Tecnoglass - Q2 2024

Transcript

Operator (participant)

Good day, and welcome to the Tecnoglass Inc. Second Quarter 2024 Earnings Conference Call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Brad Cray from Investor Relations. Please go ahead.

Brad Cray (Head of Investor Relations)

Thank you for joining us for Tecnoglass's Second Quarter 2024 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 Chief Executive Officer, José Manuel Daes, Chief Operating Officer, Christian 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's 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 operation of Tecnoglass's business. These risks, uncertainties, and contingencies are indicated from time to time in Tecnoglass's filings with the SEC. The information discussed during the call is presented in light of such risks. Further, investors should keep in mind that Tecnoglass's 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. Finally, as previously announced on June 25th, 2024, Tecnoglass's Board of Directors is conducting a review of strategic alternatives with the assistance of outside financial and legal advisors.

There is no deadline or definitive timetable set for completion of the review process, and there can be no assurance that this process will result in the company pursuing a transaction or any other particular outcome. The company does not intend to make any further public comment regarding its review until the board of directors has approved a specific course of action, or the company determines that additional disclosure is appropriate or necessary. I will now turn the call over to José Manuel, beginning on slide number four.

José Manuel Daes (CEO)

Thank you, Brad, and thank you everyone for participating on today's call. We are pleased to report another quarter of strong results to close out the first half of the year. We achieved record single-family residential revenues of $95.7 million and our second highest total revenue of $219.7 million. This demonstrates the resilience and adaptability of our business model in a complex macroeconomic landscape. These accomplishments reflect the strong demand and level of orders we saw towards the end of the first quarter. We remain confident in our ability to capitalize on attractive opportunities and to gain market share, despite certain challenges related to inflation and higher interest rates. Record single-family residential revenues reached a quarterly record of $95.7 million, up 10.1% year-over-year.

The solid growth in our residential business reflects our ability to capitalize on the strong demand we saw at the end of the quarter, as well as improving market trends, which led to a record level of orders in the second quarter of the year. We also continue to expect vinyl orders to contribute more meaningfully during the second half of the year. Our multifamily commercial business saw sequential improvement, but was impacted by higher interest and mortgage rates during the second quarter. Despite this trend, we are seeing a substantial amount of new activity, especially on the high-rise market, as evidenced by yet another record level of backlog. We anticipate this positive trend to continue through the second half of the year.

Our forward-looking optimism is supported by the significant level of orders we received in June, with residential orders up over 60% year-over-year, contributing to a record backlog of approximately $1 billion at quarter end. As a reminder, our backlog reflects the pipeline of multifamily commercial activity and firm single-family residential orders in our key geographies, providing visibility through 2025 and building into 2026. Despite some year-over-year headwinds, including unfavorable foreign exchange impact, we were pleased to see a sequential increase in gross margin and adjusted EBITDA margin. The sequential improvement in profitability and the relative stability in exchange rates over the past several quarters support our positive outlook. Our improved profitability also give us confidence in our ability to navigate the evolving market landscape and continue to create value for our shareholders.

The solid growth in our shorter cash cycle single-family residential business and careful working capital management resulted in robust cash flow generation of $34.5 million. Impressively, this was achieved even with the timing of seasonal tax payments during the quarter. Our solid cash generation continues to provide us with additional flexibility to return value to our shareholders through our share repurchases and dividends. Our cash flow has also allowed us to enhance our operational flexibility and balance sheet through another $50 million voluntary prepayment of our term loan during the quarter, totaling $30 million of debt repayments year-to-date. Overall, we are pleased with the improvement we see in our business, and we remain encouraged by the recovering demand trends in our end markets.

As we look to the remainder of the year, our positive growth outlook is supported by our strong customer relationships, record backlog, and innovative product portfolio. I will now turn the call over to Chris to provide additional operating highlights.

Christian Daes (COO)

Thank you, José Manuel. Moving to slide number 5. Our second quarter results reflect our focused execution on the growth initiatives in our business and our ability to generate solid cash flow. Our single-family residential business continued its strong trajectory, with revenues increasing 10% year-over-year to a record $95.7 million in revenues. This growth reflects improving market trends, along with the benefit of some demand pull forward related to the recent expiration of a Florida window sales tax exemption in June. Our demand momentum, along with the favorable demographic trends we see in Florida and in the Southeast, positions us for a strong single-family residential revenues through year-end. As it relates to our vinyl products, quoting activity remains strong, and we remain on a schedule to increase deliveries in the second half of 2024.

