Tecnoglass Inc. (TGLS) CEO Jose Manuel Daes on Q2 2020 Results - Earnings Call Transcript
Tecnoglass Inc. (NASDAQ:TGLS) Q2 2020 Earnings Conference Call August 6, 2020 9:00 AM ET
Rodny Nacier - Investor Relations, Managing Director - ICR
Jose Manuel Daes - Chief Executive Officer
Chris Daes - Chief Operating Officer
Santiago Giraldo - Chief Financial Officer
Conference Call Participants
Mike Shlisky - Colliers Securities
Josh Wilson - Raymond James
Tim Wojs - Baird
Will Jellison - D.A. Davidson
Thank you for standing by. This is the conference operator. Welcome to the Tecnoglass Inc., Second Quarter Earnings Conference Call. [Operator Instructions]
I would now like to turn the conference over to Rodny Nacier, Investor Relations.
Please go ahead.
Thank you for joining us for Tecnoglass' second quarter 2020 conference call. A copy of the slide presentation to accompany this call may be obtained on the Investors section of the Tecnoglass Web site. Our speakers for today's call are Chief Executive Officer, Jose Manuel Daes; Chief Operating Officer, Chris 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 operations 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 4.
Jose Manuel Daes
Thank you, Rodny, and thank you everyone, for participating on today's call.
I am especially pleased with our talented team and their unwavering commitment to excel during this unprecedented period. This was demonstrated by our solid operating performance in the second quarter. Our structural advantages and automation initiatives help us to produce record gross margin, operating margin and adjusted EBITDA margin. We were especially thrilled to achieve this strong result without taking any headcount reductions related to the economic impact of the COVID-19 crisis.
The quarter included two fewer weeks of invoicing related to the previously announced downtime at our production facilities. We took proactive steps to postproduction and implement the safest working conditions at the onset of the pandemic. This allowed us to quickly accelerate invoicing activity once we reopen the facilities in mid-April.
The timing aligned well with our customer delivery schedules and the pace of invoicing improved significantly as we progressed through the quarter with May and June having sequential incremental revenues. We expect to recover that deferred revenue in future quarters.
In June, we hit a monthly record level of residential orders and end market which now represents 90% of our trailing 12 months U.S. revenues. Momentum in residential remains strong with low margin rates and improvement in single family residential activity providing a strong demand for new home ownership.
On the commercial side, despite some project delays, our backlog continues to grow through record levels, representing an encouraging long-term pipeline of activity. We remain focused on further penetrating our key U.S. markets and capturing shares in additional cities with attractive commercial and residential demand profiles.
In the quarter, 97% of our revenue and 98% of backlog was in the U.S. Latin America has been the slowest to recover, although this market now represents a significantly lower portion of our revenue compared to a year ago. That said, we continue to expect the U.S. to be the primary driver of our growth in the quarters and years ahead.
Our strong balance sheet continues to support our growth ambitions. A strong working capital management, cost reduction initiatives and benefits from a high return automation initiative collectively helped us to generate the highest cash flow quarter in our history.
And third, we were able to further improve our net leverage ratio to 2.2x and finish the quarter at a very strong liquidity level of $136 million. As we move into the balance of 2020, we have ample financial resources to continue executing our growth strategy, while further hedging our position as a premier architectural glass leader in the U.S.
I will now turn the call over to Chris to provide additional details on our backlog.