Tecnoglass Inc

NYSE:TGLS

Earnings Call Transcript 2018-Q1

[Operator]

Greetings, and welcome to the Tecnoglass, Inc. First 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 for Tecnoglass. Thank you. Mr. Nacier, you may begin.

[Rodny Nacier, Investor Relations]

Thank you for joining us for Tecnoglass' first 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. Our speakers for today's call are: José Manuel Daes, Chief Executive Officer; Chris Daes, Chief Operating Officer; and Santiago Giraldo, Chief Financial Officer.

Moving to Slide 2. Before turning the call over 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 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, Chief Executive Officer]

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 our backlog, followed by Santiago, who will take us through our market update, financial results and outlook.

Looking at our highlights, we achieved our fifth consecutive quarter of record revenues in the first quarter of 2018, with net sales climbing by 29% to 84.9 million. This marked a strong start to the year with organic revenues up 21%. We experienced a good pace of activity throughout the quarter as evidenced by a record backlog level of 501 million. This builds up positive momentum into year-end 2017, as Chris will discuss further.

We delivered our highest adjusted EBITDA quarter since 2016 at 17.9 million. This was up 30.1% from the prior year quarter and in line with our outlook. Higher gross profit combined with several hundred basis points of improvement in SG&A as a percent of sales drove a 41.3% increase in operating income. As a result, we more than doubled our adjusted net income to 5.3 million or $0.14 per share compared to $0.06 per share in the prior year quarter. Fortunately, we have not and still do not expect to see any material impact to our business from rising aluminum spot pricing, in connection with proposed tariffs under U.S. trade regulations, which Santiago will discuss further.

On the Slide 5. We improved results across nearly all metrics, including sales growth, gross profit, SG&A, adjusted EBITDA and net income. Revenues in the U.S. and Colombia both increased in excess of 30%, primarily reflecting market share gains in the U.S. and an upswing in construction activity in Colombia, following a temporary pause in 2017. In Columbia, presidential elections are to be held at the end of May, the outcome of which we expect to promote the continuation of a pro-business agenda.

In the U.S., the market continues to represent our largest region, comprising roughly 70% of our sales in the first quarter of 2018 and 2017. This reflects our ongoing efforts to expand our mutual business in very good markets throughout the U.S., including our ongoing ramp up [indiscernible]. Our U.S. momentum also reflects the contribution from our GM&P acquisition, which we were extremely pleased to complete in May under a favorable payment structure to both sides. The transaction has been highly accretive, and we are benefiting immensely from the enhanced vertical integration and U.S. market penetration provided by GM&P.

In summary, we have a solid balance sheet to drive future growth and take advantage of additional value-enhancing investment. Our annualized dividend of $0.56 per share remaining among one of the highest dividend across the broader U.S. industrial sector. We continue to view this as an exceptional solid return for our shareholder. We are confident in the strength of our industry-leading margin business and look forward to executing our objectives in 2018 and beyond.

I will now turn the call over to Christian to provide additional details on our backlog.

[Chris Daes, Chief Operating Officer]

Thank you, José Manuel, and good morning to everyone on the line. Moving to our backlog, on Slide 6. Our strong revenue and profitability outlook is backed by continued expansion of backlog, which we grew to a new record level of $501 million in the first quarter. This represents 5.8% growth year-over-year.

We are encouraged by the steady levels of quoting and building activity in the U.S. and Latin America as represented by Q1 additions to backlog of approximately $86 million. This more than replenished record invoicing on revenue of $84.9 million during the first quarter. The upward trend in backlog is primarily resulting from favorable construction conditions in the U.S. and a number of great project additions. In South Florida, we estimate that our products have been installed in 60% of high-rise buildings during the past 20 years.

During the quarter, we further scaled our market penetration there with several attractive project wins. We expect to retain our market leadership through a steady stream of new cutting-edge products to stay ahead of evolving market trends. As examples, our efforts to expand in U.S. residential is staying up with new products such as our Prestige and Elite lines, accounting for roughly $6 million of revenue during the first quarter, which is close to the total invoice for those lines during all of 2017.

Throughout the U.S., we are sourcing project wins from a diverse number of regions, where structural glass and Curtain Wall system continue to lead the architectural glass trends. Our expanded services capabilities through UMP are providing a lot of these opportunities to reach new markets in the Northeast, West Coast and Texas.