In our multifamily commercial business, at quarter end, we were pleased to report another record multiyear backlog of approximately $1 billion. Our backlog growth reflects an expanding pipeline of projects with visibility through 2025, and now building into 2026. This robust backlog represents 2.1 times our LTM multifamily commercial business, providing us with a multiyear view on the multifamily commercial portion of our revenues. In our multifamily commercial business, we saw sequential growth in the second quarter of 2024, including a strong level of orders for light commercial projects. Revenues decreased compared to the prior year quarter, giving record activity during the second quarter of 2023, and higher interest rates and mortgage rates during 2024. That said, we were encouraged by the improving trends and expect continuous positive momentum in the second half of the year. Moving to Slide number 6.

Our backlog has seen consistent sequential growth in each quarter since 2021. We expect this momentum in our project pipeline and the strong billing activity we are seeing will help us keep a strong book-to-bill ratio, which stood at 1.5 times as of quarter two, 2024. This adds to our track record of maintaining a book-to-bill ratio above 1.1 times over the past 14 consecutive quarters. Historically, roughly two-thirds of reported backlog are invoiced over the following 12 months. Historically, there are virtually no project cancellations, giving the late stage installation of windows into largely completed buildings. Therefore, we believe that this ratio provides a strong visibility on invoicing, despite the fact that certain external factors can cause temporary delays in deliveries. I will now turn the call over to Santiago to discuss our financial results and outlook for 2024.

Santiago Giraldo (CFO)

Thank you, Christian. Turning to single-family residential on Slide 7. We generated record single-family residential revenues of $95.7 million in the second quarter, compared to $86.9 million in the prior year quarter. The year-over-year increase was primarily due to improving market trends and what we estimate to be a partial pull forward effect related to the Florida sales tax waiver Christian mentioned. Additionally, we were thrilled to see second quarter residential orders up over 60% year-over-year, reflecting solid traction in this business and supporting our expectation for solid single family growth in the back half of the year. Looking ahead, we continue to see organic growth opportunities in our single-family residential business through several Tecnoglass-specific tailwinds. First, our expanding dealer base, driven by short lead times, innovative products, and demand for impact-resistant and energy-efficient solutions.

Second, ongoing geographic expansion in Florida and increasing brand recognition across the U.S., supported by new showroom openings in key markets. And lastly, our strategic entry into the vinyl market, which has significantly expanded our addressable market and provides substantial runway for revenue growth and product diversification. Customer enthusiasm for our vinyl products remains strong, with solid quoting activity, which we expect to translate into a ramp-up of deliveries as we move through the second half of the year. The overall enthusiasm for our vinyl offering strengthens our conviction in this strategic expansion and underscores the significant long-term opportunities we see in this category. Turning to drivers of revenue on Slide number 9. Total revenues for the second quarter decreased 2.5% year-over-year to $219.7 million. This represents our second highest revenue quarter in the company's history.

The decrease was primarily due to lower multifamily and commercial revenues, partially offset by growth in single-family residential. Looking at the profit drivers on Slide number 10. Adjusted EBITDA for the second quarter was $64.1 million, representing an adjusted EBITDA margin of 29.2%. SG&A was $38.4 million, compared to $35.2 million in the prior year quarter, with the increase primarily attributable to higher personnel expenses from annual salary adjustments that took place at the beginning of the year. As a percentage of total revenues, SG&A was 17.5%, up from 15.6% in the prior year quarter, due to lower revenues and the aforementioned salary adjustments. Second quarter gross profit was $89.6 million, representing a 40.8% gross margin.

This compared to gross profit of $109.7 million and a 48.7% gross margin in the prior year quarter. Similar to recently reported quarters, the year-over-year change in gross margin primarily reflects an unfavorable FX impact of nearly 340 basis points, reduced operating leverage on lower revenues, and higher salary expenses. On a sequential basis, gross margin improved by 200 basis points compared to 38.8% in the first quarter of 2024. The unfavorable FX comparisons seen in the last few quarters should largely dissipate given the relative stability in currencies during the last twelve months and expectations through year-end. Now, looking at our strong cash flow and improved leverage on Slide number 11.

