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Tecnoglass Inc (NASDAQ:TGLS)
Q1 2020 Earnings Call
May 9, 2020, 9:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Tecnoglass Inc. First Quarter 2020 Conference Call. [Operator Instructions]

I would now like to turn the conference over to your host today, Rodny Nacier, Investor Relations. Thank you, sir. You may begin.

Rodny Nacier -- Managing Director

Thank you for joining us for Tecnoglass' first quarter 2020 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 regarding future financial performance, future growth and future acquisitions. These statements are based on Tecnoglass' current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary in a material nature from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors and other risks and uncertainties affecting the operations of Tecnoglass' business. These risks, uncertainties and contingencies are indicated from time to time in Tecnoglass' filings with the Securities and Exchange Commission. The information discussed during the call is presented in light of such risks.

Further, investors should keep in mind that Tecnoglass' financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements whether as a result of new information, future events, changes in assumptions or otherwise.

I will now turn the call over to Jose Manuel, beginning on slide number 4.

Jose M. Daes -- Chief Executive Officer and Director

Thank you, Rodny, and thank you, everyone, for participating on today's call.

To start, I would like to say that I'm incredibly proud of all of our team members who have shown such incredible strength in the face of adversity during the COVID-19 outbreak. Our thoughts are with all those impacted by this unfortunate situation. We are moving through unprecedented times, and our top priority is protecting the health and safety of our employees and others. Fortunately, all of our operations, along with most of our customers' operations in the US and Latin America, have been deemed essential, and we continue to serve customers safely and responsibly.

Looking at our first quarter results. We started the year tracking relatively in line with our plan in January and February. In March, as COVID-19 began to rapidly spread in many of our markets. The majority of national and local governments issued shelter-in-place orders. This impacted our invoicing activity into the end of the quarter, with visibility on demand trends quickly becoming lessened. Our year-over-year sales performance also reflected an exceptionally strong prior year March, which Santiago will discuss in more detail.

On the operational side, our teams delivered solid results. We produced our highest first quarter gross margin and adjusted EBITDA margin since 2016. Favorable raw material pricing and a higher mix of product revenue were the main reasons for the large improvement. We were also pleased to start realizing the benefits of our high return automation initiatives. Our selling efforts remain focused on further penetrating key US markets and gaining footholds in additional cities.

In the quarter, 90% of our revenue and 89% of backlog was in the US and our expansion in residential continued, representing 19% of our US business over the past year.

While the world has changed a lot since our last updated call, our diverse geographic footprint, lean cost structure and a strong balance sheet position give us confidence in our ability to continue winning business even in this uncertain environment. Over our 36 year history, we have successfully overcome difficult times. During the Great Recession of 2008, we grew the business and generated profits [Indecipherable] to emerge as a much stronger company. I have full confidence in our ability to do so again this time.

In our now larger and more vertical integrated platform, we are even better prepared to navigate through the current environment. While we are much bigger today, we still represent only around 1% of the US architectural glass industry. So there remain many opportunities to capture revenue and gain share as demonstrated by our strong backlog. We expect to accelerate our advantages as the markets recover.

We have a strong cash position and capital resources to face the bumpy road ahead. We are taking additional actions to improve our cost structure, cash flow and balance sheet to not only adapt our business to the current environment but also affect any structural changes that will help situate our business for long-term success as we emerge from this volatile period.

I will now turn the call over to Chris to provide additional details on our COVID-19 response and backlog.

Christian T. Daes -- Chief Operating Officer and Director

Thank you, Jose Manuel.

Beginning with our COVID-19 response on slide number 5. Over the last couple of months, we have implemented a robust response plan and have also taken many proactive measures to strengthen our business and balance sheet as the global economy experiences the impact of COVID-19 pandemic. Similar to the US, in Colombia, there are stay-at-home orders still widely in effect. We are operating under a special exception granted to companies that support the construction and infrastructure sectors.

As we continue to manufacture and install our critical products, in many cases, we have gone beyond guidelines from local governments and CDC to protect the well-being of our employees, customers and partners. We have implemented remote working policies, enhanced sanitation practices and minimized group gatherings, among other measures. We have also taken more in-depth initiatives to protect our employees such as the temporary suspension of manufacturing operations for three weeks in late March and early April. This enabled us to successfully install workplace protections and implement a comprehensive plan to incorporate social distancing and other best practices into our production and logistical processes.

