Colombian Peso denominated cost, as the peso strengthened 17.8% year over year.

### Non-operating income and expenses, net

During the three months ended March 31, 2024, and 2023, the Company recorded non-operating income of $1.1 million and $1.3 million, respectively. Non-operating income is comprised of interest income from short term investments, as well as non-operating expenses related to certain charitable contributions outside of the Company’s direct sphere of influence.

### Foreign currency transaction gains and losses

During the three months ended March 31, 2024, the Company recorded a non-operating loss of $0.2 million associated with foreign currency transactions compared to a net non-operating loss of $1.1 million during the three months ended March 31, 2023.

### Interest Expense and deferred cost of financing

Interest expense and deferred cost of financing decreased $0.2 million, or 7.3%, to $2.1 million during the quarter ended March 31, 2024, as the Company voluntarily prepaid $15 million to reduce its debt balance and benefited from having a favorable interest rate hedge in place for approximately 75% of its outstanding debt.

### Income Taxes

The effective income tax rate for 2024 and 2023, was 27.3% and 33.8%, respectively. The effective income tax rate of 27.3% during the three months ended March 31, 2024, is below the statutory rate as the Colombian subsidiaries which bear a higher corporate income tax rate recorded a proportionally lower share of the consolidated income.

As a result of the foregoing, the Company recorded net income for the three months ended March 31, 2024, of $29.7 million compared to net income of $48.4 million for the three months ended March 31, 2023.

### Liquidity

As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of approximately $135.9 million and $129.5 million, respectively. Additionally, we currently have approximately $170.0 million available under different lines of credit.

We anticipate that the Company will continue to generate positive cashflow from operating activities through, at least twelve months from the date of this report, which we believe, in addition to our current liquidity position, provides ample flexibility to service our obligations through the next twelve months.

### Capital Resources

We transform glass and aluminum into high specification architectural glass and custom-made aluminum profiles which require significant investments in state-of-the-art technology. During the Three months ended March 31, 2024 and 2023, we made investments primarily in building and construction and machinery and equipment in the amounts of $11.2 million and $20.3 million, respectively. These investments across our vertically-integrated operations include further automating our glass and window assembly production lines, adding glass production lines, expanding our aluminum facilities, putting new vinyl windows lines to penetrate this new product segment and purchasing land to grow beyond current installed capacity. The Company estimates that current manufacturing operating capacity has reached approximately $1.2 billion which does not account for incremental installation revenue capacity. Additionally, the Company expects the resulting increase in output to improve efficiency throughout its operations while reducing material waste and overall lead times.

### Cash Flow from Operations, Investing and Financing Activities

|  | Three months ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Cash Flow provided by Operating Activities | $33,447 | $43,063 |
| Cash Flow used in Investing Activities | (10,192) | (15,688) |
| Cash Flow used in Financing Activities | (16,686) | (3,287) |
| Effect of exchange rates on cash and cash equivalents | (196) | 778 |
| Cash Balance - Beginning of Period | 129,508 | 103,672 |
| Cash Balance - End of Period | $135,881 | $128,538 |

During the three months ended March 31, 2024, and 2023, operating activities generated approximately $33.4 million and $43.1 million, respectively. The main sources of operating cash during the three months ended March 31, 2024, were driven by an improvement in working capital associated with inventories and trade accounts receivable. Inventories generated $13.7 million, mostly due to a faster raw material and Finished goods turnover during the three months ended March 31, 2024, as main projects are being executed; compared to a net use of $13.0 million during the three months ended March 31, 2023, as we procured materials to meet our growing operations. In addition, Trade Accounts receivable generated $3.8 million, compared with a use of $8.6 million during the three months ended March 31, 2023. The largest use of cash in operating activities were other assets, comprised primarily of prepaid taxes, which used $9.2 million during the three months ended March 31, 2024, resulting from a higher taxable income year over year for fiscal year that will be paid in 2024; and trade accounts payable which used an additional $8.0 million. Comparatively, other assets used $14.3 million during the three months ended March 31, 2023, and Trade accounts receivable used $9.7 million.

We used $10.2 million and $15.7 million in investing activities during the three months ended March 31, 2024, and 2023, respectively. The main use of cash in investing activities during the three months ended March 31, 2024, related to the automation of our architectural system assembly processes further described above in the “Capital Resources” section. During the three months ended March 31, 2024, we paid $9.9 million to acquire property plant and equipment, which in combination with $1.3 million acquired under credit or debt, amount to total capital expenditures of $11.2 million. During the three months ended March 31, 2023, we used $15.5 million for the acquisition of property and equipment. Including assets acquired with debt or supplier credit, total capital expenditures during the period were $20.3 million.

