EX-99.1 2 tm2130796d2_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

GMS REPORTS SECOND QUARTER FISCAL 2022 RESULTS

 

Net Sales of $1.15 Billion with Record Levels of Net Income and Adjusted EBITDA

 

Tucker, Georgia, December 2, 2021. GMS Inc. (NYSE: GMS), a leading North American specialty distributor of interior building products, today reported financial results for the fiscal second quarter ended October 31, 2021.

 

Second Quarter Fiscal 2022 Highlights

 

(Comparisons are to the second quarter of fiscal 2021)

 

•Net sales of $1,150.6 million increased 41.5%; organic net sales increased 31.2%.

 

•Net income of $74.4 million, or $1.69 per diluted share; adjusted net income of $87.8 million, or $2.00 per diluted share.

 

•Gross margin of 32.3%, down 30 basis points from the prior year.

 

•SG&A and Adjusted SG&A as a percentage of sales were 20.0% and 19.4%, respectively, representing 320 basis points of improvement for SG&A and 310 basis points of improvement for Adjusted SG&A.

 

•Adjusted EBITDA of $149.5 million increased 81.2%; Adjusted EBITDA margin improved 280 basis points to 13.0% from 10.2%.

 

•Net debt leverage was 2.4 times as of the end of the second quarter of fiscal 2022, down from 3.0 times a year ago.

 

“I am pleased to report another very strong quarter for GMS,” said John C. Turner, Jr., President and Chief Executive Officer. “Net sales again topped a billion dollars with record levels of net income and Adjusted EBITDA. Supply chain dynamics have led to all-time high levels of product inflation, which have been the principal driver of both sales growth and incremental profitability. That said, our relentless focus on customer service and the solid execution of our strategic priorities have enabled us to capture the benefits of both this heightened product inflation across our portfolio as well as continued strength in the residential market.”

 

Turner continued, “While commercial activity remains well below pre-COVID levels, we were pleased to see certain commercial projects that were previously on hold receive approvals to move forward. With other positive signs also emerging, we believe that we are very well positioned as we head into the next calendar year to benefit from an eventual commercial construction recovery.”

 

 

 

 

Second Quarter Fiscal 2022 Results

 

Net sales for the second quarter of fiscal 2022 of $1.15 billion increased 41.5% as compared with the prior year quarter, primarily due to inflationary pricing, healthy residential end markets, strong performance from our complementary products and the acquisitions of D.L. Building Materials and Westside Building Material. Organic net sales increased 31.2%.

 

Year-over-year sales increases by product category were as follows:

 

• Wallboard sales of $414.5 million increased 25.4% (up 19.7% on an organic basis).

 

• Ceilings sales of $140.9 million increased 25.6% (up 17.4% on an organic basis).

 

• Steel framing sales of $272.0 million increased 144.4% (up 122.2% on an organic basis).

 

• Complementary product sales of $323.2 million increased 24.8% (up 12.6% on an organic basis).

 

Gross profit of $371.9 million increased 40.3% compared to the second quarter of fiscal 2021. Gross margin of 32.3%, while above expectations, declined 30 basis points year-over-year primarily due to continued price-cost dynamics principally related to the timing of the implementation of price actions in wallboard.

 

Selling, general and administrative (“SG&A”) expense as a percentage of net sales improved 320 basis points to 20.0% for the quarter compared to 23.2% in the second quarter of fiscal 2021. Adjusted SG&A expense as a percentage of net sales of 19.4% improved 310 basis points from 22.5% in the prior year quarter as product inflation outpaced increases in operating costs.

 

Net income increased 161.2% to $74.4 million, or $1.69 per diluted share, compared to net income of $28.5 million, or $0.66 per diluted share, in the second quarter of fiscal 2021. Adjusted net income was $87.8 million, or $2.00 per diluted share, compared to $40.2 million, or $0.93 per diluted share, in the second quarter of the prior fiscal year.

 

Adjusted EBITDA increased 81.2% to $149.5 million compared to the prior year quarter. Adjusted EBITDA margin of 13.0% improved 280 basis points from 10.2% for the second quarter of fiscal 2021.