We generated strong operating cash flow of $34.5 million in the second quarter, primarily driven by our disciplined working capital management. Our capital expenditures of $20.3 million included payments for previously purchased land for future potential capacity expansion, as well as a down payment for our new Miami headquarters, which will include a new flagship showroom to help us drive incremental business activity. We were pleased to continue our track record of returning capital to shareholders through our recently increased cash dividend payment during the period. At quarter end, we also had approximately $26 million remaining in our share repurchase authorization.

We also made $15 million of voluntary prepayments on our syndicated term loan during the quarter, with $30 million of debt prepayments year-to-date, driving our net leverage ratio to a record low near zero net debt to LTM adjusted EBITDA, compared to 0.2x in the prior year. As of June 30th, 2024, we had total liquidity of approximately $300 million, including $127 million in cash and $170 million available under our revolving credit facilities, giving us financial flexibility to drive additional value in our business. On Slide number 12, we're proud to showcase our track record of delivering exceptional shareholder value. Over the last 3 years, our strategic initiatives have consistently yielded returns that surpass industry benchmarks. This outperformance is driven by our robust profitability and significantly improved cash flow generation.

The superior returns we've achieved not only benefit our investors, but also validate the effectiveness of our multifaceted growth strategy. Now, moving to outlook on slide number 14. Based on the momentum in our business and our visibility in the expected timing of deliveries through year-end in our residential and commercial markets, we are updating our outlook for the full year. We expect full year 2024 revenue to be in the range of $860 million-$910 million. This outlook represents entirely organic growth of 6% at the midpoint. Based on these sales outlook, our anticipated mix of revenues, and our expectations for cost and expenses, we expect full year Adjusted EBITDA to be in the range of $260 million-$285 million.

We also expect gross margins to be in the low- to mid-40s range for 2024, and for healthy year-over-year cash flow growth, given most capital expenditures related to facility upgrades and vinyl investments are now complete. Our outlook is predicated on a few key assumptions, namely, growth in residential revenues based on the strong orders we received through June, a ramp-up in vinyl-related revenues through the second half of the year, as well as stable FX rates between 3,900 and 4,000. This full year outlook is also anchored in our expectations for large multifamily and commercial projects, staying within scheduled timetables and for stable activity in short-term, small commercial projects. In summary, we are pleased with our results during the first half of the year, which demonstrated the resiliency of our business and our ability to capitalize on market opportunities.

As we look to the remainder of the year, we remain confident in our ability to continue creating value for our stakeholders, given our low leverage profile and numerous avenues for market share expansion. With that, we will be happy to answer your questions. Operator, please open the line for questions.

Operator (participant)

Certainly. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Sam Darkatsh, from Raymond James. Please go ahead.

Sam Darkatsh (Managing Director of Equity Research)

Good morning, José Manuel, Chris, Santiago. How are you?

Santiago Giraldo (CFO)

Good morning, Sam.

José Manuel Daes (CEO)

Good morning. Everything well. Thank you.

Sam Darkatsh (Managing Director of Equity Research)

Thank you. Good. A couple questions. First off, Santiago, could you help us directionally think about third quarter sales, gross margin, and EBITDA expectations, and then the caveat to that or the addendum to that would be: What are you seeing in single-family orders in July now that the incentives have expired?

Santiago Giraldo (CFO)

Yeah, so if you take the range, Sam, you're gonna get to revenues in the neighborhood of $240 million-$250 million, depending on where you are. And gross margins picking up probably to the range of 43%, in line with what we had discussed kind of earlier as to how you get operating leverage on those incremental sales. And then in terms of EBITDA, you could be getting to kind of a range of, like, around $75 million-$80 million, depending on where you are in the range as well. In terms of orders, the July came in probably about 75%-80% of a normal month, but August month to date is in line with previous months. So the pull forward that we saw in June was partial in nature.

I mean, we're seeing kind of normalized level of orders as of today.

Sam Darkatsh (Managing Director of Equity Research)

My follow-up question, excuse me. Prevailing aluminum prices look like they're down, I don't know, call it 15%-20% or so over the past month or two. Are you expecting a favorable impact on gross margins? And what are you expecting for industry pricing as a result?

José Manuel Daes (CEO)

Well, this is José. We have bought most of our aluminum at a very favorable price for this year and for next. And, the aluminum went from $2,200 to $2,500 and then to $2,700, but for a very short while, because there was a plant down in Australia. But now the plant is back, and aluminum went back to normal. But we had hedged before that.