In Colombia, we continue to experience an improving macroeconomic environment, which should allow us to further capitalize our significant pent-up demand in that market. Overall, we are actively enhancing the quality of our backlog to expand our business in a disciplined manner. We are encouraged by our sturdy foundation that we continue to build and by the visibility of our multiyear project pipeline afforded by our record backlog. I will now turn the call over to Santiago to disclose our financial results and markets.

[Santiago Giraldo, Chief Financial Officer]

Thank you, Christian, and good morning to everybody on the line. Beginning with our financial highlights on Slide number 8. We delivered another quarter of record revenue and recorded our 14th straight quarter of the year-over-year growth. Adjusted EBITDA increased 30.1% to $17.9 million from the prior year quarter. As José Manuel mentioned, revenue and adjusted EBITDA performed in line with our expectations. Gross profit increased 18.9% on the strength of higher sales and cost-saving actions.

These positive factors in gross profit were partially offset by an approximately $475,000 unfavorable FX effect impact due to an exceptionally strong appreciation of the Colombian peso during the quarter, which increased by 6.8% from the end of December to the end of March, making it one of the most revalued currencies globally during that time period.

Additionally, our mix of revenues and incremental depreciation offset a portion of gross profit gains as well, consistent with recent quarters. Moving forward, we expect to experience more normalized comparisons in our mix of revenues following the anniversary of GM&P's engineering and installation contribution to revenue in March 2018. Adjusted earnings increased by 160.7% to $0.14 per share on the strength of sales and favorable operating leverage. We remain very confident in our ability to generate incremental margins on higher sales, and we'll continue to source additional avenues to improve efficiencies and reduce our cost base.

Our cash flow performance compared to prior year was impacted by the timing of working capital usage, given expected growth, mainly to build out inventories ahead of anticipated second quarter shipments. Additionally, seasonal factors related to our semi-annual interest payments and first quarter cash taxes also consumed operating cash during the period. CapEx remained very low at less than 2% of sales, as we continued to benefit from our recent plant expansion, which has created ample installed capacity to address future growth.

We ended the quarter with a strong cash position of $31 million and a conservative leverage profile of 3x net debt-to-adjusted EBITDA. And on a pro forma basis, after giving effect to the completion of the GM&P purchase under a highly accretive payment structure, we are especially pleased to report that our net leverage is essentially unchanged at roughly 3x. This balance sheet strength supports our future growth initiatives and operational enhancements, along with our direct returns to shareholders through our strong dividend policy.

Looking at the drivers of revenue and adjusted EBITDA on Slide number 9. U.S. revenues increased by 31.2% to $60.7 million for the first quarter, primarily driven by strong commercial activity and a full quarter of GM&P revenues compared to one month in the prior year quarter. Colombia revenues increased by an even more impressive 32.8% year-over-year. The increase in Colombia was primarily due to stronger project activity, following a resurgence in quoting and bidding activity beginning in the second half of 2017.

Adjusted EBITDA growth to $17.9 million was largely volume driven, with the mix impact reflecting GM&P service revenue, as I mentioned earlier. In SG&A, our results were quite favorable as a percent of sales with 360 basis point improvement to 19.7% on a reported basis and an approximately 380 basis points improvement to 18.1%, excluding onetime items.

On a dollar basis, SG&A increased, primarily reflecting incremental amortization expense related to the GM&P acquisition, along with some other higher transportation and commission expenses associated with higher shipments. While most of our business is hedged in some manner to currency fluctuations, we do have some FX exposure in portions of our expenses in Colombian pesos that are not linked to the U.S. dollar.

In terms of aluminum headwinds, in connection with proposed U.S. trade regulations, we have not seen any material impact to our business from rising aluminum spot prices. We manufacture our products in Colombia and sell a majority of our goods into the U.S., so we are actually in good spot. There are several factors to consider that shield us from aluminum headwinds on our top and bottom line.

First, we source aluminum primarily outside the U.S., where supply remains relatively abundant. Second, we have already negotiated with most of our clients to pass through a large portion of the incremental cost associated with these tariffs. Third, we ultimately expect Colombia to be fully exempted from U.S. tariffs on aluminum imports, based on the de minimis clause under Sections 232 and 301 of the U.S. Trade Act of 1974, with Colombia only accounting for about 0.1% of U.S. aluminum imports. Furthermore, Colombia has a long-running overall trade deficit with the U.S., which should support a favorable outcome on this trade matter.

Given our raw material efficiency and disciplined purchasing economics, we believe we are well positioned to improve our profitability moving forward as U.S. developers and contractors face inflationary construction costs across a variety of products and services. Overall, we remain very focused on additional efficiencies and productivity initiatives to further enhance profitability, while preserving a strong platform to support expected growth.

