Greetings and welcome to Tecnoglass Fourth Quarter and Full Year 2018 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. I would now like to turn the conference over to your host Mr. Rodny Nacier, Investor Relations. Thank you. You may begin.

Thank you for joining us for Tecnoglass' fourth quarter and full year 2018 conference call. A copy of the slide presentation to accompany this call may be obtained in the Investors section of the Tecnoglass website. Our speakers for today's call are José Manuel Daes, Chief Executive Officer; Chris Daes Chief Operating Officer; and Santiago Giraldo, Chief Financial Officer. 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 José Manuel beginning on Slide number 4. José Manuel Daes: Thank you, Rodny and thank you everyone for participating on today's call. 2018 was a successful year for Tecnoglass on many fronts. We met or exceeded our expectation across most metrics and in recent quarters we have had several exciting business…

Thank you, José Manuel and good morning to everyone on the line. Moving to our backlog on Slide number 6, we ended 2018 with a record backlog of $515 million, up 3.2% year-over-year. This compared to $506 million at the end of the third quarter. The year-end backlog level represent almost 1.4 times our full year revenue. Attractive project wins allow us to fully replace four straight quarters of record invoicing, enhancing our project pipeline for 2019 and building our position for 2020. We feel good about the composition and good visibility provided by our project pipeline. The U.S. market continues to represent our largest region comprising approximately 86% of our backlog. This reflects our ongoing efforts to further penetrate the U.S. and to expand our mix of business to regions where economic fundamentals support long-term demand for architectural glass systems. We continue to see healthy construction activity within our market in the U.S. including project in our less-penetrated geographies, which currently represent nearly a quarter of our U.S. backlog. Several recent project wins include the high-rise structures in New York, Boston and Texas. In addition, our offering of high-end Schüco products are already enabling us to attract new customers and grow our reputation for excellence in the architectural glass industry. As José Manuel mentioned, we were recently awarded our first project specified for Schüco products. So we are pleased to see the partnership delivering results. Our dramatic ramp-up in single-family residential have been impressive and validates our efforts to penetrate that end market, primarily through our Elite and Prestige product lines. Many of those single-family projects are typically shorter cycle and under-represent in backlog, but we expect to continue growing in these end market. Overall, we are actively enhancing the quality of our backlog to expand our business in a disciplined manner. While we are growing backlog, we are being mindful to carefully balance volume and price with a focus on strong margins. We are experiencing a more favorable pricing environment in the U.S. in line with industry trend. We have a strong R&D pipeline of high-performing products to build upon our innovative culture and continue growing faster end markets at industry-leading margins. We look forward to another year of solid growth in sales and adjusted EBITDA as we capitalize on our structural advantages to continue gaining market share. I will now turn the call over to Santiago to discuss our financial results and markets.

Thank you, Christian, and good morning to everyone on the line. Beginning with our financial highlights on slide number 8. Our 2018 results were very strong. During the year, we continue to expand our business into new geographies, capture an increasing amount of the value chain through our vertically-integrated model, invest in our facilities and implemented cost-savings initiatives. 2018 reflects these collective efforts with double-digit growth in sales, gross profit and adjusted EBITDA allowing us to reach record levels in each of those metrics for the quarter and full year 2018. We are pleased with this performance, which also highlights our ground-up project-by-project outlook methodology initiated in 2018 that has allowed us to better plan our business for success. Our operating cash flow performance reflects working capital investments. This includes a buildup of inventories to support a strong pipeline of projects being invoiced during the first quarter of this year and beyond. While account receivables increased on a nominal basis with strong sales growth, days sales outstanding improved by approximately five days in 2018 versus 2017. We spent $13.1 million on CapEx in 2018 including $5.9 million in Q4 with the added spend into year-end reflecting opportunistic high return investments and efficiency initiatives, primarily to address robust demand within our aluminum frame manufacturing operations. We ended the quarter with a strong cash position of $33 million and a conservative leverage profile of 2.6 times net debt-to-adjusted-EBITDA representing a solid improvement from 3 times at the end of 2017. This balance sheet strength supports our growth initiatives and operational enhancements moving forward. Looking at the drivers of revenue on slide number 9. We reported our seventh straight quarter of record revenues, which were up 16.1% to $97.9 million for the fourth quarter. Strong demand in the U.S. drove fourth quarter sales.…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from Jeremy Hamblin with Dougherty & Company. Please proceed with your question.