Santiago Giraldo (CFO)

Just to follow up on that, Sam, remember that on the residential orders, it's kind of spot in nature, so you don't get a pickup. Basically, it's a match based on how you quote versus how, you know, the LME behaves. Then on the commercial side, as José was saying, we enter into forward contracts to hedge against what was quoted. So not necessarily a fact that we're kind of going long or short on inventory.

Sam Darkatsh (Managing Director of Equity Research)

I guess the spirit of my question was, your market intelligence in terms of how others that you compete against in the state or that use aluminum, how much they've hedged and whether the lower aluminum prices of late at least may have influenced pricing, especially in July and August after the, after the incentives expired?

José Manuel Daes (CEO)

No, we have seen in the last 6-7 months of the, in this year, that a couple of our competitors have increased prices because of the aluminum tariff more than the LME, and most of them imported from Turkey and from China and from other places that were hit hard with the tariff. And also, glass prices are going a little up, and I believe by next year, they're gonna go a lot up. So, we have very stable pricing, so we're very happy with that.

Sam Darkatsh (Managing Director of Equity Research)

Thank you.

Operator (participant)

Thank you. The next question comes from Alex Rygiel with B. Riley. Please go ahead.

Alex Rygiel (Senior Managing Director)

Good morning, gentlemen. Very nice quarters.

Santiago Giraldo (CFO)

Good morning, Alex.

José Manuel Daes (CEO)

Thank you.

Alex Rygiel (Senior Managing Director)

José, can you provide us a little bit more color on the new orders and the strength and backlog in the quarter, like, geographically, where are you seeing the strength come from?

José Manuel Daes (CEO)

Well, mostly it's coming from Florida, New York, Boston, and now since we have some sales in the Carolinas and Virginia, that's where most of the orders are coming from.

Alex Rygiel (Senior Managing Director)

Excellent. And then how should we think about the mix in backlog today between installation and product sales, and how that might affect margins over the coming kind of 12, 18 months?

José Manuel Daes (CEO)

Well, it's always around the same. We believe it's around 50/50. Half is installed, and half of it is, or perhaps 40% is just product. But we are getting much better margins now in the installation side, because we have cut a lot of fat that we had, and we have reached much better deals with the installation crews, et cetera.

Santiago Giraldo (CFO)

Remember, Alex, that we only do. Oh, go ahead. Go ahead.

Alex Rygiel (Senior Managing Director)

No, finish your thought, please.

Santiago Giraldo (CFO)

No, just as a follow-up, remember that we only do installation on certain commercial projects in Florida. All of the other geographies, we only provide the windows. So, you know, to the extent that we continue growing outside of Florida, the mix there is more favorable as far as doing installation or not.

Alex Rygiel (Senior Managing Director)

Sure. And lastly, as it relates to vinyl windows, have you started shipping yet? And how might we think about the cadence over the next two quarters and maybe even an early look into a revenue target for 2025?

José Manuel Daes (CEO)

We are shipping already, yes. This is slowly coming up. We had a couple of products that we were missing. They're gonna be in line for next month, and we see that we can increase to maybe $5 million a month, and we hope for next year, we can do from $5 million-$10 million.

Alex Rygiel (Senior Managing Director)

Thank you very much.

Santiago Giraldo (CFO)

Thank you.

Operator (participant)

Thank you. The next question comes from Julio Romero with Sidoti & Company. Please go ahead.

Alex Hantman (Equity Research Analyst)

Good morning. This is Alex on from Julio. Thanks for taking questions.

Santiago Giraldo (CFO)

Hey, good morning.

Alex Hantman (Equity Research Analyst)

First question on CapEx. Could you give us a quantified CapEx guide for 2024? Does that include any further capacity expansion?

Santiago Giraldo (CFO)

Yeah. So we had already kind of provided at the beginning of the year, CapEx guidance to be around $40 million-$45 million. So if you kind of do the math, it's front loaded, and it steps down in the third and fourth quarter. That includes investments in land that we had previously made, but there is also some things that are getting done to increase capacity to address the orders for 2025.

Christian Daes (COO)

Yeah, this is Christian. We're trying to, especially, increase capacity in certain areas where we believe that we're gonna have the big demand in 2025 and 2026. And instead of waiting until we are there, we already, especially with the buildings that we need, we're gonna have them ready. Because we are certainly, we are pretty sure that 2025 is gonna be a very busy year for us.

