Transcript: Tecnoglass Q2 2026 Earnings Conference Call

Tecnoglass (NYSE: TGLS ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

The full earnings call is available at Summary Full Transcript OPERATOR Good day and welcome to the Tecnoglass Incorporated second quarter 2026 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference call over to Mr.

Brad Cray, Investor Relations. Mr. Cray, the floor is yours, sir. Brad Cray, Investor Relations Thank you for joining us for Tecnoglass second quarter 2026 conference call.

A copy of the slide presentation to accompany this call may be obtained on the Investors section of the Tecnoglass website. Our speakers for today's call are Chief Executive Officer Jose Manuel Daes, Chief Operating Officer Christian Daes and Chief Financial Officer Santiago Giraldo. I'd like to remind everyone that matters discussed in this call, except for historical information, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth and future acquisitions.

These statements are based on Tecnoglass' current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary in a material nature from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors and other risks and uncertainties affecting the operation of Tecnoglass' business. These risks, uncertainties and contingencies are indicated from time to time in Tecnoglass filings with the Securities and Exchange Commission. The information discussed during the call is presented in light of such risks.

Further, investors should keep in mind that Tecnoglass' financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. I will now turn the call over to Jose Manuel, beginning on slide number four. Jose Manuel Daes, CEO Thank you, Brad.

And thank you everyone for participating on today's call. We are pleased to report another period of record revenue that demonstrates the strength and resilience of our business with robust double-digit growth in both our single-family residential and multifamily and commercial businesses. Our backlog is at another record level and we continue to gain market share. The strength of our platform continues to differentiate us in the market.

That includes the quality of our products, a vertically integrated low-cost model and our deep customer relationships. As we discussed last quarter, we expected the cost pressure from tariffs to hit ahead of the offsetting benefit from our pricing actions and other efficiency measures. That played out as anticipated. We have spent years building the flexibility to operate through shifting cost and trade conditions.

That model lets us respond faster than most companies in our industry facing those same cost pressures. Demand remains strong even with our own pricing actions now flowing into orders. Our industry-leading advantages are truly hard to replicate. S.

showroom opened in the past few years. Our vinyl line continues to build momentum and our automation program is advancing on schedule. Subsequent to quarter end, we completed our redomiciliation from the Cayman Islands to the United States in July. S.

listing, enhances index eligibility and broadens our potential investor base. S. facility in the coming weeks. As we discussed last quarter, we continue to advance discussions with state and local authorities on incentives that will support the economics of the potential project and we are working to finalize the remaining terms.

Tecnoglass has been built over many years with a focus on high-quality products, customer service and operational excellence. That discipline continues to underpin the business today. Over the long term, we expect this model to keep generating durable cash flow which supports our ability to return capital to shareholders. It also lets us keep investing in the growth initiatives that will drive long-term value.

We remain as confident as ever in our ability to continue building long-term value for our shareholders. I will now turn the call over to Chris to provide additional operating highlights. Christian Daes, Chief Operating Officer Thank you, Jose Manuel. 4 billion.

0. 8 million, reflecting consistent execution on an expanding project pipeline and continued market share gains, including growing contributions from projects beyond Florida. The strength of our backlog is supported by several key factors. First, we experience virtually no project cancellations as we typically install windows in buildings that are already well advanced into the construction process.

Second, our mix has shifted toward larger high-end projects such as luxury condominiums and upscale lodging which have been less sensitive to interest rate fluctuations. And third, the continued geographic diversification of our project portfolio is driving our expansion in untapped markets. Florida represented approximately three-quarters of backlog in the second quarter versus approximately 80% in the first quarter and nearly 90% in the year-ago quarter, reinforcing our geographic expansion.

Importantly, while this reflects strong growth in new markets, our Florida pipeline remains healthy and we continue to expect strong demand trends in the Florida market through the balance of the year. 5 million. This performance was driven by continued market share gains through geographic expansion, growing contributions from our vinyl product line and healthy order activity, including strong orders placed ahead of our May pricing actions. As a reminder, approximately 65% to 70% of our single-family revenues are tied to repair and remodel demand which is more resilient and less correlated with mortgage rates.

We see multiple avenues to continue gaining share. Our dealer network has expanded over 20% in the last 12 months, supported by our high-quality products and efficient five- to six-week lead times. We have generated approximately $15 million of single-family residential revenues outside of Florida year to date, on pace with our original target of roughly $30 million for the full year. Our Los Angeles showroom is on track to open in late September, which will be our fifth showroom outside of Florida and seventh overall, bringing our Legacy line aluminum window line to the West Coast market.

Our vinyl line continues to gain traction, contributing to this quarter's record results as we continue scaling across our footprint with this product that has more than doubled our addressable market. S. 1% this year. From a regional perspective, the South Atlantic, Mid-Atlantic and West South Central Census divisions, where our business is more concentrated, are projected to be among the strongest-performing regions for residential construction spending in 2026.

This geographic alignment between our platform and strong markets, combined with our expanding dealer base and the ongoing vinyl ramp, underpins our confidence in achieving our double-digit revenue growth guidance which is well above expected end-market growth. I will now turn the call over to Santiago to discuss our financial results and full year outlook. Santiago Giraldo, CFO & Head of Investor Relations Thank you, Christian. 3 million.