Thanks. Congratulations guys on the strong results. Santiago, I wanted to start by asking about working capital and – which is creating a fairly significant drag on cash flow. I think you ended the year with inventories up about 28%. And you mentioned that, that was really because of orders that are coming here early in the year. Can you provide some context behind that in terms of how we should be expecting that to translate to Q1 revenues? And then, the second part of the question really is in terms of thinking about working capital, how that will play out in 2019? And what type of recovery we might expect to get from that?

Sure, hi, Jeremy, good morning. Basically as you know most of what we do is build-to-suit. So the inventory that you're seeing there is really work that is already going for Q1. So, inventory in process and even finished goods. So that increase in inventory is driven by what we see as a strong Q1. We are projecting for full year almost double-digit increase. And we also said that, what we see – that on a percentage-wise, we see the first half of the year being higher than the second half which is in line with the increased inventory and the increased activity in Q1. So that being said, on your question as to what should we expect for the full year. With more taper growth as opposed to the 18% growth that we saw in 2018 we expect positive cash flow for the full year. As you know, we don't provide full guidance on that. But if you look at the cash flow, it's – the cash flow use for the year is related to inventory and AR. It's fully invested in the business mainly on that inventory for upcoming growth. And on the AR front, DSO actually came down by five days. So it's commensurate with the growth that we are seeing. On more taper growth, we expect to have positive cash flow for the year.

Okay. But then in terms of my question on Q1 specifically, historically, you guys have -- Q1 has been your – the lightest quarter of the year for you. And it sounds like you're expecting maybe that seasonality not to play out quite in the manner that it has in the past. You've had seven straight quarters of record growth. I just want to make sure our expectations are kind of consistent with what you're thinking about here in maybe in Q1?

I think you're going to see less of that seasonality effect Jeremy, just based on the year-end work that we ended up getting. But nevertheless, Q1 as a whole should still be the seasonal low quarter, albeit at a lower rate this year. So it would be a more even quarter comparable to Q2, Q3 and Q4.

Got it. Helpful. And then the commentary on residential business really caught our attention. I think you – I think you'd said that the plan José is for maybe $25 million or $30 million and you had exceeded that. Can you give us a little bit more color in terms of what percent of revenues that business is today? Why you think you're seeing such growth? I think up 400% is that – and kind of where that business might be headed in 2019? José Manuel Daes: Well, Jeremy, the business for residential is growing, because we were not in the business before. And we are new for residential especially replacement market. We were not in the replacement market. We have a lot of new dealers and they love our product. I mean, customers love our product is clearly superior to all the rest of the peers and it has a very good competitive price. I believe we closed for around $40 million last year, which is almost 60% more than we thought. And in 2019, we hope to grow another 30% to 40%.

Wow, okay. And in terms of the margins that you're getting in that portion of your business, how do they compare to the rest of your business like your EBITDA margins or your gross margins? José Manuel Daes: Well, the margin in that business is the same as any other business that we have and – but the best part is that we have no retention and it is almost a cash cow. We're seeing the new increase in residential monitors around very quick and most of the customers this was – they pay within 30 days to 60 days at the most.

Okay. Great. And then you're guiding to EBITDA margins of I think 21.8% to 22.7% for the year. So another increase on top of what you just did. I think you indicated that you may get more favorable mix. But Santiago, are we should we be looking for those margin gains really to be coming more on the gross margin side or getting some leverage on SG&A?

Well, we're projecting to get some operating leverage on the gross margin, Jeremy. There is a possible headwind that we may have is continued ground transportation cost, which we saw this year. So to be cautious, we are projecting the leverage that you see in the guidance coming from the gross margin line as opposed to the operating SG&A.

