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Tecnoglass Inc (TGLS) Q4 2019 Earnings Call Transcript

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TGLS earnings call for the period ending December 31, 2019.

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Tecnoglass Inc (NASDAQ: TGLS)
Q4 2019 Earnings Call
Mar 2, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Tecnoglass Inc. Fourth Quarter and Full Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief 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, Brad Cray [Phonetic], Investor Relations. Thank you. You may begin.

Brad Cray -- Investor Relations

Thank you for joining us for Tecnoglass' fourth quarter and full year 2019 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, Jose Manuel Daes; Chief Operating Officer, Chris 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' 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 the 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. 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 Jose Manuel beginning on slide number 4.

Jose M. Daes -- Chief Executive Officer and Director

Thank you, Brad and thank you everyone for participating on today's call. 2019 was another exceptional year for Tecnoglass in which we achieved record total revenues, gross profit, adjusted EBITDA and backlog. Additionally, we effectively managed our inventory and working capital contributing to further balance sheet improvement and robust cash flow into year-end. We were especially pleased to deliver positive free cash flow during a year where we invested a considerable amount of capital toward completing several high-return projects. This will further enhance the strength of our vertically integrated operations over the long term.

We are excited by the momentum that we are [Indecipherable] of our business. With this in mind and in line with the vision of our high-return growth strategy, we have amended and simplified our dividend policy by eliminating the option to give dividend in the stock starting in the first quarter of 2020. After a long review process, we are confident that our amended dividend policy further aligns with the interest of our shareholders. We remain committed to returning a portion of capital to shareholders while delivering strong returns on identified growth initiatives and accretive investments to drive improved profitability and cash flow.

As demonstrated during 2019, we continued to dramatically expand our presence in the US which now represents 35% of our total revenue. We consider ourselves to be a US company supported by a world-class manufacturing operation and logistical network rooted in Colombia. Based on the attractive mix of projects and backlog, over the next 12 months, we expect the US to remain the primary driver of our growth.

Through our expanding reputation for excellence and our extensive portfolio of projects in diverse regions, we believe we can continue to gain market share through further geographic expansion in our commercial business and a continuation of meaningful projects within residential.

In Colombia, the revenues were up double digits year-over-year in the fourth quarter, excluding FX. Similar to the improvement last quarter, this was encouraging and better than expected while we remain cautiously optimistic.

In summary, we believe our 2019 results and [Indecipherable] reinforce our commitment to creating meaningful value. We are outpacing market growth and delivering higher profits and cash flow, while aligning our capital structure to produce more attractive returns. Into 2020, we remain excited by our project pipeline and the strength of our industry leading margin business.

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

Christian T. Daes -- Chief Operating Officer and Director

Thank you, Jose Manuel. Moving to our backlog on Slide 6. We continue to generate record levels of project backlog which stood at $542 million at the end of 2019. Backlog increased 5% year-over-year primarily representing attractive project wins and positive reception of our advanced glass and curtain wall system.

Backlog grew each quarter on a sequential basis through the year primarily in the US which now represents 90% our backlog compared to 82% in 2018. The quarter four backlog level represents more than 1.3 times our trailing 12-month revenue and an even more impressive 1.5 times when excluding residential sales which do not get captured in our backlog. We continue to see solid levels of quoting and bidding activity and we have a strong base of activity that gives us confidence in our goals for 2020.

On the product side, the success of our residential offerings primarily through our Prestige and Elite product lines continue to earn us new business with residential now accounting for over 80% of our US business. Full year 2019 single-family residential sales increased by an impressive 78% surpassing our expectations.

On the commercial side, we had several exciting project wins in the new and existing geographies. Given the robust construction activity in many markets were very low, unemployment rate in the US, some customer experienced labor constraints which pushed some activity into 2020, but overall the environment remains very positive.

Our recently automated facilities and added aluminum capacity are coming on line at a great time to capture the incremental demand that we anticipate for our business over time given our strong backlog. Into 2020 we will continue to focus our efforts on adding new customers, entering new markets and providing best-in-class service. While we are growing our backlog, we are being mindful to carefully balance volume and price with a focus on sustaining our industry leading margin. We have a strong R&D pipeline of high-performing growth that should allow us to continue growing faster than our end markets. We look forward for another year of above market growth in sales, adjusted EBITDA and we benefit from our structural advantages to continue gaining share.

