Third quarter revenues and gross profit for Tecnoglass Inc., manufacturer of architectural glass, windows and associated aluminum products for the global residential and commercial construction industries, were near or more than those of the same period last year.

Total revenues for the third quarter of 2020, which ended September 30, 2020, were $103.3 million compared to $108.5 million in the prior year quarter. U.S. revenues of $95.7 million, which represented 93% of total revenues, grew 3.1% compared to $92.8 million in the prior year quarter, primarily driven by strong growth in residential activity. The contribution of U.S. revenue growth to total revenues was more than offset by lower revenue from Colombia and other Latin American regions, primarily attributable to delayed activity at many customer job sites due to COVID-19 related factors. Changes in foreign currency exchange rates had an adverse impact of $0.9 million on Colombia and total revenues in the quarter.

Gross profit for the third quarter of 2020 grew 12.3% to $40.1 million, representing a 38.8% gross margin, compared to gross profit of $35.7 million, representing a 33% gross margin in the prior year quarter. The 580 basis point improvement in gross margin mainly reflected lower raw material costs, greater operating efficiencies from prior automation initiatives, and a higher mix of revenue from manufacturing versus installation activity. Selling, general and administrative expense (SG&A) was $19.9 million compared to $20.2 million in the prior year quarter, primarily attributable to lower variable expenses related to shipping, commissions and other personnel expenses as well as tight cost controls. As a percent of total revenues, SG&A was 19.3% compared to 18.6% in the prior year quarter due to lower revenues.

Net income was $8.3 million, or $0.18 per diluted share, in the third quarter of 2020 compared to net loss of $1.3 million, or $0.03 loss per diluted share, in the prior year quarter, including an after-tax non-cash foreign exchange transaction loss of $3.1 million in the third quarter 2020 and a $12 million loss in the third quarter 2019. As previously disclosed, these gains and losses are related to the accounting re-measurement of U.S. Dollar denominated assets and liabilities against the Colombian Peso as functional currency.

Adjusted net income was $12.7 million, or $0.28 per diluted share, in the third quarter of 2020 compared to adjusted net income of $8.3 million, or $0.18 per diluted share, in the prior year quarter.

“I could not be more thrilled with the truly outstanding performance of our company, delivering record year-to-date adjusted EBITDA of $72.1 million and a solid 500 basis point improvement in adjusted EBITDA margin year-over-year, all while retaining our entire workforce. The strength of our business carried into the third quarter, demonstrated by record quarterly gross profit, adjusted EBITDA and operating cash flow. Our ability to innovate, adapt and excel allowed us to increase our U.S. revenues, led by growth in single family housing, one of our strongest growth channels,” says Tecnoglass CEO José Manuel Daes. “Operationally, we continue to reap the benefits of our previously completed high return automation initiatives, contributing to the expansion of our industry-leading margins, improved cash generation and a quarter end net debt to LTM Adjusted EBITDA ratio below 2 times.”

“We are extremely pleased that our consortium of mostly U.S. and European based lenders have recognized our record of success, as well as the benefits of our strategically located and vertically-integrated operations,” he adds. “This is reflected in our new $300 million credit facility underwritten on what we believe to be terms comparable to or better than many publicly traded U.S. companies of similar size. For Tecnoglass, 2020 has been a milestone year on many fronts thus far and we plan to continue creating additional value in our business.”

“Our third quarter results reflect a continued recovery in the U.S., particularly in residential, and overall strong demand for our best-in-class architectural glass products. We recently introduced a new product for homebuilders that should help us further expand our addressable market in single family housing beyond renovation projects and outside of hurricane prone markets,” says Christian Daes, chief operating officer. “Overall market share gains and successful expansion into new U.S. geographies are allowing us to produce growth in a complex environment. As we move to the end of 2020, we are excited by the momentum in our business. We believe our innovative product portfolio, strong industry relationships and structural competitive advantages position us to continue growing faster than our end markets into 2021 and beyond.”

Business Outlook

Based on the company’s current invoicing schedule and underlying market demand, it is providing a full year 2020 adjusted EBITDA outlook of $95 million to $100 million. At the midpoint, this outlook implies adjusted EBITDA growth of approximately 6% for the full year and 18% for the fourth quarter on a year-over-year basis, according to chief financial officer Santiago Giraldo.

“We expect revenue in the fourth quarter to be comparable to the prior year quarter, with a higher mix of product revenue versus installation revenue,” he says. “Furthermore, we expect stronger demand in the U.S. to offset the slower recovery in Latin American markets.”