Okay. And then last one. I think this is more for Christian. But the Colombian business – that segment continues to kind of just going to be flattish for the year and it sounds like that's a similar expectation for 2019, even though I think that GDP in Colombia saw a significant step up in 2018. Is there any additional color you might be able to provide on why that business seems to be struggling a little bit more compared to your U.S. business that's growing off the charts?

Jeremy, we have -- last three years ago interests went up on also inflation and construction in Colombia gets really hurt when that happens. But we're now back to the good numbers in Colombia and that's why they are rising the growth in Colombia this year to at least 3.3% I heard last time. And we are seeing a lot of activity in new construction, and we believe that we are going to pick up growth in the second half of the year. We are being really cautious with projections because we want to end up like in 2018 reporting at the highest end of all the numbers that we are giving to the public. And so we want to be very conservative about it.

Okay, got it. Last one from me. The Saint-Gobain JV, in terms of -- this is clearly a deal that's aimed at the future and long-term growth. But José can you provide a little bit of color and context in terms of how -- when you think the earliest that that JV is expected to have some sort of impact in terms of either revenues, or I guess more importantly maybe on the cost side of the equation? Is that -- that's really probably a 2020 event? José Manuel Daes: No, no. It would be, I believe at the end of 2021 or beginning of 2022 when we have the second float very near to our factory running. When the new plant starts the benefits are as follows. Number one, we're going to have access to jumbo glass, which reduces waste. Number two, they're going to be able to produce a gray, bronze, green and blue glass locally, which we have to import right now. And third, we're going to have availability all the time of fresh glass, which makes it more easier to coat than the glass when it's already became after a few months of being produced. And it's a win-win situation. And -- but most of the benefits are around 2022. It's not a short-term investment.

Understood. Thanks guys for answering all the questions. Good luck this year.

Thanks, Jeremy.

Our next question comes from Julio Romero with Sidoti & Company. Please proceed with your question.

Hey, good morning, everyone.

Good morning, Julio.

So you're seeing that further geographical diversification of your backlog and you talked about some inroads into the Northeast and Texas. Can you just discuss the margin profile of the work you have in backlog? I imagine some of that Northeast work may be more complex and value-added than some of your legacy Florida mix. José Manuel Daes: Yes, it is. It is mostly. Although it is a soft coat, we are doing a lot of window, wall deal but we're getting into quality wall more complicated works, which is more value added. The margin remains the same overall, but it’s a more expensive product per square feet, which in turn makes it -- you produce less square feet for more price, which is easier for the product company overall.

Okay, helpful. And you mentioned you're seeing increased land transport cost, but marine continues to be stable. Can you just talk about how your overall freight costs -- how you see that faring in 2019 and beyond and maybe on a stand-alone basis and also relative to some of your U.S. based competitors? José Manuel Daes: Well, actually the price increases for everybody. It's not only for us. So what we're doing to compensate is instead of shipping to Florida and then taking to land to New York or to Baltimore or to Texas, we are shipping now to Houston in Texas and we are shipping to New York and to even Boston at a more favorable price. And we're getting the warehouses to store the containers. In the meantime we need them at the job site. Anyways all those costs are included in our quotes to our client. So it's not relevant to the margin.

Right. But you think marine costs are going to maintain where they are despite what land does for the next year or so? José Manuel Daes: Yeah, marine costs are not increasing for us. And we're getting more lines working into Barranquilla. So we have our diversity of shipping now. And even in Cartagena we're getting offers to ship from Cartagena, and they will observe the land from Barranquilla to Cartagena in order for us to ship through that port. That is not going to affect anything. We're doing good in that front.

And just to add to José's comments, Julio. As you know we have a structural trading balance between Colombia and the U.S. So, there's certainly a lot more containers coming into the country and going out. So, we certainly expect that structural advantage to continue going forward.