The late March timing allow us to move more scheduled deliveries into April as some customers delay shipments while they assess the [Indecipherable] government orders getting introduced around that time. While this did limit our ability to invoice projects during that time, since mid-April, we have quickly ramped it back up and made up for a significant portion of the pause in invoicing activity. We retained the labor force while the plant was shut down by using vacation day slots, where possible, so we were able to resume operations relatively efficiently.

We entered this pandemic at the strong point in our Company's history with a financial position along with the capital resources to effectively support our global operations. We are focused on maintaining that financial flexibility and generating cash flow. We have implemented strict cost controls, reduced operating expenses and limited all noncritical capital expenditures beyond the completion of initiatives started in 2019. We have significant contractual flexibility to make quick staffing decisions for the majority of our workforce given that a large part of our operating force is contracted through temp agencies.

We are taking a balanced approach to protecting jobs, where possible, while ensuring our cash preservation goals are achieved. We will continue to be prudent with our resources and capital allocation. The actions that we have taken will not only help us mitigate the impacts of any near-term demand challenges related to the pandemic but are also designed to allow for accelerated share gains and deliver more profitable growth as we emerge from this crisis.

Moving to our backlog on slide number 6. A value element of our business is that we have a multiyear view of projects in our pipeline on the commercial portion of our revenues. Our quarter-end backlog was $545 million, up 5.8% year-over-year primarily in the US, which now represents 89% of our backlog compared to 83% in the first quarter of 2019. As the COVID-19 crisis continue, we are closely monitoring its impact on the broader macro environment and, specifically, how this might influence the timing of projects compared to initial invoicing schedules.

On the bright side, most projects are still proceeding according to plan in markets where construction activity is permitted. However, visibility is much lower than usual as we are reasonably assuming that some projects get delayed or temporarily put on hold. To that point, we have seen delays in some commercial projects in the northeast US such as in the New York area, where the local authorities have entirely prioritized combating the pandemic.

Overall building activity in the US has remained relatively stable for the first four months of 2020 through April, which is encouraging as we read [Phonetic] into underlying demand beneath the COVID-19-related market disruptions. Our sales teams are seeing continued quoting activity. And based on conversation with developers, most are looking to get projects off the ground once they are able to get favorable finance in place.

In residential, which is not captured by our backlog, we have been very pleased with our continued penetration into more single-family projects, which we enter that end market in 2017. Recent US housing start data suggest residential projects are feeling the effects of shelter-in-place orders and other economic uncertainties. In our business, we still have a rapidly growing presence with our new product offerings to capture additional share regardless of the demand environment.

Overall, the conversations for most national and local governments are gradually shifting to the timing and pace of lifting shelter in place and restoring battered economies. In this environment, we have to remain flexible to tailor our operation base on how we see demand evolving.

For us, we have the benefit of a vertically integrated operation to scale up and down quickly. We will continue to focus on optimizing our liquidity, growing backlog through our focused business development and sales program and delivering quality service to our customers during this volatile period.

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

Santiago Giraldo -- Chief Financial Officer

Thank you, Christian.

Beginning with our capital resources on slide number 8. In recent years, we have made progress to reduce leverage, enhance cash flow and generally strengthen our balance sheet metrics. During the first quarter, we generated cash flow from operations of approximately $550,000. The first quarter is seasonally a low point of our cash flow given timing of interest and tax payments but improved by $6.3 million compared to the prior year quarter. This partly reflects aggressive actions to preserve cash, including tight cost controls and working capital improvements.

Our capex increased by approximately $2.5 million, mainly reflecting scheduled annual maintenance at our production facility, plus approximately $3 million of final payments for a high-return automation investments completed in 2019. As a result, we expect capex to be largely front-loaded in 2020.

Since the end of the first quarter, we have continued to build our liquidity position. Our cash preservation measures are paying off. And at an abundance of caution, we also drew down an additional $10 million on our available lines of credit to begin May with approximately $50 million of cash and total liquidity of approximately $105 million, including available lines of credit. The structure of our long-term capital resources are set up well for the current environment. Our senior notes in the amount of $210 million do not mature until 2022. Beyond that, our credit facilities extend through 2024 in a weighted average maturity on lines of credit of roughly 4.7 years out.