Financing activities used $16.7 million and $3.3 million during the three months ended March 31, 2024 and 2023, respectively. We paid $4.2 million and $3.6 million of dividends to holders of our ordinary shares during the Three months ended March 2024 and 2023, respectively. Additionally, during the three months ended March 31, 2024, we used $15.2 million to repay debt from our Senior Secured Line of Credit.

### Off-Balance Sheet Arrangements

None

## Market risk

As filed, 4,470 characters.

We are exposed to ongoing market risk related to changes in interest rates, foreign currency exchange rates and commodity market prices.

A rise in interest rates could negatively affect the cost of financing for a significant portion of our debt with variable interest rates. If interest rates were to increase over the next 12 months by 100 basis points, net earnings would decrease by approximately $0.3 million based the current composition of our indebtedness. This market risk exposure is net of the effect from interest rate hedging derivative financial instruments further described in the footnotes to the financial statements.

We are subject to market risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar. Some of our subsidiaries’ operations are based in Colombia, and primarily transact business in local currency. Approximately 3% of our consolidated revenues and 24% of our costs and expenses are effectively incurred in Colombian pesos, thereby mitigating some of the risk associated with changes in foreign exchange rates. This portion of costs and expenses denominated in Colombian Peso excludes certain items which are transacted in Colombia using Colombian Peso but are priced in U.S. Dollars or are otherwise indexed to U.S. Dollar rates. However, as our costs and expenses in Colombian Pesos exceed, a 5% appreciation of the Colombian Peso relative to the US Dollar would result in our quarter revenues increasing by $0.3 million and our costs and expenses increasing by approximately $2.2 million, resulting in a $1.9 million decrease to net earnings based on results for the three months ended March 31, 2024.

Similarly, a significant portion of the monetary assets and liabilities of these subsidiaries are generally denominated in US Dollars, while their functional currency is the Colombian peso, thereby resulting in gains or losses from remeasurement of assets and liabilities using the end of period spot exchange rate. These subsidiaries have both monetary assets and monetary liabilities denominated in US Dollars, thereby mitigating some of the risk associated with changes in foreign exchange rate. Furthermore, we record a portion of the non-cash foreign currency transaction gains and losses from remeasurement of certain intercompany loans as other comprehensive income. Net of this, the Colombian subsidiaries’ US Dollar denominated monetary liabilities exceed their monetary assets by $29.4 million, such that a 1% devaluation of the Colombian peso will result in a loss of $0.3 million recorded in the Company’s Consolidated Statement of Operations as of March 31, 2024.

Additionally, the results of the foreign subsidiaries must be translated into US Dollars, our reporting currency, in the Company’s consolidated financial statements. The currency translation of the financial statements using different exchange rates, as appropriate, for different parts of the financial statements generates a translation adjustment, which is recorded within other comprehensive income on the Company’s Consolidated Statement of Comprehensive Income and Consolidated Balance Sheet.

We are also subject to market risk exposure related to volatility in the prices of aluminum, one of the principal raw materials used for our manufacturing. The commodities markets, which include the aluminum industry, are highly cyclical in nature, and as a result, prices can be volatile. Commodity costs are influenced by numerous factors beyond our control, including general economic conditions, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions. Our selling prices are also impacted by changes in commodity costs base our pricing of aluminum products based on the quoted price on the London Metals Exchange plus a manufacturing premium with the intention of aligning cost of our raw materials with selling prices to attempt to pass commodity price changes through to our customers.

We cannot accurately estimate the impact a one percent change in the commodity costs of would have on our results of operation, as the change in commodity costs would both impact the cost to purchase materials and our selling prices. The impact to our results of operations depends on the conditions of the market for our products, which could impact our ability to pass commodities costs to our customers.

## Controls and procedures

As filed, 1,505 characters.

### Evaluation of Disclosure Controls and Procedures

We performed an evaluation required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of Tecnoglass, Inc.´s design and operating effectiveness of the internal controls over financial reporting as of the end of the period covered by this Quarterly Report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, were effective as of March 31, 2024, in order to provide reasonable assurance that the information disclosed in our reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

For the quarter ended March 31, 2024, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Filed May 9, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-018466. Last ingested by Listed: Nov 5, 2026, 11:57 ET. No prices; not investment advice.