Alex Hantman (Equity Research Analyst)

Thank you. Appreciate the context. And then one more for me. We touched on this a little bit earlier in the Q&A. But on the promotional activity from last quarter within single-family residential, did that have an impact at all in the second quarter? And, you know, do you think that there's some residual impact for the remainder of the year?

Santiago Giraldo (CFO)

Not for the remainder of the year, I would say. The residual impact was already taken in Q2. And in line with what you're seeing with the effect of the expiration of the sales tax waiver in Q2, some of those orders were taken ahead of time, so people took advantage of the opportunity not to be delivered only in Q3, but a little bit in Q4. You get that same effect with the promotional stuff at the end of last year, where a lot of it kind of went through in Q1, but a little bit in Q2. The expectation is for that to be, you know, completely through and not affect going forward.

Alex Hantman (Equity Research Analyst)

Great, thank you.

Santiago Giraldo (CFO)

Thank you.

Operator (participant)

Thank you. The next question is from Tim Wojs with Baird. Please go ahead.

Tim Wojs (Senior Research Analyst)

Hey, hey, guys. Good morning. Nice, nice job.

Santiago Giraldo (CFO)

Good morning.

Tim Wojs (Senior Research Analyst)

Maybe just on the first one, on the backlog piece, yeah, obviously, really strong performance this quarter. Just given the June kind of uptick in single family, I mean, did that get captured a little bit in the backlog? I'm just kind of curious if you can quantify that. And just also wanted to verify if you guys do expect backlog to continue to grow year-over-year in the back half of the year.

Santiago Giraldo (CFO)

Yeah, I'll take the first one, and I'll let José speak on the backlog the rest of the year. Yes, there were firm orders that came in in June that get added to the backlog. You saw kind of the numbers that we provided. Orders for Q2 were 60% higher than what they were the previous year. So if you take, just as a general benchmark, just take the revenues from last year and do the math as to what the orders were, and you probably get to the neighborhood of, like, $50 million-$60 million that is still in the backlog. So despite that, there was a lot of pickup on the commercial side as well.

I'll kind of, like, use that as a segue for José to tell you what he's seeing in the markets the rest of the way.

José Manuel Daes (CEO)

Talking about the backlog in commercial, we will see an increase in the next two quarters for sure, because every month we invoice X, we are closing at least two X. It's unbelievable the amount of new buildings that we're getting. It's just crazy. Thank God.

Tim Wojs (Senior Research Analyst)

Okay. Okay, that's helpful. And then maybe just on the backlog conversion. So I think historically, you talked about in the slides, you've converted about 2/3 of your backlog over the next twelve months. And so I know the mix of the backlog has changed a little bit, but if I would kind of apply that, you know, kind of same conversion percentage to your trailing twelve-month backlog, I have a non-res business that's probably gonna be closer to $550 million-$600 million over the next, you know, twelve to eighteen months, versus kind of the $450 million that you're kind of reporting on a run rate basis today.

I just wanna kind of verify that the math I'm doing is kind of okay, and if there's any kind of change in that kind of conversion timeline.

Santiago Giraldo (CFO)

There's a couple of variables here. The first one is that there's more kind of high-end luxury towers that are multi-year in nature, right? So you have these high rises that not—they don't take 1 year or 2 years, they sometimes go longer than that, if you're talking about like an 80, 90, 100-story tower. So you're gonna have a little bit more of that mix in there. And the other variable is what assumptions you make for the light commercial that kind of gets booked on a month-to-month basis. But generally, I mean, I would say with the combination of how we're seeing both of those, you know, I think that the 18-month formula still kind of plays out. We don't see that kind of varying too much.

If you look at the graph, I think that the range in which that moves could be, you know, 90%-105% conversion. So I would expect that range to hold through still.

Tim Wojs (Senior Research Analyst)

Okay. Okay, great. And then just the last one for me, on the salary increases that you kind of mentioned in the quarter, I guess, were those kind of standard in nature? Or were those any, any sort of kind of special increases? And I guess as you think about the back half of the year, will you get some leverage on that as you just get better volumes?