Looking at our net leverage. We ended the quarter at 2.4 times, which was down 0.6 times compared to the prior year quarter and up slightly from December 31. This sequential increase is partly due to $6.5 million of capex during the period to complete our automation initiatives and major maintenance and $4 million FX impact on cash held in local currencies.

We believe our balance sheet is properly structured to face the challenges ahead. We have no covenants worth discussing at this time, and we have over $55 million available to us on our lines of credit. We are prepared to draw down additional capital as needed but do not see a reason to do so at this time based on our other cash-building efforts.

From a capital allocation perspective, our primary objective at this time is to preserve cash and return a portion of capital to shareholders through our dividend. Based on our current install capacity as a result of our completed automation investments, we don't foresee material growth capex investments in the short term.

In our joint venture with Saint-Gobain, we previously communicated the plan to begin construction of the second float glass plant in 2020. The float glass plant calls for funding to be entirely arranged at the JV level, with the JV partners providing a backstop on a pro rata basis for any additional funding needs. Given the current market climate, we are reviewing the project time line as we reassess near-term demand and internal return thresholds. The permitting is expected to be completed soon so the project can get off the ground once market conditions are conducive to do so. Overall, we ended the quarter with a strong capital position and have further fortified our balance sheet to effectively navigate the evolving economic environment.

Looking at the drivers of revenue on slide number 9. Based on the timing of invoicing and projects in the prior year, on our last update call we indicated that we would have a challenging prior year comparison in the first quarter. During January and February of 2020, revenues tracked relatively in line with our expectations and essentially on par with the prior year quarter. This was good because we had five more days of downtime in January for scheduled maintenance at our Colombia manufacturing facility compared to the prior year quarter. That means five less days of invoicing due to planned maintenance.

The month of March represented a decline in revenues for the quarter. In the prior year month of March, the level of invoicing was well above trend due to the timing of closing out projects. However, looking at March of 2020, our revenue were impacted by nine fewer invoicing days as we temporarily suspended planned operations from March 23 to April 13. As Chris mentioned, we took the downtime to implement processes and protocols at the plants for safer production flows after engaging with customers on delivery schedules given the uncertain outcomes of the rapid US outbreak of COVID-19 in mid-March, causing disruptions to customer construction schedules.

For efficiency, we used the initial phase of the Colombian government stay-at-home orders to prepare the plan to resume full operations under a safe environment to prioritize our employees' health. As previously stated, we have been operating under an essential business exemption as a key supplier to the infrastructure and construction sectors even as the stay at home order remains in place as of today.

Through the month of April, the US demand environment improved as customers gained confidence in their ability to proceed with projects, most of which are essential work. Since resuming operations on April 14 and, have added shifts to address pent-up demand.

Looking at the drivers of adjusted EBITDA on slide number 10. Despite the unfavorable impact to revenue from the COVID-19-related issues in March, we were pleased to improve adjusted EBITDA as a percent of sales by 350 basis points to 23.3% compared to 19.7% in the prior year quarter. In dollars, adjusted EBITDA was $20.3 million compared to $21.1 million or 19.7% of sales, with lower revenues partly offset by a 510 basis points improvement in gross margin to 34.9% for the quarter. The improvement in gross margin primarily reflected lower raw material costs, a higher mix of revenue from manufacturing products versus installation as well as greater operating efficiencies from our implementation of automation initiatives in 2019.

SG&A was lower by $0.3 million as we continue to manage expenses and as we were incurring less variable costs given lower revenues. As mentioned, we are trimming costs given the ongoing market volatility. We have made good progress on this front. Our lean, highly efficient and vertically integrated operations, along with our dedicated employee base, leave us confident in our ability to efficiently match our costs with our demand. We will continue to source additional avenues to improve efficiencies and maintain our industry-leading margins.

Looking at our markets on slide number 12. For the most part, we are supporting customers in any market where construction is permitted. While we have made good progress to diversify outside of Florida, that state still represents a significant market for us. In that state, construction is essential and housing is considered critical infrastructure. So that is assuring for a large part of our revenues and customer base.