I will now turn the call over to Santiago to discuss our financial results and market.

Santiago Giraldo -- Chief Financial Officer

Thank you, Christian. Beginning with our financial highlights on slide number 8. During 2019, we expanded our business into new geographies after an increasing amount of the value chain through our vertically integrated model, invested in our facilities and implemented cost-saving initiatives. 2019 reflects these collective efforts with double-digit growth in sales, gross profit and adjusted EBITDA allowing us to hit record levels in each of those metrics for the full year 2019. This is a true statement to our team's ability to execute our strategy in attractive, high-growth markets.

In the fourth quarter we did see temporary impacts of tight labor on the US sales and gross margin. Aside from those labor dynamics, we closed out the year with good momentum, which I will discuss in a moment. For the year we were pleased to generate very strong operating cash flow of $27 million allowing us to generate positive free cash flow while successfully completing our high return capacity and automation initiatives. This highlights our continued focus on enhancing our working capital management, mainly through tighter inventory control and managing account receivables. We spent $25 million on capex for the year with the majority of that geared toward the capacity upgrades and automation initiatives. We thank our hardworking teams for completing these operational enhancements on time and within budget.

We ended the year with a strong cash position of $48 million and a net leverage ratio of 2.3 times, down from 2.6 times last year. These balance sheet strengths support our growth initiatives and previously announced investments such as the plant construction of our second float glass facility in a joint venture.

In regards to our capital structure, our new simplified dividend methodology, which Jose discussed earlier in the call, allows for the continued return of a portion of capital to shareholders while eliminating the dilutive impact of stock dividends to existing shares. The revised cash portion approximate the aggregate value of cash dividends that we have made during most of our recent full quarters and a yield in line with our dividend paying peers.

As another simplification to our capital structure, in December we announced our plan delisting from the Colombian Stock Exchange. Our move to an exclusive listing on NASDAQ does align with the evolution of our business and the movement of our shareholder base to the US. In addition, we will save time and money and the administrative requirements associated with multiple exchanges. We expect to complete the Colombian delisting by the end of 2020.

Looking at the drivers of revenue on slide number 9. Continued outperformance in the US drove the majority of fourth quarter sales growth which increased 4% to $101.4 million. The US primarily reflected stronger residential invoicing and healthy commercial construction activity. This was partially offset by the late start on key commercial projects representing an estimated $5 million of deferred invoicing. As we mentioned earlier, the delays were mainly due to temporary labor constraints experienced by our customers amid overall robust commercial construction activity.

In Latin America we were pleased with better than expected fourth quarter performance in Colombia where revenues grew 9.2% year-over-year and 17.4% excluding FX. For the year the US continued to mark an increasing mix of our business representing approximately 85% of our total revenue. This compares to an average of approximately 80% for our US based building products peer group.

Looking at the drivers of adjusted EBITDA on slide number 10. Adjusted EBITDA for the fourth quarter 2019 was stable year-over-year at $21.5 million, representing an adjusted EBITDA margin of 21.2%. Adjusted EBITDA for the full year increased 14.4% to a record $92.4 million representing a margin of 21.4%.

Gross profit was $29.3 million representing a 28.9% gross margin. These compared to gross profit of $34.1 million in the prior-year quarter representing a gross margin of 34.9%. The difference in gross margin for the quarter was primarily related to higher US labor costs. This was mainly related to installation revenues and subcontracting costs, which are the more labor-intensive aspects of our business. The impact was most pronounced in the Southeast where economic recovery is the strongest in the US. To a much lesser extent, our fourth quarter gross margin was adversely impacted by modestly higher aluminum costs per unit, attributable to higher cost inventory purchase earlier in the year. I'll provide some context here.