Growth was broad based with continued execution on our record backlog in multifamily and commercial and ongoing market share gains in single family residential aided by orders placed ahead of our May pricing action, an estimated 15 to 20 million dollars of residential orders were pulled into the second quarter ahead of the May price increase. Order levels have since returned to a more normalized growth trend. 2% in the prior year quarter. 7% in the prior year quarter.

The year over year change in gross margin was primarily driven by several factors. S. S. aluminum price up approximately 77% year over year, higher labor costs related to the 23% minimum wage increase in Colombia at the beginning of the year and a Colombian peso that appreciated approximately 14% year over year.

7 million in severance costs related to headcount reductions under our efficiency and automation initiatives. These collective pressures were partially offset by operating leverage on record volume. The May pricing actions began flowing into orders late in the quarter with the revenue benefit beginning in the third quarter. 8% of total revenues in the prior year quarter.

The increase primarily reflected approximately $17 million of expenses associated with the Section 232 tariffs on finished aluminum windows along with higher transportation and commission expenses associated with our revenue growth and higher personnel expenses from annual salary increases coupled with a stronger peso. This was nearly a full quarter carrying the new 10% tariff. We provide a closer look at the margin dynamics on slide number 12. Aluminum was at a record high for the quarter.

S. aluminum price, which combines the LME benchmark and the Midwest premium, was up approximately 77% year over year. Costs have come down from this year's peak in May. The peso has continued to strengthen and, at approximately 3,200 to the dollar, is currently at its strongest level since June 2019, running stronger than the assumptions in our prior outlook scenarios.

On average, a 5% movement in the Colombian peso impacts our gross margins by approximately 120 basis points. We will continue to be opportunistic in adding foreign exchange hedges where possible. In addition to reducing our peso expenses in line with our ongoing automation-related headcount reduction, I will walk through how our pricing flows into results. On the residential side, our May actions included a 7% adjustment.

Those orders started getting invoiced right at the end of the second quarter, so the benefit begins in the third quarter and builds through September as more of what we ship reflects those actions. In commercial and multifamily, pricing flows through over a longer time horizon. What we are invoicing today out of backlog was priced well before May, so the benefit reaches revenue as we book and execute additional projects. That starts in late 2026 on smaller, quick-turnaround jobs and in late 2027 on larger projects.

Putting that together, we expect third quarter gross margin to be roughly flat or slightly higher when compared to the second quarter with improved pricing helping offset a stronger peso and continued high aluminum cost. Now examining our cash flow and balance sheet on slide numbers 13 and 14. -sourced aluminum as part of our supply chain resilience and tariff mitigation strategy. 4 million in the quarter included scheduled payments related to previously announced capacity and automation investment.

Our balance sheet remains solid. 6 times. We maintain a conservative leverage profile that provides significant financial flexibility to continue investing in growth and returning capital to shareholders. Our disciplined investments in operational excellence and our vertically integrated platform have consistently delivered superior returns relative to the broader industry supported by our leading profitability and working capital management.

We expect these trends to continue generating cash flows to support our history of balanced, high-return capital deployment. Now moving to our outlook on slide 16. 12 billion with adjusted EBITDA in the range of $220 million to $230 million. This factors in our expectation for third quarter revenues to step down sequentially from the record second quarter, primarily reflecting some revenue pull forward ahead of the implemented price increases.

That said, we expect year over year growth in each of the remaining quarters of 2026 and reiterate our expectation for double-digit revenue growth for the year, supported by a solid production schedule and a growing benefit from pricing. Our automation and efficiency program reduced headcount by 10% as of the end of June, with additional automation expected to be operational by year end, providing incremental headcount efficiency. We are executing this program while preserving our capacity to serve a strong order book. We believe these actions are strengthening our cost structure and competitive position for years to come.

Our revised guidance accounts for prevailing high aluminum costs and a stronger-than-expected Colombian peso that has provided a higher-than-anticipated headwind to margins versus our prior assumptions. That being said, we continue to be highly encouraged with demand trends and our ability to grow well above industry rates within our guidance range. The primary factors remain the timing of project invoicing from our commercial backlog, the pace of residential end market activity, expansion into new geographies and vinyl, and the trajectory of aluminum costs and foreign exchange.

As pricing initiatives and incremental automation savings are realized, we remain committed to fully offsetting the tariff impact. In 2027, we expect capital expenditures in the range of $80 million to $95 million. S. facility, which we expect to complete in the coming weeks.

Executing the land purchase reserves our optionality as the feasibility study continues. If we decide to move forward with construction, the project would proceed in phases with each stage evaluated based on demand trends, return profiles and overall market conditions. In conclusion, our results demonstrate the durability of our business model and the strength of our competitive position. We are executing on a record backlog and gaining share in new and existing geographies.

With a growing national presence in single family residential and a solid balance sheet, we remain confident in our ability to deliver on our objectives and outperform the market for years to come. With that, we will be happy to answer your questions. Operator, please open the lines for questions. OPERATOR Thank you, sir.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.

Again, it is star then one to ask a question. At this time, we will pause momentarily to assemble our roster. The first question we have will come from Julio Romero of Sidoti & Company. Please go ahead.

Julio Romero, Analyst at Sidoti & Company Thanks. Hey, good morning.