More broadly, approximately 85% of first quarter 2020 backlog is in states or jurisdictions that have designated suppliers of products or services to the construction sector as an essential business. In some markets where we have a notable presence such as New York and Pennsylvania, we have projects proceeding under certain extensions. But for the most part, construction activity is limited. On an encouraging note, several US states, including Florida and Texas, have begun easing general restrictions.

In Colombia, the country is under a nationwide shelter-in-place order through at least May 25, but we expect the general exemption for infrastructure and construction projects to continue.

Moving to our 2020 outlook on slide 14. We have withdrawn our previously provided full year 2020 financial outlook for revenue and adjusted EBITDA. Our backlog has historically provided a high degree of visibility for commercial revenues over a 12 month period. Our prior outlook issued before the COVID-19 pandemic represented existing projects in backlog, plus anticipated demand from our continued expansion into the single family residential end market.

Our commercial backlog remains firm in the short term, but we do have lower visibility on the timing of project invoicing through the year-end 2020 as deliveries will depend on the ongoing COVID situation in each market that we serve. For single family, housing starts declined in March and are expected to remain depressed in the near term.

In the second half of April, daily revenues were higher than levels seen prior to the temporary suspension of our plant. Given that the plant was being adapted to meet COVID sanitary standards during the first half of April, on a revenue per day basis for the days that we were operational, revenues increased by an encouraging 15% per invoicing day in April compared to March. We attribute the majority of that month-over-month improvement to backfilling of orders and the remainder to relatively stronger underlying demand.

While we expect second quarter of 2020 revenues to be lower compared to the prior year quarter, we currently anticipate sequential improvement on a month-to-month basis through June. Given the unprecedented nature of the current economic climate, the remainder of 2020 cannot be estimated with precision at this time.

In summary, we entered the year with a good momentum on solid operating platform supported by a strong capital base. As we move through the uncertain period ahead, we are focused on cash management and taking necessary actions to deliver strong cash flow while safely serving customers. We will continue to monitor and adjust plans for our business that are aligned with our expectation to emerge as a stronger company when global market conditions begin to improve.

With that, we will be happy to answer your questions. Operator, please open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Mike Shlisky with Dougherty & Company. Please proceed with your question.

Michael Shlisky -- Dougherty & Company -- Analyst

Good morning.

Santiago Giraldo -- Chief Financial Officer

Good morning, Mike.

Michael Shlisky -- Dougherty & Company -- Analyst

So I wanted to ask about your sort of near-term invoicing schedule and where the real concerns on the backlog are. I mean, at this point, when you started the year into the spring time, if a building is halfway finished or even partially finished -- they're not going to stop building that building at this point. They're going to see it kind of all the way through the end. So my guess is, the current project -- the very near-term backlog isn't going to change much other than maybe some timing differences. I guess my question is, is your worry more about the end of year backlog at this point or 2021 projects? Do you feel pretty good about what has to be delivered this year? Quarter-to-quarter, perhaps, there's not that much. There's some question, but sort of end of year is kind of the more concerning to you because of the new projects that might come onboard?

Jose M. Daes -- Chief Executive Officer and Director

Well, this is Jose. We feel very confident about this year. We have a strong backlog, and all the projects are continuing, especially the ones that are even 20%, 30% up. We've seen a couple of delayed projects. But last week, for example, one of them just restarted and said that they already locked the financing. So, for this year, we see still a strong demand. And next year, we have a good backlog for next year. And we are starting to see people talking again about closing because they're going to open New York. In Boston, there is a lot of work. In Texas, they haven't closed anything. We're very confident that the world is going to keep going.

Michael Shlisky -- Dougherty & Company -- Analyst

Okay. And then what's been your ability to kind of do business within the four walls in Colombia with other people who are outside those four walls, things like getting trucking services, some of your outside contractors, food service, and other items that have to be brought in every day. Because you're under an exemption. That might be OK for you. But have your various outside provider has been able to help you out as well since April 14?