Turning to our GM&P update, on Slide number 10. We recently announced the completion of our payment obligations in connection with our GM&P acquisition. This was a very exciting milestone that will obtain a very attractive return on a business that has contributed considerably to our growth over the past year. At the time of the 35 million acquisition in March 2017, the purchase multiple was approximately 4 times LTM EBITDA. Given the outperformance and rapid integration of GM&P, the implied purchase multiple is even more rewarding today when considering realized and expected earnings.

In May, we completed several transactions directly with the sellers of GM&P to complete the payment of the remaining 29 million obligation. The payment structure included 6 million of cash on hand, the execution of a 10 million junior subordinated note and the issuance of 1.2 million Tecnoglass ordinary shares. The fixed rate of 6% per annum on these interest-only notes is less than the weighted average rates on our existing long-term debt. The structure of this note provides ample financial flexibility to address our expected growth need in the short and midterm.

The 1.2 million ordinary shares were issued at a price of $10.50 per share or a 23% premium over the last sales price of our shares on the date of the payment. The premium valuation on Tecnoglass stock effected by the sellers of GM&P is validation of their confidence in our business and their commitment to Tecnoglass. We were extremely pleased to not only complete a highly accretive transaction but also get the deal done with no significant impact to our pro forma leverage, which provides us ample flexibility to accomplish our objectives.

Turning to our Colombian market update, on Slide number 12. Activity in Colombia picked up over the last six months following some very unique volatility in 2017 that we have discussed on prior calls. We are seeing moderate improvement in building construction on the demand side for 2018, with the stabilization of inflation and interest rates trending around 3% and 4.25%, respectively during the past several quarters. We still see a number of contractors starting or resuming projects consistent with stable quoting and bidding activity in Colombia since midyear 2017. We are watching the market carefully, but overall, we feel good about our prospects in 2018, and we are working hard to build our project pipeline for 2019.

Looking at the U.S. construction fundamentals, on Slide number 13. We continue to see favorable construction activity in many U.S. markets. The Architectural Billings Index, ABI, forecasted business conditions to remain strong, specially for commercial and residential activity in the South and West, which is positive for our selling efforts and consistent with our first quarter backlog composition.

Looking at commercial specifically, which still represents the majority of our business, most of our indicators point towards single-digit market growth, consistent with our internal projections. The need for energy-efficient buildings, increasing environmental regulations, rapid advances in coating technology and demographic shift to urban centers is expected to drive mid-single-digit growth until well beyond 2021. Additionally, we are driving growth by expanding into a penetrating market through innovative new products and a rapidly expanding reputation for high-quality service, which we believe position us for continued success.

Moving to our 2018 outlook, on Slide number 15. Based on our momentum to start the year 2018, growth in commercial construction activity and exciting project wins and backlog, we continue to anticipate good growth prospects for our company in full year 2018. We reiterate our outlook for revenues to grow to a range of $345 million to $365 million with higher year-over-year growth in the first half of 2018, based on anticipated timing and invoicing in 2018 compared to 2017.

Based on this sales outlook and anticipated mix of revenues, we expect full year adjusted EBITDA to be in the range of $71 million to $81 million. Favorable operating leverage on higher revenues and an improved mix of sales from manufacturing operations, along with continued cost optimization efforts, should allow us to drive higher margins. We expect to generate positive cash flow from operations for the full year.

With our stronger financial flexibility following the completion of the GM&P purchase, we are extremely confident in our ability to achieve our growth objectives, while further improving our industry-leading margins. We look forward to delivering improved results in 2018 through our highly efficient, vertically integrated and low-cost production with an extensive portfolio of in-demand products. We thank you for your continued support in Tecnoglass. We'll be happy to answer your questions.

Operator, please open the line for questions.

[Operator]

Thank you. We’ll now begin our question-and-answer session. [Operator Instructions] Our first question comes from the line of Jeremy Hamblin with Dougherty & Company.

[Jeremy Hamblin, Dougherty & Company]

I wanted to get a sense first for focusing on your production plant. And I saw that the backlog growing to just over $0.5 billion, impressive number. Wanted to get a sense for how your -- kind of your production output is marrying with your order growth that you're seeing, with that backlog continuing to grow? Are you just simply seeing significantly more order growth than you are on the production output that you're capable of? I know this production efficiencies is something that Christian has been working very hard on over the last couple of years. Any commentary on that?