 

Balance Sheet, Liquidity and Cash Flow

 

As of October 31, 2021, the Company had cash on hand of $59.3 million, total debt of $1.1 billion and $302.2 million of available liquidity under its revolving credit facilities. Net debt leverage was 2.4 times as of the end of the quarter, down from 3.0 times at the end of the second quarter of fiscal 2021.

 

The Company recorded a use of cash from operating activities and free cash flow of $2.0 million and $11.3 million, respectively, for the quarter ended October 31, 2021. This compared to cash provided by operating activities and free cash flow of $39.8 million and $32.7 million, respectively, in the second quarter of the prior fiscal year.

 

Platform Expansion Activities

 

During the second quarter of fiscal 2022, the Company acquired the EIFS division of DK&B Construction Specialties, Inc. (“DK&B”). DK&B is a leading EIFS/stucco distributor serving the Nebraska market through a single location in Omaha, NE. This transaction enabled GMS to expand its complementary product offerings and expertise throughout the region.

 

 

 

 

Also, during the period, the Company opened a new greenfield location in Johnson City, TN, expanding its coverage to provide enhanced customer service in the Tri-Cities area in Northeast Tennessee.

 

Subsequent to the end of the quarter, on December 1, 2021, GMS completed the acquisition of AMES Taping Tools Holding LLC (“AMES”.) With more than 85 company-owned stores, a fleet of 100,000 tools available for rent and the most highly respected brand of automatic taping and finishing (“ATF”) tools, AMES is the leading provider of ATF tools and related products in the professional drywall finishing industry. AMES provides a distinctive complement to GMS’s current offerings, significantly expanding the Company’s presence in the tools and fasteners market. AMES’s portfolio includes the finishing tool brand, TapeTech® and specialty interior finishing e-commerce platform, All-Wall®.

 

Conference Call and Webcast

 

GMS will host a conference call and webcast to discuss its results for the second quarter of fiscal 2022 ended October 31, 2021 and other information related to its business at 8:30 a.m. Eastern Time on Thursday, December 2, 2021. Investors who wish to participate in the call should dial 877-407-3982 (domestic) or 201-493-6780 (international) at least 5 minutes prior to the start of the call. The live webcast will be available on the Investors section of the Company’s website at www.gms.com. There will be a slide presentation of the results available on that page of the website as well. Replays of the call will be available through January 2, 2022 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13723764.

 

About GMS Inc.

 

Celebrating the 50th anniversary of its founding in 1971, GMS operates a network of more than 280 distribution centers across the United States and Canada. GMS’s extensive product offering of wallboard, suspended ceilings, steel framing and complementary construction products is designed to provide a comprehensive one-stop-shop for our core customer, the interior contractor who installs these products in commercial and residential buildings. In addition, through its newly acquired AMES Taping Tools business, GMS operates more than 85 retail locations servicing professionals in the interior finishing market.

 

Use of Non-GAAP Financial Measures

 

GMS reports its financial results in accordance with GAAP. However, it presents Adjusted net income, free cash flow, Adjusted SG&A, Adjusted EBITDA, and Adjusted EBITDA margin, which are not recognized financial measures under GAAP. GMS believes that Adjusted net income, free cash flow, Adjusted SG&A, Adjusted EBITDA, and Adjusted EBITDA margin assist investors and analysts in comparing its operating performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. The Company’s management believes Adjusted net income, Adjusted SG&A, free cash flow, Adjusted EBITDA and Adjusted EBITDA margin are helpful in highlighting trends in its operating results, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which the Company operates and capital investments. In addition, the Company utilizes Adjusted EBITDA in certain calculations in its debt agreements.

 

You are encouraged to evaluate each adjustment and the reasons GMS considers it appropriate for supplemental analysis. In addition, in evaluating Adjusted net income, Adjusted SG&A and Adjusted EBITDA, you should be aware that in the future, the Company may incur expenses similar to the adjustments in the presentation of Adjusted net income, Adjusted SG&A and Adjusted EBITDA. The Company’s presentation of Adjusted net income, Adjusted SG&A, Adjusted SG&A margin, Adjusted EBITDA, and Adjusted EBITDA margin should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. In addition, Adjusted net income, free cash flow, Adjusted SG&A and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in GMS’s industry or across different industries. Please see the tables at the end of this release for a reconciliation of Adjusted EBITDA, free cash flow, Adjusted SG&A and Adjusted net income to the most directly comparable GAAP financial measures.