The aluminum impact was mainly felt on the residential side of the business. While we typically lock in raw aluminum supply for commercial projects in backlog, our faster pace residential business is more exposed to moves in aluminum spot prices and the timing of raw material inventories flowing through the P&L. As of the year-end, we have worked through the higher cost aluminum in inventory. Gross margin in the fourth quarter also included approximately $1.5 million of non-recurring costs to finalize the implementation, testing and start-up of our high-return automation projects at our production facilities. Despite these adverse impacts during the quarter, we ended 2019 with a record full year gross profit of $135.8 million. We anticipate that the efficiency savings from our timely completion of automation initiatives, among other actions, will help to mitigate any continuation of these higher labor costs.

Our operating expenses as a percentage of revenue improved by 200 basis points year-over-year to 18.3% in the fourth quarter. This reflects operating leverage on higher revenues coupled with ongoing Companywide initiatives to improve SG&A, mainly on shipping and handling and personnel costs, which we discussed last quarter. Our full year operating expenses improved by 180 basis points to 17.9% of sales due to reasons similar to the fourth quarter drivers I just mentioned.

Marine shipping costs have remained relatively stable for us given the favorable trade dynamics between Colombia and the US. Overall our highly efficient manufacturing capacity and our sustainable access to talented employees continues to generate strong results. We remain confident in our ability to generate strong margins on higher sales while mitigating the impact of what we see as a temporary headwind in the industry. We will continue to source additional avenues to improve efficiency and reduce our cost base.

Looking at the construction demand in our key markets on slide number 12. US commercial construction activity continues to dominate our business while residential is becoming an increasingly important end market for us. Rising construction activity, low interest rates, and consumer spending are expected to drive demand for architectural glass products over the next five years, according to third-party sources. The Architectural Billing Index is above 50 in all of our key regions, suggesting further expansion on the commercial side.

Combined with a generally stable to positive outlook on the residential construction with the macro support for a favorable end market environment in coming years, we believe that our markets in the US will continue to grow faster than the national average. We also expect to take share in our market, largely driven by enhanced relationships with new customers, proven execution in a broad range of high-value added projects and structural differences that allow us to be very competitive while maintaining a quality-first approach. With our exposure to both commercial and single-family residential, we see significant upside in our business to capture a rising share of US demand into the new decade.

In Colombia GDP growth in 2019 accelerated by 80 basis points to 3.3%. Additionally construction permits more than doubled as of December. Taking into account these positive trends with prior volatility, we are maintaining a cautiously optimistic outlook for Colombia in 2020.

Looking at our continued expansion into the residential market on slide 13. As a reminder we refer to US single family residential as our residential business. We classify all other sales, including medium and high-rise condos, as commercial. In 2017 we entered the US single-family market and our rapid growth in this segment of our business continues to surpass our expectation. Our residential revenues grew at an impressive 78% in 2019 and now represents 18% of our US revenue compared to just 3% two years ago. We see significant potential in our ability to capture additional share of residential demand due to the various positive US macro factors that I discussed previously.

Moving on to our high-return investments on the slide number 14. As of the end of 2019, we successfully completed all of our high-return growth and efficiency initiatives. This includes our mid-year aluminum production capacity expansion in response to strong customer demand for aluminum products. In the fourth quarter, we completed our other initiatives to automate key operations at several glass and aluminum facilities as planned. As of the end of 2019, we have deployed $18 million of our total anticipated $20 million capital investment. We expect the remaining portion to be spent in early 2020 after all testing and start-up is complete.

In regards to our float glass joint venture with Saint Gobain, the previously announced construction of the second state-of-the-art float glass plant in Colombia is expected to begin construction in 2020 and expected to be operational by 2022. We have advanced on the permitting and the pre-construction administrative aspects to get the project moving as planned. We continued to be encouraged by the additional efficiencies we expect to gain through the expansion of our vertically integrated float glass supply.

Moving to our 2020 outlook on slide number 16. We anticipate above industry top and bottom line growth in full-year 2020. For the full year, we expect revenues to grow to a range of $445 million to $455 million. We expect the US to represent the significant majority of growth fueled by innovative new products, project types, geographic expansion and further penetration into single-family residential. Based on this sales outlook and anticipated mix of revenues, we expect full-year adjusted EBITDA to be in the range of $97 million to $102 million. This outlook assumes favorable operating leverage on higher revenues and the flow-through of high return investment. We anticipate that these favorable factors together with SG&A efficiencies will offset impacts from increasing labor cost which we expect to be most pronounced in the first half of 2020.