[Chris Daes, Chief Operating Officer]

Yes. Actually, we have a lot of capacity available for production. And we actually are reducing our personnel because actually taking some people down and the new orders, we want to become more efficient and be able to produce more with less people. So we are really prepared to sell 30% more without having to do any spending on -- of any type in the production. So we are really working now like at 65% capacity tops.

[Jeremy Hamblin, Dougherty & Company]

Okay. And then, just kind of adding on to that question. On the soft coating side of your business and the significant investment you made in that capability going back a couple of years. You probably held the line in terms of not commoditizing that capability and just selling it, just on the coated glass, you've really focused on having finished product for that capability. In terms of where you stand on running that portion of the business today, and I think there is some tightness of supply out there in the market where you might be able to get a little better pricing on that, is there any thought to potentially opening that side of your business up to kind of more commodity type selling, so you use some of that capacity?

[Chris Daes, Chief Operating Officer]

Yes, we are still working at 25% capacity in the soft coat business. And we really believe that there is more business. The problem is that we want to grow with finished product and not with commodities. But we have a good plan for the third quarter of this year. We are working hard on a new adventure that we're going to take. We yet don't -- kind of not release yet what we expect to do, but yes, the quarter will be -- we expect it to be at full capacity in a year if we are able to do what we plan to do.

[Jeremy Hamblin, Dougherty & Company]

Okay. Great. I also wanted to ask about shipping costs. Shipping costs have been a bit of an issue globally. Certainly within U.S., rates have increased. I wanted to just get a sense for how that's impacting your overall model. Gross margins came in just a little bit lower than we had anticipated. But could you give me a sense of how those higher shipping costs are impacting, either the routes that you're taking on getting deliveries done, is it extending lead times at all? Any commentary you can provide on that?

[Chris Daes, Chief Operating Officer]

Well, actually, they've been going up. We average like $100 per container, they went up. But we are adjusting either by increasing, trying to fill more of the containers with 5% more stuff inside or the other -- and we are also passing the new cost for all the new jobs that we are doing, having into consideration that there might be an increase in the future again of shipping costs. Right now, there is an impact. It's very small, but there is an impact, and we are trying to accommodate with the new shipping rates.

As a matter of fact, at the end, we make a percentage of all sales. And for us, it will be great if aluminum would get to double what it is today and glass will go up 100% because we can make more money in the future, because we continue to make the same percentage at the end. Obviously, the jobs that we have signed, we take kind of a heat on that. But you have to remember that we do have a lot of inventory in hand to supply most of what we have hired.

[Jeremy Hamblin, Dougherty & Company]

And then I also wanted to ask about the Colombian market. You've seen some bounce back on that. But as I note, kind of just under $22 million here in Q1. If I look back at the run rates that you had previously seen all the way back in 2016, it seems to me that there is still opportunity to close the gap on maybe what the embedded run rate would be on that segment of your business. Can you provide any color on how we should be thinking about that? If I go back to, again, 2016, you did almost $100 million of business in Colombia. You did $63 million a year ago, and now we're kind of looking at maybe $75 million-or-so in 2018. Was 2016 more of an extraordinary year and maybe represented more than we should be thinking about? Or is there an opportunity to close that gap now as you've started to seeing a little better economic performance in Colombia?

[Santiago Giraldo, Chief Financial Officer]

You're right. 2016 was a very, very strong year for Colombia. And the expectation for what we are projecting as far as guidance goes, they've seen a growth in Colombia year-over-year, obviously, from 2017, but not quite getting to 2016 levels. The expected growth is coming from the U.S. more so than it is from Colombia, the $75 million number that you were mentioning, these are around what we are projecting. So not quite to the 2016 level. Obviously much better than last year, as we have discussed in previous calls. But more of the growth is going to come out of the U.S. and LATAM rather than Colombia. And in comparison to 2016, which was extraordinarily strong year for Colombia, not quite there.

[Jeremy Hamblin, Dougherty & Company]

And then just in terms of other market exposure. There has been a little bit of softening in the Northeast, and that's reflected in the ABI chart that you have in your presentation deck. If I'm not mistaken, I think Northeast is your second largest geographic exposure in the U.S. Have you seen any softening in terms of kind of quoting activity or whatnot in the Northeast U.S. portion of your business? And if so, are you replacing it with other geographies?

[José Daes, Chief Executive Officer]

Now we are seeing a lot of quoting in the Northeast. Remember that we are new. Even if the market softens, for us, we have a lot of room to grow, and the couple of jobs that we have finished, people are very happy. The customers were getting repeated jobs from them. And we are seeing those market share grow, and we expect to get a few big jobs within this year in the Northeast.

