Greetings, and welcome to the Tecnoglass, Inc. Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rodny Nacier, Investor Relations. Thank you. Mr. Nacier, you may begin.

Thank you for joining us for Tecnoglass' second quarter 2018 conference call. A copy of the slide presentation to accompany this call may be obtained on the Investors section of the Tecnoglass website at www.tecnoglass.com. Our speakers for today's call are: José Manuel Daes, Chief Executive Officer; Chris Daes, Chief Operating Officer; and Santiago Giraldo, Chief Financial Officer. On Slide 2. Before turning the over the call to José Manuel, 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 differ in a material nature from those expressed or implied by these 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 SEC or 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 José Manuel, beginning on Slide number 4. José Daes: Thank you, Rodny. And thank you, everyone for participating on today's call. I will begin with a review of our operating highlights. Chris, will then discuss…

Thank you, José. And good morning to everyone on the line. Moving to our backlog Slide 6. We continue to have a very strong backlog which stood at $497 million at the end of the second quarter compared to $501 million at the end of the quarter one. The Q2 backlog clearly represents more than 1.5 times our trailing 12 month revenue. Backlog increased 2% year-over-year. We attracted project wins fully replacing four consecutive quarters of record invoicing. Furthermore, we have some additional projects in the pipeline that has not being yet closed by the end of the quarter. So overall we are seeing steady levels of foreign and bidding activity in the U.S. and Latin America and we feel good about the composition of our project pipeline and the good divisibility afforded by our backlog. The U.S. market continues to represent our largest region comprising almost 80% of the backlog and revenues. These reflect our ongoing efforts to expand our new mix of business in very good market throughout the U.S. We continue to experience favarable construction conditions and saw a number of major projects additions which is accretive to our growing client base, our stronger potential in South Florida and our inclusion in a number of the U.S. markets. In South Florida, where we have been exceptionally in a strong position, we further scale our market penetration by increasing the participation in the retail origination markets. We previously was largely on top by Tecnoglass. As we have mentioned, despite seeing a more and more activity in the high end condo market, we were able to win two of the largest projects to come to the market in the past months and are moving more into the midrise and open space not only in South Florida but also other…

Thank you, Chris. And good morning to everybody on the line. Beginning with our financial highlights on Slide number 8. We improved results across nearly all metrics including sales, adjusted EBITDA margins and adjusted net income. We recorded our 15 straight quarter of the year-over-year growth to deliver another record quarter of revenue. Adjusted EBITDA increased 36% to $18.3 million from the prior year quarter, driving an adjusted margin of 20.5%, up 400 basis points from the prior year quarter. We remain confident in our ability to generate incremental margins on higher sales and will continue to source additional avenues to improve efficiencies and reduce our cost base. Our cash flow performance improved compared to the prior year with improved working capital management and the timing of spend following a buildup of inventory earlier in the year. CapEx remain fairly low at approximately 2.8% of sales, as we continue to benefit from prior investments which have created ample install capacity to address future growth. We ended the quarter with a strong cash position of $30 million and a conservative leverage profile of 2.8 times net debt to adjusted EBITDA which has been stable over the last five quarters. We were especially pleased to complete the payment of GM&P on their highly accretive payment structure, while slightly improving net leverage compared to the first quarter. This balance sheet strength supports our growth initiatives and operational enhancements moving forward. Looking at the drivers of revenue on slide number 9. U.S. revenues increased by 15.8% to $69.9 million for the second quarter, primarily driven by strong commercial and residential construction activity. Columbia revenues were approximately flat year-over-year, which we primarily attribute to the extended presidential election as previously mentioned. Year-to-date, we experienced a more balanced growth from the U.S. and Colombia with a…

Thank you. [Operator Instructions] Our first question comes from the line of Jeremy Hamblin with Dougherty & Company. Please proceed with your question.

Hi. This is actually David on Jeremy. Thanks for taking my question. Nice job on the quarter. José Daes: Thanks, David. How are you? Pretty good yourself?