 

 

 

 

When calculating organic net sales growth, the Company excludes from the calculation (i) net sales of acquired businesses until the first anniversary of the acquisition date, and (ii) the impact of foreign currency translation.

 

Forward-Looking Statements and Information

 

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by the Company’s use of forward-looking terminology such as “anticipate,” “believe,” “confident,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” or “should,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about the markets in which GMS operates, including in particular residential and commercial construction, and the economy generally, the pricing, demand for complementary products, and the timing and benefits of the AMES proposed transaction contained in this press release may be considered forward-looking statements. The Company has based forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control, including current and future public health issues that may affect the Company’s business. Forward-looking statements involve risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section in the Company’s most recent Annual Report on Form 10-K, and in its other periodic reports filed with the SEC. In addition, the statements in this release are made as of December 2, 2021. The Company undertakes no obligation to update any of the forward-looking statements made herein, whether as a result of new information, future events, changes in expectation or otherwise. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to December 2, 2021.

 

Contact Information:

Investors:

Carey Phelps

ir@gms.com

770-723-3369

 

 

 

 

GMS Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 

   Three Months Ended   Six Months Ended 
   October 31,   October 31, 
  2021   2020   2021   2020 
Net sales  $1,150,551   $812,856   $2,192,627   $1,615,429 
Cost of sales (exclusive of depreciation and amortization shown separately below)   778,681    547,785    1,484,924    1,089,900 
Gross profit   371,870    265,071    707,703    525,529 
Operating expenses:                    
Selling, general and administrative   230,531    188,352    444,612    371,464 
Depreciation and amortization   29,403    27,245    57,117    54,342 
Total operating expenses   259,934    215,597    501,729    425,806 
Operating income   111,936    49,474    205,974    99,723 
Other (expense) income:                    
Interest expense   (14,744)   (13,525)   (28,401)   (27,606)
Other income, net   938    797    1,730    1,452 
Total other expense, net   (13,806)   (12,728)   (26,671)   (26,154)
Income before taxes   98,130    36,746    179,303    73,569 
Provision for income taxes   23,769    8,277    43,740    17,881 
Net income  $74,361   $28,469   $135,563   $55,688 
Weighted average common shares outstanding:                    
Basic   43,135    42,723    43,112    42,674 
Diluted   43,894    43,174    43,933    43,096 
Net income per common share:                    
Basic  $1.72   $0.67   $3.14   $1.30 
Diluted  $1.69   $0.66   $3.09   $1.29 

 

 

 

 

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)

 

   October 31,
2021		   April 30,
2021		 
Assets
Current assets:       
Cash and cash equivalents  $59,310   $167,012 
Trade accounts and notes receivable, net of allowances of $7,374  and $6,282, respectively   732,272    558,661 
Inventories, net   552,180    357,054 
Prepaid expenses and other current assets   21,331    19,525 
Total current assets   1,365,093    1,102,252 
Property and equipment, net of accumulated depreciation of $211,543 and  $193,364, respectively   326,490    311,326 
Operating lease right-of-use assets   133,052    118,413 
Goodwill   589,561    576,330 
Intangible assets, net   382,332    350,869 
Deferred income taxes   19,206    15,715 
Other assets   9,249    8,993 
Total assets  $2,824,983   $2,483,898 
Liabilities and Stockholders’ Equity
Current liabilities:          
Accounts payable  $351,226   $322,965 
Accrued compensation and employee benefits   69,298    72,906 
Other accrued expenses and current liabilities   133,795    87,138 
Current portion of long-term debt   46,082    46,018 
Current portion of operating lease liabilities   36,174    33,474 
Total current liabilities   636,575    562,501 
Non-current liabilities:          
Long-term debt, less current portion   1,062,291    932,409 
Long-term operating lease liabilities   97,341    90,290 
Deferred income taxes, net   17,184    12,728 
Other liabilities   60,241    63,508 
Total liabilities   1,873,632    1,661,436 
Commitments and contingencies          
Stockholders' equity:          
Common stock, par value $0.01 per share, 500,000 shares authorized; 43,052 and 43,073 shares issued and outstanding as of October 31, 2021 and April 30, 2021, respectively   431    431 
Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of October 31, 2021 and April 30, 2021   —    — 
Additional paid-in capital   534,931    542,737 
Retained earnings   410,098    274,535 
Accumulated other comprehensive income   5,891    4,759 
Total stockholders' equity   951,351    822,462 
Total liabilities and stockholders' equity  $2,824,983   $2,483,898 