[Jeremy Hamblin, Dougherty & Company]

Okay. Great. And then the last question is also a geographic question. You had mentioned, José, that there was some softening in the Florida high rise markets that had been seen in 2017 that had, maybe it's a little bit of an impact on slower growth. But overall, it seems like that has been bouncing back. Is there any commentary that you can provide on kind of your core market in the U.S. in Florida and kind of Southeast Florida?

[José Daes, Chief Executive Officer]

Well, the high rise in Florida, let's be specific. The reservational high rises in Florida are very slow. I mean, there was no new construction almost. There were only two isolated buildings this year, and we've got both of them, one is Turnberry and the other one we just got is a huge job, it's called the Aston Martin, it's a $35 million job. But the mid rise and the low rise and the rentals have been going up and up. So we are replacing some of the high rises with mid rise and low rise. Even though it's not the same volume, we get a lot of growth in that area.

[Operator]

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

[Min Cho, B. Riley FBR]

This is actually Min Cho for Alex. Just a couple of questions here. Congratulations on the strong backlog. Can you tell me how much of the backlog is actually from Florida?

[Santiago Giraldo, Chief Financial Officer]

For competitive reasons, Min, we're starting to break it out by geography, U.S.A. versus Colombia, LATAM. That being said, Florida accounts for about 55% of total backlog that was reported as of March 31. So in line with what José was saying, we got awarded a couple of large projects that added to the total of Florida. And thus as of March, it's way more than it was where as of December. But the idea is to continue to obviously penetrate other places in the U.S. and diversify as much as possible.

[Min Cho, B. Riley FBR]

Okay. That makes sense. And in terms of your residential business, it sounds like you had a pretty good quarter. Do you still feel comfortable with the 20 million to 25 million for the full year? Or do you think that, that could actually be higher given the demand that you're seeing?

[Santiago Giraldo, Chief Financial Officer]

Actually through the first quarter, there was about $6.5 million, which is almost the amount that we did in 2017. And we're expecting the year to actually finish probably higher than we had originally anticipated. So that $20 million to $25 million is certainly doable if not better than that.

[Min Cho, B. Riley FBR]

And then also in terms of your GM&P business I know that there’s the opportunity to add some new branches in order to expand geographically there. Just wondering if you had any type of target or goals for how many new branches you might be opening up in this year or next year or if you thought about that?

[Santiago Giraldo, Chief Financial Officer]

Well, they are already working in different places. We are looking at some jobs in the West Coast. They're active in bidding processes in a couple of large projects in the Northeast, and we've been very active in the Southeast. Tennessee is a good market, there's a couple of large projects in there. So the plan remains basically being active in all of the different markets that we don't attend to as much today outside of Florida. We don't have a target number. It's just going to depend on the opportunities that are presented out there, I mean.

[Min Cho, B. Riley FBR]

And then in terms of the presidential election in Colombia. Do you expect any impact on the Colombian market depending on who actually wins the election? Or is it just there could be some near-term uncertainty until the election is over? Or if you can tell if that would be the case?

[Santiago Giraldo, Chief Financial Officer]

This question two months ago would have been more uncertain. I think based on the polls and what's happened in the last couple of months, there is a lot of comfort that the right party is going to continue, and there is not going to be a material deviation from current policies or anything like that. So if you look at what's happening with the rating agencies reaffirming their rating for Colombia, a lot of that has to do with the fact that there is an expectation that there is going to be continuity and that there is not going to be any material effects on a deviation from current policy. So in other words, we're going to know more in a couple of weeks. But based on all of the polls, there's going to be continuity on current policy, basically. We don't expect any major surprises there.

[Min Cho, B. Riley FBR]

And then final question. I know that most of the work that you do is, especially on the commercial side, is new build. But I was wondering if you're looking at the retrofit market at all. And does GM&P participate in the retrofit market?

[José Daes, Chief Executive Officer]

No. GM&P does not. This is José. But we are starting to participate in the replacement market with our new dealers that we're pursuing with the new Elite line for residential.

[Min Cho, B. Riley FBR]

So just on the residential side, not so much on the commercial side?

[José Daes, Chief Executive Officer]

No. The commercial, we already have some replacement on the commercial side. But the biggest is the residential.

[Operator]

Our next question comes from the line of Julio Romero with Sidoti & Company.