I'll provide some additional color on the first quarter of 2020. We expect the first quarter to be our smallest quarter for revenues and EBITDA. This is in line with our typical seasonal US construction trend and also the timing of our factory scheduled annual major maintenance during January. In addition, in the first quarter we will also have a challenging prior-year comparison due to the unusually strong timing of invoicing in the first quarter of 2019 given a spike in residential orders. As mentioned, the impact of labor on sales and revenues are mainly a first-half dynamic. Accordingly, we expect our year-over-year growth to be the lowest in the first quarter of 2020 and accelerate as we move through the year.

I'll mention that at this point we have not seen any direct impact on our business due to the coronavirus. In addition, our supply chains do not have any material overlap with China. Based on our current backlog schedule, we do not have any impact of the virus incorporated into our 2020 outlook at this time. That said, we are mindful of the potential disruption that this unfortunate epidemic may potentially cause for our customers during any stage of construction. Therefore, we will continue to monitor the situation and provide update as we move through the year.

In summary we believe we are well positioned to deliver another year of double-digit growth in sales and adjusted EBITDA as we capitalize on the many positive catalysts mentioned on today's call. We are confident in the trajectory of our business and look forward to executing on our multi-year project pipeline while actively pursuing additional opportunities to generate attractive returns for our shareholders in 2020 and beyond.

We will be happy to answer your questions. Operator, please open the line for questions.

Questions and Answers:

Operator

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

Michael Shlisky -- Dougherty & Company -- Analyst

Good morning, guys. So looking at the guidance for 2020, it's 5% revenue growth at the middle of the range. And with backlog is at 5%, I guess that makes some sense. But last year you were up, I think, 3% on backlog and delivered 16% growth on the top line. And you are seeing some good res trends which doesn't really hit the backlog. So [Indecipherable] had a bit higher than the $450 million or so revenues for 2020. Can you maybe kind of walk us through some of moving parts on the res business for 2020? Are you at this point being very cautious? I don't know if you'd be able to get 78% growth again, but any kind of ballpark would be helpful to see if there's any kind of obstruction here.

Santiago Giraldo -- Chief Financial Officer

Yes. Hi, Mike. This Santiago. A couple of things there. On the resi, we're still projecting double-digit growth, low double-digit which we think it's cautious, like you said. We want to get a little more color as to how these moves along with all the circumstances around everything that's going on, but we feel that that's certainly a prudent approach at this point in time.

On the commercial side, the timing of the backlog, if you look at it we grew quite a bit at the end of 2019 with some of that backlog actually getting invoiced toward the end of 2020 and into 2021. So you also want to be mindful of delivery times at the end of 2020 in order to be able to account for that revenue this year. So there were -- those were the two main considerations that we have when we guided for this year.

Michael Shlisky -- Dougherty & Company -- Analyst

Okay. Also I wanted to ask about the $5 million worth of orders that were pushed out from Q4. Will that all hit your top line in Q1 or when you have is a backlog such that you might get it in Q1, but then you'll have $5 million of different business pushed into Q2, like what's the cadence for that pushed-out business?

Santiago Giraldo -- Chief Financial Officer

Yeah, the expectation is for the first half of the year. In our end it's really not under our control. I mean, it's more on the client's control as to when they can solve some of their operational issues. So for modeling purposes, I would say Q1 and Q2 is probably the safe way to go.

Michael Shlisky -- Dougherty & Company -- Analyst

Okay. And then on capex, I know it was elevated in 2019, I just didn't see it in your release, was there any kind of outlook for 2020 for your capex budget?

Santiago Giraldo -- Chief Financial Officer

Definitely much lower than 2019. I think $7 million or so is a prudent number. We still have the tail then of our efficiency investments probably $2 million to $3 million and then the rest being mainly maintenance capex. But it's certainly a much lower number than 2019 based on what we have going forward.

Michael Shlisky -- Dougherty & Company -- Analyst

So as the automation kicks in and growth rates get a little more -- it sounds like a little more under control here, maybe not quite what we saw in 2019, there is a pretty good free cash outlook then for 2020?