Jose M. Daes -- Chief Executive Officer and Director

No, we haven't had any problems, contractors or anything, especially in Colombia. Construction is already back to work. We were sent home for three weeks. We tried to keep a piece open through those three weeks. Unfortunately, obviously, that hit the sales being a little bit lower than expected. But it's all over now. We've been working for the last now four weeks, and we're doing record numbers of invoicing every day. So we expect to have a very decent quarter, for example, now in the second quarter, obviously, taking into consideration that the first 13 days of April, we were closed. But things look good. Supply looks good, demand looks good and we are trying to build 2021, the end of 2021. And that is going to be done also with a lot of retail, which is not in our backlog, but is a residential event. But that is very strong today and has continued to grow in our Company.

Michael Shlisky -- Dougherty & Company -- Analyst

Okay. Maybe just one more for me. Obviously, a very strong job on EBITDA margins in the quarter. I guess do you think you've reached a whole new range or a plateau from margins since you made some of those improvements in the fourth and first quarter here to your automation? Or was there anything kind of cut on a kind of temporary basis to kind of offset some of the volume declines in the quarter?

Santiago Giraldo -- Chief Financial Officer

Hi, Mike, this is Santiago. Basically, some of it was done through raw material efficiency. We're seeing less raw material costs against contracts that were already in place. So we do expect that to continue moving forward. Another piece of that was the mix of business with the installation business closing out some projects. So you basically had some more manufacturing revenues rather than installation. So in large part, it's going to depend on the mix quarter-over-quarter.

But on a structural basis, I think that the rest of the year, you can expect efficiencies both from lower raw material and efficiencies related to automation. As we had mentioned earlier in the year and even in previous conversations, we do expect to gain efficiencies on a gross margin basis. So I think it's going to depend more or less on what happens on mix quarter-over-quarter, but there is certainly structural things that would allow us to gain efficiencies from a gross margin perspective.

Michael Shlisky -- Dougherty & Company -- Analyst

Just to follow up this, Santiago. The large amounts of buildings you had here in just in the last few weeks in April, was that heavy on the closeout [Phonetic] activity?

Santiago Giraldo -- Chief Financial Officer

I missed the first part of your question, Mike.

Michael Shlisky -- Dougherty & Company -- Analyst

Yeah. The high level of invoicing that's happened in the last few weeks since you came back to work, the mix there have been high on the closeouts?

Santiago Giraldo -- Chief Financial Officer

Yes. It's been constant with what we've seen so far throughout the year. It's been in line.

Michael Shlisky -- Dougherty & Company -- Analyst

Okay. Thanks so much. I'll pass the line.

Santiago Giraldo -- Chief Financial Officer

Yes. Thank you.

Operator

Our next question comes from Tim Wojs with Baird. Please proceed with your question.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Yeah. Hey guys, good morning. Hope you guys are all safe. It sounds like you are. And appreciate all the detail on the slides. Maybe just my first question, the residential business. How would you kind of frame the performance in the first quarter relative to your expectations? And have you seen that same kind of -- so you have that same kind of expectation for month-over-month improvement through the second quarter?

Jose M. Daes -- Chief Executive Officer and Director

Hello. This is Jose. We've been doing really good. We surpassed our expectations for the first quarter because -- even though we didn't work in the first two weeks in January, we closed for a week and a half -- almost two weeks in March, we invoiced a lot more than we did in the first quarter of 2019. And we see strong demand in April, and we keep receiving -- the residential business is a day-by-day business, and we've seen a lot of demand in the past couple of weeks that we're open. We expect to grow at least 20% this year.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Okay. So despite everything, the residential business should still grow pretty meaningfully in 2020. That's good to hear. And then maybe just, Santiago, on the liquidity, I think you mentioned working capital should be positive in 2020 and it's been, at least the last couple of years. I know it depends on a sales rate. But any sort of kind of big-picture guardrails that you might be able to give us in terms of what working capital might improve by?

Santiago Giraldo -- Chief Financial Officer

Like you say, it's going to depend mainly on sales. I think pretty much our inventory is very efficient. You saw it coming down again this quarter. So it's really related to how efficient we're able to collect. The last couple of months, we've been able to collect normally. Our clients continue to work, and that hasn't been an issue. So I think it's going to be relating to what sales shape up to be. But I certainly think that we should be able to build on what we delivered last year. Without kind of giving you an exact number, I think we are seeing that -- you already saw it in the first quarter. We improved operating cash flow by almost $6.5 million. And I think we should be able to build on that and deliver better operating cash flow than last year.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Okay. That's helpful. And then I guess just a last question, just maybe a bigger picture one. But just given your low cost position, I'm just kind of curious how you would expect Tecnoglass to perform relative to the industry if things would kind of weaken from a backlog perspective as you got into 2020 and 2021?