[Julio Romero, Sidoti & Company]

So I was hoping to drill into that 21% organic growth rate in the quarter. Just can you talk about was that driven by, I assume, mostly volume, but can you just drill into pricing mix as well? And how much of that 21% came from delayed orders regarding Irma?

[Santiago Giraldo, Chief Financial Officer]

About $3.5 million is related to push orders from Q4 of 2017 and a little bit of Q3, which we had already talked about. But even beyond that, there was strong growth on an organic basis, just based on timing of orders. If you look at sequential revenues from Q4 to Q1, you'll see that Colombia grew significantly, and that has nothing to do with Irma, obviously. And then, the U.S. also grew about 31% or so. And like I said, just about that amount is related to Irma. The rest was pure organic.

[Julio Romero, Sidoti & Company]

So that leaves you with about 14% to 15% organic growth, excluding Irma, that's pretty good. And I think you've called out that you expected the first quarter to be maybe your strongest quarter from a revenue growth standpoint year-over-year. Can you just give us any color on how you expect the cadence of revenues for the year. Are you looking at $85 million to $90 million in Q2. And just any color on where the peaks in values are for the year?

[Santiago Giraldo, Chief Financial Officer]

We expect sequential growth on revenues, obviously, to get to our midpoint of guidance. You'll have to bake in growth, and we are still expecting that. So there is not going to be much seasonality going forward. The number that you're mentioning, $85 million to $90 million, is appropriate. No one quarter, in particular, should be the strongest. Perhaps, if everything falls into place, the end of the year is going to be the strongest, but for the time being, we're expecting just kind of a flat level of growth, but nothing too -- not too much of a peak in any particular one.

[Julio Romero, Sidoti & Company]

Got it. And then just on the GM&P payment announced earlier this week. Just wanted to ask for some thoughts on maybe capital allocation and how you guys decided on that, the mix of cash, debt and stock, and then maybe just how you see capital allocation going forward?

[Santiago Giraldo, Chief Financial Officer]

Yes. We just wanted to make sure that we addressed what's important, and we wanted to make sure that the acquisition was accretive and ended up being quite accretive based on the earnings that GM&P is bringing. We also wanted to be mindful of the company's leverage and ensure that the structure was going to be providing ample flexibility for what we're expecting of growth in the near and midterm.

So the way to do it, with a mix, provided both, and also just utilizing some of the cash that we have on hand. So all in all, was a structure that we felt was appropriate as a whole to address the acquisition being accretive for shareholders, to address our financial flexibility and to use our capital in the best way possible, to increase value for the shareholders and the company as a whole. So doing it this way and being able to get a more adequate valuation from where the stock is trading today was also helpful.

[Operator]

Our next question comes from the line of Hans van der Burg with Logos Investment Management.

[Hans van der Burg, Logos Investment Management]

I had a question on the backlog in the U.S. outside of Florida and given the 55 percentage backlog related to Florida that you mentioned, it seems that backlog in the U.S. outside of Florida has not grown much over the last couple of quarters? And in the past, the company mentioned that GM&P acquisition could provide for a platform to win more business in other states. And I was just wondering is that something that still hasn't pan out a bit? Or how should we look at that given these backlog developments?

[Santiago Giraldo, Chief Financial Officer]

It's all dependent on timing of when you are able to sign these projects, Hans. So there is a lot of quoting activity in a lot of processes in which we are competing with GM&P. Very large projects outside of Florida, but it's always going to be just a matter of timing on when you are able to book those into the backlog.

So we obviously were able to pick up some large projects in Florida this quarter, which are embedded into the backlog, and we had record revenue invoicing during the quarter. So we are pleased that we were able to fully replenish the backlog and then increase somewhat, almost 6% year-over-year. But if you were to look at the activity and -- in the processes that are being bid and are being quoted, a lot of that activity comes from outside of Florida, which is in line with what we have discussed in previous calls.

[Hans van der Burg, Logos Investment Management]

Okay. So it's not that you expect -- you're going to see perhaps some more resistance in these other U.S. states than perhaps you expected may be a year ago, that's not what you are seeing?

[Santiago Giraldo, Chief Financial Officer]

No, not at all. We are -- like I was saying, we are in the midst of bidding a couple of large -- a few large projects. And so far we're in the running. So hopefully, we'll be able to report some good news on that front in the quarters to come.

[Operator]

There are no further questions in queue. I'd like to hand the call back to Mr. Manuel for closing comments.

[José Daes, Chief Executive Officer]

Okay. Well, thank you all for participating in today's call and for your continued interest in Tecnoglass. We look forward to speaking again soon. Thank you.

[Operator]

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.