Santiago Giraldo -- Chief Financial Officer

Yeah, well you saw what we were able to do at the end of 2019. Certainly a lot of improvement year-over-year mainly on working capital management related to inventory procurement. And from a free cash flow perspective, obviously having a much lower capex will help. So obviously, we're focusing on continue to generate free cash flow and operating cash flow obviously.

Michael Shlisky -- Dougherty & Company -- Analyst

Okay. Got it. I'll pass along. Thanks so much, guys.

Santiago Giraldo -- Chief Financial Officer

Thanks, Mike.

Operator

Thank you. Our next question comes from the line of Tim Wojs with Baird. Please proceed with your question.

Tim Wojs -- RW Baird -- Analyst

Yeah. Hey, guys. Good morning.

Santiago Giraldo -- Chief Financial Officer

Good morning, Tim.

Christian T. Daes -- Chief Operating Officer and Director

Good morning.

Jose M. Daes -- Chief Executive Officer and Director

Hello.

Tim Wojs -- RW Baird -- Analyst

Maybe just a high-level question. So relative -- I'm just curious your visibility today as you kind of enter 2020 relative to prior years, how would you kind of describe that visibility for 2020 relative to how you've had visibility entering any previous year?

Santiago Giraldo -- Chief Financial Officer

Well, I think the exception would be more of a macro with everything kind of going on right now. On the commercial side, you have a lot of visibility based on the timing of projects. Obviously, you can't control when you can deliver the products. On the resi side, I think we're taking a cautious approach and see how things evolve. We're still, like I was saying, projecting double-digit growth on the resi side. Last year, we grew 78%. Obviously, we were not going to bake in the same type of growth for this year. We expect the positive trend to continue but are taking a more measured approach as we move through the year, and we can update based on actual results.

Tim Wojs -- RW Baird -- Analyst

Okay, OK. And then as you think about just the returns on some of the automation equipment in aluminum, could you just remind us what the benefit to that in 2020 could look like?

Santiago Giraldo -- Chief Financial Officer

It's going to depend all on demand. Thus, as you recall, on the aluminum front, we spent about $5 million. And really, the payback on that is very short. It's about 24 months. So if the demand is there, and we haven't even touched into what's going on in LatAm, but if you look at the trend, we've seen some positive trends in the last couple of quarters, we're not baking in any substantial upside there. But if it does take place, that the trend continues, we should be able to fill up that -- more of that capacity. So we're expecting quite a quick payback on those investments, Tim.

Tim Wojs -- RW Baird -- Analyst

Okay, OK. And then just to make sure I've got it right. Just if you look at gross margins and you look at SG&A, do you -- where would you expect the most leverage in 2020 to come from? The gross margin line or would you expect that strong SG&A leverage to continue?

Santiago Giraldo -- Chief Financial Officer

Absolutely. It's definitely going to be on the gross margin line. We should be able to do 150 basis points to 200 basis points on operating leverage there. Obviously, there were some one-offs this quarter that impacted the results. But beyond that, absent any headwinds on U.S. labor, remember that we have the automation kicking in, in this quarter, and we're expecting to drive some synergies there. So from a gross margin perspective, we're expecting operating leverage. On the SG&A front, the main leverage that we got in 2019 was related to shipping and handling. We are expecting to ship a bit more into further places, so we're being a little prudent as to how we model SG&A. So on that front, I think it's going to be kind of more flattish, and we'll be able to get the leverage on the COGS side.

Tim Wojs -- RW Baird -- Analyst

Okay. Okay, great. Appreciate the time, guys. Thank you. Good luck 2020.

Santiago Giraldo -- Chief Financial Officer

Thanks, Tim.

Operator

Thank you. Our next question comes from the line of Josh Wilson with Raymond James. Please proceed with your question.

Josh Wilson -- Raymond James -- Analyst

Good morning and thanks for taking my questions.

Santiago Giraldo -- Chief Financial Officer

Good morning, Josh.

Josh Wilson -- Raymond James -- Analyst

Wanted to drill down a little more on some of these things here. So as it relates to the cadence of sales for the year, given all the headwinds you listed for 1Q, do you -- you still expect 1Q sales to be flat to up year-on-year?