Good, thanks. So we just had a couple of questions today. First, I wanted to ask about this non-recurring acquisition expense of $3.6 million. Can you just kind of walk us through what happened here again so we can better understand it? And then can you give us a sense of how we should be thinking about gross margins for the back half of the year?

Sure. So this was related to a couple of specific projects that GM&P had already been executing prior to the acquisition, under the purchase agreement we had agreed that any inefficiencies or over - overrunning costs related to any of the projects that they had already booked would be compensated in the acquisition price. So basically what happened is that they had some inefficiencies in the subcontracting schemes that they had in some other third party purchasing of some of the materials. Those two projects have been closed and all of the projects ongoing are basically under our new supply chain structure. So we see that as something that is non-recurring. And to your second question on gross margins, if you look at the history since the acquisition have been really stable at the low 30s type margin. We expect that to be the case and possibly pick up a little bit of leverage on the second half of the year on what we have projected as higher revenues. So all in all, since the beginning we have mentioned that we deal - with the acquisition integrated into Tecnoglass, we would be looking at low 30s type gross margins.

Okay, great. And then next just wanted to touch on Colombia and kind of what happened in Q2 given some disruption, it sounds like around the election. And then also it seems like you were a bit more positive moving forward. So could you just talk about what you saw in Q2, your outlook moving forward and how we should be thinking about kind of growth rates in Colombia, specifically kind of in the back half of this year?

Yes. So essentially the Q1 was very strong. If you look at growth year-over-year, we experienced substantial growth in Colombia. And then it is coincidental. And then is coincidental in the sense that during the second - or during the first quarter call we were actually getting closer to the presidential elections and the leftist party was getting closer in the polls in what that cost was for a lot of people to kind of get a worried sentiment that there was actually a strong possibility of these leftist candidates becoming the President. Since then obviously the outcome was very favorable. But during May and June specifically a lot of the activity really got put on hold until people got a better understanding on what was going to happen with the outcome. And then as I said overall once that – it was said and done, a pro business candidate ended up winning the election and what we're seeing right now is confidence in both residential and commercial sentiment, with index is actually been the highest since 2012. So more to come in the next hundred days as the new president talks more about his macroeconomic policies. But on a preliminary basis he has indicated that he intends to lower corporate taxes, so we see that as a positive. We're being cautious with the remaining of the year as far as how fast we think that's going to pick up. I think there's certainly a lot of pent up activity. So what we're thinking as far as revenues for the rest of the year is probably stable over what we saw in Q2 with any upside to that you know, coming really as an outside, as opposed to just kind of being overly optimistic on the timing of what the new administration - new regime is going to flow into the marketplace.

All right. Great. Appreciate taking the question, guys. Thanks and good luck.

All right, thanks.

Our next question comes from the line of Alex Rygiel with B Riley FBR. Please proceed with your question.

Thanks. Nice quarter, gentlemen. José Daes: Hi, Alex. How are you?

Very good. Couple of few questions. I didn't miss a moment or two during the call here, so I apologize if there's any duplication here. But first could you kind of address the mix in your backlog that's associated with residential office and multifamily, I think what I'm trying to get here – get to hear is kind of understanding more what your mix is in multifamily today? And then maybe talk about sort of the outlook that you think about over the next 12 months in the U.S. associated with one of those end markets? José Daes: So basically in the backlog, there is no really residential components, that's really very short lived and intra-quarter. That segment is performing very well and actually above expectations. So what you've seen there is essentially commercial work. Out of which, I would tell you 80% is U.S. base and that portion probably I will tell you 80% multifamily and the rest probably rentals and others two commercial. And on your second question on our projections, you meant what we see as part of the execution of the backflow or the composition from a geographical perspective?

I think, I was looking for your particular kind of view on the multifamily market versus the office market over the course of the next 12 to 24 months? José Daes: Okay. So the general view for the Florida market, specifically is that the high end condo markets cooled off. We did win a couple of large projects, but as we said in the past we are shifting more into mid-size office space, in other pockets within Florida. So you know if you talk about Miami specifically, we did see a little bit of cool off from the - on the high end condo market. However, the focus right now is to replace out with other outside types and also focus on work on Curtain Wall in the Northeast an=d other places within the U.S.