Santiago Giraldo (CFO)

Yeah, no, I mean, remember, we, I think we even discussed this in Q1. The way it works in Colombia is that you get salary increases adjusted for inflation at the beginning of the year for the rest of the year. So this was already kind of a headwind in Q1, especially against lower revenues. But as you ramp up revenue sequentially, you start diluting those salaries more and more, and you get leverage. But it's not like you are to expect incremental salary adjustments the rest of the way. I mean, it was done once, and it plays out for the rest of the year.

Tim Wojs (Senior Research Analyst)

Gotcha. Okay, so it's kind of just the normal kind of salary increases you see.

Santiago Giraldo (CFO)

Yes.

Tim Wojs (Senior Research Analyst)

Okay, good.

Santiago Giraldo (CFO)

Yeah, that's right.

Tim Wojs (Senior Research Analyst)

Awesome... Okay, great. Well, thanks for the time. Good luck on the back half.

Santiago Giraldo (CFO)

All right, Tim.

Tim Wojs (Senior Research Analyst)

Thank you.

Santiago Giraldo (CFO)

Yep, thank you.

Operator (participant)

Thank you. Ladies and gentlemen, if you have a question, please press star then one. The next question comes from Gene Ramirez with D.A. Davidson. Please go ahead.

Gene Ramirez (Managing Director and Senior Research Analyst)

Good morning. Thank you for the time. Could you help me understand what the bridge looks like between your 3Q guidance and the year-end? I mean, at the midpoint, it feels, it looks like there's some sort of inflection point that needs to happen to reach your gross margins and that revenue guidance. But your gross margins this quarter with that 14% quarter-over-quarter revenue growth was sort of, you know, kept down at 40.8%. Could you, yeah, could you help me understand, like, what needs to happen for that gross margin growth? And given, you know, the DFX, it's now starting to taper down or starting to sort of materialize itself out. Yeah, let's start with that.

Santiago Giraldo (CFO)

Okay. A couple of moving pieces. Just to clarify, sequentially, gross margin didn't take down. It went up 200 basis points. I don't know if that's what you meant. But in terms of what happens, I mean, the guidance that we're providing is for low to mid-40s for the full year. That makes sense, as I was mentioning earlier in the first question that came up, that implies that gross margins get to a range of like 43%-44% or so. Where that's coming from is a couple of things. Revenues going up, and you get a substantial amount of operating leverage on that. And what gives us a lot of visibility on revenues is the fact that we already have the orders in place.

On the residential side, you know, the headline that you read, 60% higher year-over-year, gives us a lot of clarity as to what the second half of the year looks like, and we're already seeing that in July and in August. Then you mentioned FX. FX is actually trending in the right way for us. FX was averaging close to 3,800-3,900 in the first half of the year, now is closer to 4,100. So both of those factors are actually playing a favorable part in what we're projecting for the second half of the year.

Gene Ramirez (Managing Director and Senior Research Analyst)

Thank you. And for vinyl, can you provide some color on the shipment trends and invoice trends, post 2Q? And do you still expect, around $20 million in the second half vinyl?

José Manuel Daes (CEO)

That looks reasonable. We expect vinyl to keep growing. I mean, this is a learning curve, it's normal, and I believe it should be around that figure. And next year is gonna be much better. Much, much better.

Santiago Giraldo (CFO)

Just to follow up on that, the contribution from vinyl in the first half was not material, as we discussed earlier in the year. So all of the pickup and the record level of revenues that you saw on the residential side were still kind of the legacy aluminum product.

Gene Ramirez (Managing Director and Senior Research Analyst)

Thank you. And last one from me. Could you, if you could provide some update on that strategic review that was announced earlier in the quarter, is there anything you can say regarding that?

Santiago Giraldo (CFO)

No, not at this point in time. We will not provide comments on that, and we will once it's warranted, if there is something to announce.

Gene Ramirez (Managing Director and Senior Research Analyst)

Perfect. I appreciate the time.

Santiago Giraldo (CFO)

Okay.

Gene Ramirez (Managing Director and Senior Research Analyst)

Thank you.

Santiago Giraldo (CFO)

Thank you.

Operator (participant)

Thank you. This concludes our question and answer session. I would like to turn the conference back over to CEO, José Manuel Daes, for any closing remarks.

José Manuel Daes (CEO)

Well, thanks everyone for participating on today's call. As I said, the last time, the best is yet to come. We are doing great, and we see a very favorable future for the company, our shareholders, and our employees. Thank you.

Operator (participant)

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.