Santiago Giraldo -- Chief Financial Officer

Yeah, I think flat modeling is probably about right. And again let's remember that we have a pretty tough comp because Q1 of last year had a significant spike in resi sales. This year is more of a usual quarter where we had a couple of weeks for scheduled maintenance. So the way that we're modeling this is kind of a flat Q1 and then ramping up over the year like you heard in the call.

Josh Wilson -- Raymond James -- Analyst

Got it. And then as it relates to your answer to the previous question on gross margin, just to make sure I understood, you're looking for 150 basis points to 200 basis points and expansion with more so in the back half than maybe less so in the front half given the ongoing labor inflation headwinds, is that about right?

Santiago Giraldo -- Chief Financial Officer

That's absolutely right.

Josh Wilson -- Raymond James -- Analyst

Okay. And then in your guidance specifically are you assuming Colombian sales are flat or what's the assumption there?

Santiago Giraldo -- Chief Financial Officer

Yes, we are assuming flat sales with the growth coming out of the US. If Colombia continues the positive trend that will -- that we have seen over the last couple of quarters then that would be an upside to results.

Josh Wilson -- Raymond James -- Analyst

Got it. And then last one for me. Your days accounts payable dropped quite a bit year-on-year. Was that just timing or has there have been some adverse shift there?

Santiago Giraldo -- Chief Financial Officer

No, it is timing. I mean it depends on what you have, what kind of orders of inventory you have at one point in time. So we don't expect any structural changes there.

Josh Wilson -- Raymond James -- Analyst

Got it. Good luck with the next quarter.

Santiago Giraldo -- Chief Financial Officer

Thanks, Josh.

Operator

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

Julio Romero -- Sidoti -- Analyst

Hey, good morning everyone.

Santiago Giraldo -- Chief Financial Officer

Good morning, Julio.

Jose M. Daes -- Chief Executive Officer and Director

Good morning.

Julio Romero -- Sidoti -- Analyst

Wanted to ask if you could potentially quantify how much of an impact, higher US labor cost had in the fourth quarter? And if you're seeing that particular labor constraint in any particular geographic regions of the country or if it's rather just kind of broadly spread out?

Santiago Giraldo -- Chief Financial Officer

Mainly in the southeast, as you heard and it was a lot more related to the installation. And to your question as to how much it was, it was about $1.5 million that we saw during Q4. We're monitoring to see what Q1 looks like. We hope that to be a temporary effect. And as you heard in the call we're looking to mitigate some of that impact with the automation that is kicking in in the Q1 which will help us with labor cost in Colombia.

Julio Romero -- Sidoti -- Analyst

Okay, got it. And can you talk about maybe what the final install versus manufacturing sales mix was in 2019? And I know you said you expect greater mix for manufacturing in 2020. But if those US labor headwinds continue if that mix can potentially swing more toward manufacturing, then what is currently embedded in your guide?

Santiago Giraldo -- Chief Financial Officer

It all depends on the end clients. We actually have a more weighted revenue mix on the manufacturing side in the first quarter or so. We do expect to have a better gross margin based on that during the first couple of quarters. But at the end, the mix of shipping is going to kind of depend on customer orders because obviously you can't ship anything until you get those orders in place.

Julio Romero -- Sidoti -- Analyst

Got it. And just lastly for me, just housekeeping here. Would you happen to have the dollar amount for shipping and handling on the full year?

Santiago Giraldo -- Chief Financial Officer

It's about 5% of revenues. For this year, it is going to be about $8 million or so.

Julio Romero -- Sidoti -- Analyst

Okay, great. Thanks very much.

Santiago Giraldo -- Chief Financial Officer

All right.

Jose M. Daes -- Chief Executive Officer and Director

Thank you.

Operator

Thank you. Our next question comes from the line of Brent Thielman with D.A. Davidson. Please proceed with your question.

Brent Thielman -- D.A. Davidson -- Analyst

Great. Thank you. Good morning.

Santiago Giraldo -- Chief Financial Officer

Good morning, Brent.

Jose M. Daes -- Chief Executive Officer and Director

Good morning.

Brent Thielman -- D.A. Davidson -- Analyst

Maybe more on the residential side, are you guys exploring any new markets kind of beyond the Southeast Florida or you still feel like the TAM is still big enough and under-penetrated there?