 

 

 

 

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

  

Six Months Ended

October 31,

 
   2021   2020 
Cash flows from operating activities:       
Net income  $135,563   $55,688 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:        
Depreciation and amortization   57,117    54,342 
Amortization of debt discount and debt issuance costs   1,392    1,505 
Equity-based compensation   7,951    6,370 
(Gain) loss on disposal and impairment of assets   (222)   875 
Deferred income taxes   (718)   (9,296)
Other items, net   1,682    (1,057)
Changes in assets and liabilities net of effects of acquisitions:        
Trade accounts and notes receivable   (147,359)   (57,106)
Inventories   (168,519)   (950)
Prepaid expenses and other assets   (216)   (4,776)
Accounts payable   16,608    (19,898)
Accrued compensation and employee benefits   (3,561)   (23,889)
Other accrued expenses and liabilities   23,187    22,240 
Cash (used in) provided by operating activities   (77,095)   24,048 
Cash flows from investing activities:          
Purchases of property and equipment   (16,119)   (11,845)
Proceeds from sale of assets   466    720 
Acquisition of businesses, net of cash acquired   (124,976)   (51)
Cash used in investing activities   (140,629)   (11,176)
Cash flows from financing activities:          
Repayments on revolving credit facilities   (442,442)   (102,189)
Borrowings from revolving credit facilities   583,233    14,750 
Payments of principal on long-term debt   (2,555)   (4,984)
Payments of principal on finance lease obligations   (15,154)   (14,629)
Repurchases of common stock   (13,124)   (1,222)
Proceeds from exercises of stock options   1,840    863 
Payments for taxes related to net share settlement of equity awards   (2,835)   (754)
Proceeds from issuance of stock pursuant to employee stock purchase plan   1,140    1,270 
Cash provided by (used in) financing activities   110,103    (106,895)
Effect of exchange rates on cash and cash equivalents   (81)   1,282 
Decrease in cash and cash equivalents   (107,702)   (92,741)
Cash and cash equivalents, beginning of period   167,012    210,909 
Cash and cash equivalents, end of period  $59,310   $118,168 
Supplemental cash flow disclosures:          
Cash paid for income taxes  $37,784   $20,224 
Cash paid for interest   17,596    25,726 

 

 

 

 

GMS Inc.

Net Sales by Product Group (Unaudited)

(dollars in thousands)

 

   Three Months Ended   Six Months Ended 
   October 31,
2021		   % of
Total		   October 31,
2020		   % of
Total		   October 31,
2021		   % of
Total		   October 31,
2020		   % of
Total		 
Wallboard  $414,522    36.0%  $330,515    40.7%  $804,657    36.7%  $658,600    40.8%
Ceilings   140,866    12.2%   112,126    13.8%   278,937    12.7%   226,769    14.0%
Steel framing   272,000    23.6%   111,293    13.7%   468,276    21.4%   221,825    13.7%
Complementary products   323,163    28.2%   258,922    31.8%   640,757    29.2%   508,235    31.5%
Total net sales  $1,150,551        $812,856        $2,192,627        $1,615,429      

 

 

 

 

GMS Inc.

Reconciliation of Net Income to Adjusted EBITDA (Unaudited)

(in thousands)

 