Christian T. Daes -- Chief Operating Officer and Director

Listen, I've been with the Company 35, 36 years now. And every time there is a crisis, that's when we performed better. I mean, because we are in a low cost environment, we were born out of crisis, we love to handle them and we have a lot of future. I mean, we see that our -- we could make Tecnoglass a winner in the middle of this pandemic situation. And we can sell more, be more efficient, we are improving on deliveries, efficiencies, on everything. And we expect to continue to better the numbers as we go along. We would have had easily -- if we [Indecipherable] invoiced a complete quarter, we would have easily invoiced $8 million more or $9 million more and we could have had 2 or 3 of EBITDA additional to the number that you're seeing today.

So we feel very confident that the future ahead is for us. Obviously, we want to make sure that we have enough backlog for 2021, which we already have some, but we want to build more, especially with residential. Jose can add to my comments.

Jose M. Daes -- Chief Executive Officer and Director

Yes. When things go down and demand goes down, since we have better margins than all our peers, we're able to lower the price, be more competitive, get a lot of work and still make money. But we're not changing that. As long as we see the demand enough to make a good profit, we'd rather sell the good businesses and not gain a lot of ground just on price. If we had idle capacity, of course, we will do it. But for the moment, we're growing with solid business with solid profits, and that's what we're doing for now.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Okay. Thank you. Good luck on everything, guys, and stay safe.

Jose M. Daes -- Chief Executive Officer and Director

Thank you.

Santiago Giraldo -- Chief Financial Officer

Thanks, Tim.

Operator

Our next question comes from Josh Wilson with Raymond James. Please proceed with your question.

Joshua Wilson -- Raymond James & Associates -- Analyst

Good morning. Thanks for taking the questions. And hope you all are well.

Santiago Giraldo -- Chief Financial Officer

Good morning, Josh.

Jose M. Daes -- Chief Executive Officer and Director

Good morning, Josh.

Joshua Wilson -- Raymond James & Associates -- Analyst

Thank you. First one. Could you, Santiago, give us some sense of maybe what capex and D&A looks like for the year now?

Santiago Giraldo -- Chief Financial Officer

Yeah. So, at the beginning, we had talked about being less than $10 million. As you heard on the commentary, we expect capex to be heavily front-loaded given that we had the remaining pieces of the automation initiatives in Q1. Moving forward, I still think it's going to be less than the $10 million we talked about. We don't foresee any growth capex for the remaining of the year. It'll just be mainly maintenance capex and whatever is left on the automation, which is not much.

Joshua Wilson -- Raymond James & Associates -- Analyst

Okay. And then you mentioned some cost-cutting efforts on the expense side as well. Can you give us a sense of what those might be and how much of it is volume-based?

Santiago Giraldo -- Chief Financial Officer

Yes. Obviously, what you would expect is rationalizing traveling expenses, professional fees, everything you can do from an SG&A front. Obviously, on the cost side, there's only so much you can do since it's a lot of variable cost. The Company has prioritized preserving employment, so we're keeping our employees. And with the backlog for the short term that Christian and Jose were talking about, we're going to need employees. So it's not related to headcount reduction. It's more what we can do on other fronts mainly related to SG&A. And also the efficiencies that are going to come or that are already kind of flowing through related to the automation as far as having less material waste and others, that's going to help out.

Joshua Wilson -- Raymond James & Associates -- Analyst

Got it. And what sort of progress have you made in adding single-family resi dealers?

Santiago Giraldo -- Chief Financial Officer

Jose, you want to take that?

Jose M. Daes -- Chief Executive Officer and Director

Yes. Yes. We are adding dealers day by day. I mean, we just opened a new distributor in Orlando, which in Orlando is a different breed because we didn't have even product for Orlando because this is a different zone. It's in the middle of Florida. And most of it is not hurricane-proof. So we took a bit of time to design the windows for that area. We already did. And we opened our distributor and is doing good. It's starting. We're opening also in the Panhandle, another distributor. We didn't sell one window there before. And we are having a lot of dealers in Miami [Indecipherable] Palm Beach County and also in the West Coast because they're seeing that we're reliable, our product is the best by far and we have the widest range of windows of any company in the US. So we're very confident that we're going to keep growing in residential.