Jose M. Daes -- Chief Executive Officer and Director

Hi. this is Jose Des. We are moving upstate Florida because we were selling only residential in Dade, Broward and Palm Beach county. Now we are on the West Coast up to Tempa and now we're moving to the Panhandle and we'll try to open and also on the East Coast up to ejection bill for the moment.

Brent Thielman -- D.A. Davidson -- Analyst

Okay. Okay and then just given all the movement in commodity prices as of late, maybe you can just update us on kind of the impact to the P&L, material cost, aluminum and so forth. So we think about 2020 and I assume at this point do you have any new supply chain disruptions or anything like that?

Santiago Giraldo -- Chief Financial Officer

That's correct. I mean at this point we haven't seen any. It's hard to tell what that's going to look like going forward, not only for us, but for the industry. In Q4 we did have a little bit of a headwind with some higher priced aluminum for short-term orders. But going forward, we're modeling commodity prices being somewhat stable, but again we'll have to wait to see what happens with everything that's going on right now.

Brent Thielman -- D.A. Davidson -- Analyst

Okay, that's all I had. Thank you.

Santiago Giraldo -- Chief Financial Officer

Thanks, Brent. Thank you. Our next question is a follow-up from Mike Shlisky with Dougherty & Company. Please proceed with your question.

Michael Shlisky -- Dougherty & Company -- Analyst

Hey guys. Thanks. I wanted to circle back on your SG&A commentary from one of the earlier questions. You stated earlier that on a dollar basis, it's looking flat for this year? Or is the percent of sales going to be flat from the previous year?

Santiago Giraldo -- Chief Financial Officer

I'm sorry. Are you asking if SG&A is going to be flat year-over-year?

Michael Shlisky -- Dougherty & Company -- Analyst

Yeah, I thought you had said that and I wasn't sure if you meant dollar or percent basis.

Santiago Giraldo -- Chief Financial Officer

No, on a dollar basis. On a percentage basis, I was saying that we don't expect to get significant operating leverage over the higher sales. And that's just based on the fact that we're expecting to ship into a lot more kind of further destinations. So we are now projecting to be able to get the same shipping and handling efficiencies that we were able to obtain in 2019. But on an absolute -- on absolute terms, we are modeling SG&A to be a little bit higher on a dollar basis.

Michael Shlisky -- Dougherty & Company -- Analyst

Okay. Got it. Got it. And then secondly, I did notice that the President of Colombia is visiting the White House for a meeting today with our President. I think that's actually taking place right now as we speak. I know that your company is one of the better success stories of Colombia. And any sense what they're going to be talking about today in the meeting? Are there any trade or economic discussions do you think that might be taking place?

Santiago Giraldo -- Chief Financial Officer

No.

Christian T. Daes -- Chief Operating Officer and Director

Basically, the President of Colombia is going to try to make sure that the free trade agreement continues to go on that the tariffs -- that the President Trump put on aluminum for Colombia may be taken down. He wants to make sure President Trump understands that Colombia is a partner in the long run and we are in a deficit with the U.S. in trading.

Michael Shlisky -- Dougherty & Company -- Analyst

Okay. Thanks. Fair enough. Appreciate it.

Santiago Giraldo -- Chief Financial Officer

Thanks, Mike.

Operator

We have reached the end of our question-and-answer session. I would like to turn the call back over to Mr. Jose Manuel Daes for any closing remarks.

Jose M. Daes -- Chief Executive Officer and Director

Thank you, everyone for participating in today's call. And we're going to keep working hard to give better and greater results and expanding windows all over the United States, and hopefully, some other continents. Thank you.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Brad Cray -- Investor Relations

Jose M. Daes -- Chief Executive Officer and Director

Christian T. Daes -- Chief Operating Officer and Director

Santiago Giraldo -- Chief Financial Officer

Michael Shlisky -- Dougherty & Company -- Analyst

Tim Wojs -- RW Baird -- Analyst

Josh Wilson -- Raymond James -- Analyst

Julio Romero -- Sidoti -- Analyst

Brent Thielman -- D.A. Davidson -- Analyst

More TGLS analysis

All earnings call transcripts

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