And then could you address the impact if any to yourself and your competition as it relates to rising raw material costs and the tariffs?

This is Chris, Well, at the beginning there was in impact of a few dollars, now after all oil prices have been going up and we have been able to pull into the cost, the tariff and have been paid by customers without any complaints because there's a shortage of aluminum due to the new tariffs and so at the end it ended up being convenient. And we see that the best is yet to come in the year. And that's why we are very optimistic for the second half of the year.

And turning to sort of future growth opportunities, where do additional acquisitions fit into your strategy in 2018. Are you building up book of M&A targets or is that something that we should think about more so in 2019?

No, I think we just completed the integration of GM&P, Alex, and you know, what we're looking for given our backlog in hand is to execute that and continue to have organic growth for the time being. So obviously as opportunities arise we are going to be listening and mindful of valuations, but nothing on the horizon. We just want to basically continue to execute the backlog in hand.

Excellent. Thank you very much.

Thank you, Alex.

Our next question comes from the line of Julio Romero with Sidoti Company. Please proceed with your question.

Good morning, everyone.

Morning, Julio. How are you?

Morning. So just wanted to first start out with the 10% revenue growth in the quarter. Can you maybe give us a breakout in regards to how much of that was priced, how much of that was volume and how much was mix?

Basically volume, we have not baked in or seen you know, a substantial price inflation yet. So what you are seeing is basically the result of the U.S. growing about 16% year-over-year in volume, just incremental work.

Got it. And you mentioned the residential was performing above expectations. You know, we’re two quarters of the way through the year, how do you feel about that full year target of $20 million $25 million on the residential side?

We still feel very confident to end up towards higher end of that target Julio. And I think that is going to compensate, while we were seeing for Colombia to start off the year we're being more cautious about the second half of the year about residential and the new products that we launched last year are certainly being well perceived and we feel very good about getting toward the higher end of the original target there.

Understood. And I wanted to piggyback on Alex's question earlier rising input costs. I mean, certainly, freight and labor have also been rising across the industry. Can you just talk about what you're seeing in the market from a competitive perspective when it comes to maybe freight specifically, given that you have one site one site – one vertically integrated site, can you talk about kind of last maybe versus your competitors and can you maybe try to quantify the incremental gains you might be seeing as a result?

Hi. This is José Daes. Listen, the tariffs and the increasing salaries have been good for us because most of our products we buy we source in Colombia and the previous product does not have a tariff coming into the states, but the raw materials. So we've seen all of our competitors increasing their prices from 6% to 10 and we haven’t increased to keep changing market, and we see that as a good sign, maybe next year we’ll increase a little bit, but not as much as competition because we wanted to penetrate in new markets and gaining a foothold in. the U.S.

Understood. And then maybe my last one here is just on the cash flow, definitely an improvement year-over-year, but still slightly negative in the quarter. Just given your lower CapEx requirements going forward, should we expect positive free cash flow in the back half of the year?

There's a seasonal effect here, Julio.. All taxes get paid in the first half of the year. So you do have a seasonal effect. What you'll see in relation to operating cash flow is mainly related to buildup of inventory as we see higher activity in the second half of the year. They are actually from a DSL perspective is trended down but obviously on a higher amount of sales. We also are going to have little bit of usage there. That being said, you know, given that seasonal affect that I just mentioned, we are foreseeing the second of the year as being cash flow positive. And as a follow up, CapEx should remain very mute and in line with what we have guided for the year approximately $10 million which if you see 6 months into it we’re basically trending right on at about $4.8 million or so.

That's helpful. Thanks for taking my questions. And good luck in the back half of the year.

Take care. Thank you.

There are no further questions in the queue. I'd like to hand the call back to management for closing comments. José Daes: Thank you, everybody for taking the call. As we said we expected much better results in the second half and continued growth into 2019. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.