Great. And maybe just last one here is that you're seeing nice inroads to penetrate the U.S. market and it's certainly flowing through your financial results. But just what keeps you guys up at night? What are you worries could cause maybe some of that structural advantage to possibly breakdown? How do you guys think about that? Thank you.

So one thing that, obviously, one has to be mindful of is the construction market, how it plays out. But to tell you the truth from a bottoms-up analysis and talking to the people that are on the ground, the amount of quote and the amount of activity that we continue to see out there is very healthy and very robust. So given that in the commercial construction segment you are afforded quite a bit of visibility for the next 18 months to two years, we think that risk is mitigated. Other than that obviously unforeseen events that you may have. But if you pay close attention to the operations as we have been doing, you can control that to the best possible way.

Great. I hop back in queue and best of luck in 2019.

Thanks, Julio. Thanks for your view.

[Operator Instructions] Our next question is from Alex Rygiel with B. Riley. Please proceed with your question.

Thank you. Good morning gentlemen. Very nice quarter.

Good morning Alex. How are you?

Doing well. Couple questions for you here. First, can you expand a little bit upon the favorable pricing you're getting in the United States? Is that a -- I suspect it's driven by a number of variables including your high quality product as well as some of the competitors needs to raise prices. But if you don't mind expanding up on that a little bit I'd appreciate it. José Manuel Daes: Well, there is a lot of demand today for product. And I believe it's exceeding the capacity of the United States. So people are increasing the prices, I mean, our competitors and we are following. All-in-all we're doing good. I mean, the whole market everybody is doing good. Everybody is busy. And in the downside we have the advantage of lower costs. So I believe at least for the next two years we're almost sold out.

Excellent. And then can you identify some of the newer markets in the U.S. where you're starting to build some backlog in? You mentioned a few on the call, but maybe expand upon others. José Manuel Daes : We're doing a lot of work in Texas increasing and increasing. We're doing in New York, New York City specifically, Boston and some work in the West Coast in California from LA to San Francisco.

And in 2019 do you have any initiatives to enter any kind of new geographies inside the U.S.? José Manuel Daes : Well, yes, we're doing some work in Tennessee, a small award. We're doing some work in Maryland, in Washington D.C. Chicago is another city that we're doing two or three jobs at the same time. We expect to grow in the ones that we have. In some of the GCs, we'll request quotes for all the cities for the GCs that we're doing work right now and that's how we grow. We grow by the hand. We do a -- we perform a good job in the city and they request quotes for another city. That's the way we've been growing for all these years.

And could you address future interests in acquisition targets in 2019 and 2020? And sort of kind of what targets are you interested in and how should we think about that? José Manuel Daes : Well, if you see our history, we've been growing organically. I mean, the only two or three acquisitions we have made are very low cost and one of them was strategic. The others -- I mean, we don't grow by the backlog we've already won, because they are too expensive. We are growing with new products, with new geographies by the hand of our clients that we perform very well for them and they take us to different places. So we don't have any target in mind. If an opportunity comes, well, we might look at it, but we're not looking for anything.

Very helpful. And Santiago, could you help us to quantify the EBITDA contribution in your 2019 guidance from the JV that's closing in 2Q?

Yes. That business carries about a 25% EBITDA margin as a whole. So it depends when we finally close it out, Alex. I think it is going to be late in the Q2. So it will depend on that. So roughly half of the year will be contributed to our percentage, to our minority stake on that new operation.

Thank you. José Manuel Daes: Yes. But what he -- what you were asking I believe is the amount. We projected in the number of EBITDA around $3 million to $3.5 million of EBITDA from the JV. Am I correct Santiago?

Yes, yes. That's correct. That's in line with the 25% EBITDA profile. So that's about right from May on.

Very helpful. Nice quarter gentlemen.

Thanks Alex. Thanks for your view.

There are no further questions. At this time, I'd like to turn the call back to José Manuel Daes for closing comments. José Manuel Daes : Well, thank you everyone for participating in today's call. We are doing the best we can to keep the company growing and very profitable for our shareholders. Thank you.

This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.