Joshua Wilson -- Raymond James & Associates -- Analyst

Good to hear. And one last clarification for me. So, as far as your downtime goes, it's fair to say that you didn't lose any jobs or your customers weren't impacted because they chose to delay at the same time.

Christian T. Daes -- Chief Operating Officer and Director

No. Thank God we are -- we have gotten used to being ahead of the bull all the time. So we were like four weeks ahead in deliveries because we liked to stock the materials already finished in the Port of Miami. So if there is a strike, if a hip is broken or anything, it won't affect the jobs. So we were able to take the three weeks off when the shelter order came in without a problem. Obviously, it hurt the volume a little bit, but there was not one single delay in the whole process. Jose can amplify there.

Jose M. Daes -- Chief Executive Officer and Director

And about the jobs, we have had two or three jobs in Florida that were delayed and one of them just restarted, as I stated before, and two of them, I believe, as soon as -- because the other two are hotels, and the hotel sector is suffering a lot. So I believe by the end of the year, they're going to retake the hotel, and we believe that everything is going to come back to normal.

Joshua Wilson -- Raymond James & Associates -- Analyst

Good luck. Stay well.

Santiago Giraldo -- Chief Financial Officer

Thanks, Josh.

Jose M. Daes -- Chief Executive Officer and Director

Thank you.

Operator

Our next question comes from Brent Thielman with D.A. Davidson. Please proceed with your question.

Our next question comes from Alex Rygiel with B. Riley. Please proceed with your question.

Alexander Rygiel -- B. Riley FBR -- Analyst

Thank you. Good morning, gentlemen.

Santiago Giraldo -- Chief Financial Officer

Good morning, Alex. How are you?

Jose M. Daes -- Chief Executive Officer and Director

Good morning.

Alexander Rygiel -- B. Riley FBR -- Analyst

Pretty good. Santiago, what portion of your sales don't get captured in backlog?

Santiago Giraldo -- Chief Financial Officer

Just single-family residential.

Alexander Rygiel -- B. Riley FBR -- Analyst

Okay. And then what was the exact single-family number in the quarter?

Santiago Giraldo -- Chief Financial Officer

About $13 million or so.

Alexander Rygiel -- B. Riley FBR -- Analyst

Perfect. And then, Jose Manuel or Christian, could you go back through kind of some of those key competitive advantages that you see developing due to COVID?

Jose M. Daes -- Chief Executive Officer and Director

No, the advantages do not develop because of COVID. What my brother was stating is that in the case of a down on the demand, since we have the lowest cost advantage, we can lower our price and still make money and keep gaining ground.

Christian T. Daes -- Chief Operating Officer and Director

And also, the other phase that is coincidental with the COVID is that the sorting system and all the automation that we bought is coming into place precisely now in the first and second quarter of 2020. For example, the sorting system for the aluminum for our window factory, which will be a big impact, it will be operational in June. So you will need a lot less people that you could use to build more windows and be more efficient and lose less materials.

And so all that is coming into place. We already have in our extrusion plant the sorting system. And we are now painting 20% more profiles than ever before with less amount of people, so the cost has come down. Prices of aluminum have come down. So there is a lot of efficiencies that will develop from now on that will help us maintain the competitive advantage and make us an even better competitor.

Alexander Rygiel -- B. Riley FBR -- Analyst

Very helpful. Thank you very much.

Santiago Giraldo -- Chief Financial Officer

Thanks, Alex.

Operator

Thank you. At this time, I would like to turn the call back over to Jose Manuel, Chief Executive Officer.

Jose M. Daes -- Chief Executive Officer and Director

Well, thank you, everyone, for participating in today's call. We are very confident of our future. We work hard to satisfy our shareholders and to make sure that we keep gaining ground in the market in the US. Thank you.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Rodny Nacier -- Managing Director

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

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Joshua Wilson -- Raymond James & Associates -- Analyst

Alexander Rygiel -- B. Riley FBR -- Analyst

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