Tecnoglass, Inc. :TGLS-US: Earnings Analysis: Q3, 2016 By the Numbers : November 22, 2016

Tecnoglass, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Tecnoglass, Inc. – Ply Gem Holdings, Inc., PGT, Inc., Masonite International Corp., PPG Industries, Inc. and Huttig Building Products, Inc. (PGEM-US, PGTI-US, DOOR-US, PPG-US and HBP-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 80.03 million, Net Earnings of USD -7.92 million.
  • Gross margins widened from 34.54% to 37.01% compared to the same period last year, operating (EBITDA) margins now 24.15% from 22.10%.
  • Year-on-year change in operating cash flow of -324.07% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from 17.20% to 19.16%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 80.03 77.51 60.9 66.4 62.89
Revenue Growth (%YOY) 27.24 33.52 17.02 50.16 0
Earnings (mil) -7.92 14.37 13.66 -0.55 7.58
Earnings Growth (%YOY) -204.48 226.67 38.29 -104.1 319.68
Net Margin (%) -9.9 18.54 22.44 -0.82 12.06
EPS -0.28 0.47 0.47 -0.02 0.25
Return on Equity (%) -36.42 90.47 133.46 -4.61 46.7
Return on Assets (%) -7.61 14.28 15.61 -0.72 10.13

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Market Share Versus Profits

Revenues History
Earnings History

TGLS-US‘s change in revenue this period compared to the same period last year of 27.24% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that TGLS-US is holding onto its market share. Also, for comparison purposes, revenues changed by 3.24% and earnings by -155.12% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 34.54% to 37.01%, while operating margins improved from 22.10% to 24.15% over this period. For comparison, gross margins were 34.14% and EBITDA margins 20.81% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

TGLS-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 61.76, compared to last year’s level of 36.18 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

TGLS-US‘s change in operating cash flow of -324.07% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from 17.20% to 19.16%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from 25.61% to -2.36%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Tecnoglass, Inc. operates as a holding company, which engages in the design, manufacture, and trade of architectural glass. Its products include the following types of glass: laminated, thermo-laminated, tempered, silk-screened, curved, and digital print. It also distributes floating facades, bathroom dividers, automatic doors, and hurricane-proof and commercial display windows. It operates under the Alutions by TG and Alutions trademarks. The company was founded on September 21, 2011 and is headquartered in Barranquilla, Colombia.

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