   Three Months Ended   Six Months Ended 
   October 31,   October 31, 
   2021   2020   2021   2020 
Net income  $74,361   $28,469   $135,563   $55,688 
Interest expense   14,744    13,525    28,401    27,606 
Interest income   (27)   (14)   (27)   (51)
Provision for income taxes   23,769    8,277    43,740    17,881 
Depreciation expense   13,703    12,710    26,628    25,537 
Amortization expense   15,700    14,535    30,489    28,805 
EBITDA  $142,250   $77,502   $264,794   $155,466 
Stock appreciation expense(a)   983    314    1,875    1,106 
Redeemable noncontrolling interests(b)   593    186    903    438 
Equity-based compensation(c)   3,215    3,252    5,173    4,857 
Severance and other permitted costs(d)   249    762    396    2,709 
Transaction costs (acquisitions and other)(e)   2,393    25    2,968    125 
(Gain) loss on disposal and impairment of assets(f)   (144)   481    (222)   875 
Effects of fair value adjustments to inventory(g)   —    —    1,731    — 
EBITDA addbacks   7,289    5,020    12,824    10,110 
Adjusted EBITDA  $149,539   $82,522   $277,618   $165,576 
                    
Net sales  $1,150,551   $812,856   $2,192,627   $1,615,429 
Adjusted EBITDA Margin   13.0%   10.2%   12.7%   10.2%

 

 

 

(a)Represents changes in the fair value of stock appreciation rights.

 

(b)Represents changes in the fair values of noncontrolling interests.

 

(c)Represents non-cash equity-based compensation expense related to the issuance of share-based awards.

 

(d)Represents severance expenses and other costs permitted in the calculation of Adjusted EBITDA under the ABL Facility and the Term Loan Facility, including certain unusual, nonrecurring costs and credits due to COVID-19.

 

(e)Represents costs related to acquisitions paid to third parties.

 

(f)Includes gains from the sale of assets and impairment of assets resulting from restructuring plans to close certain facilities.

 

(g)Represents the non-cash cost of sales impact of acquisition accounting adjustments to increase inventory to its estimated fair value.

 

 

 

 

GMS Inc.

Reconciliation of Cash (Used In) Provided By Operating Activities to Free Cash Flow (Unaudited)

(in thousands)

 

   Three Months Ended   Six Months Ended 
   October 31,   October 31, 
   2021   2020   2021   2020 
Cash (used in) provided by operating activities  $(2,018)  $39,759   $(77,095)  $24,048 
Purchases of property and equipment   (9,305)   (7,100)   (16,119)   (11,845)
Free cash flow (a)  $(11,323)  $32,659   $(93,214)  $12,203 

 

 

 

(a) Free cash flow is a non-GAAP financial measure that we define as net cash provided by (used in) operations less capital expenditures.

 

GMS Inc.

Reconciliation of Selling, General and Administrative Expense to Adjusted SG&A (Unaudited)

(in thousands)

 

   Three Months Ended   Six Months Ended 
   October 31,   October 31, 
   2021   2020   2021   2020 
Selling, general and administrative expense  $230,531   $188,352   $444,612   $371,464 
                     
Adjustments                    
Stock appreciation expense(a)   (983)   (314)   (1,875)   (1,106)
Redeemable noncontrolling interests(b)   (593)   (186)   (903)   (438)
Equity-based compensation(c)   (3,215)   (3,252)   (5,173)   (4,857)
Severance and other permitted costs(d)   (251)   (812)   (412)   (2,693)
Transaction costs (acquisitions and other)(e)   (2,393)   (25)   (2,968)   (125)
Gain (loss) on disposal and impairment of assets(f)   144    (481)   222    (875)
Adjusted SG&A  $223,240   $183,282   $433,503   $361,370 
                     
Net sales  $1,150,551   $812,856   $2,192,627   $1,615,429 
Adjusted SG&A margin   19.4%   22.5%   19.8%   22.4%

 

 

 

(a)Represents changes in the fair value of stock appreciation rights.

 

(b)Represents changes in the fair values of noncontrolling interests.

 

(c)Represents non-cash equity-based compensation expense related to the issuance of share-based awards.

 

(d)Represents severance expenses and other costs permitted in the calculation of Adjusted EBITDA under the ABL Facility and the Term Loan Facility, including certain unusual, nonrecurring costs and credits due to COVID-19.

 

(e)Represents costs related to acquisitions paid to third parties.

 

(f)Includes gains from the sale of assets and impairment of assets resulting from restructuring plans to close certain facilities.

 

 

 

 

GMS Inc.

Reconciliation of Income Before Taxes to Adjusted Net Income (Unaudited)

(in thousands, except per share data)

 

   Three Months Ended   Six Months Ended 
   October 31,   October 31, 
   2021   2020   2021   2020 
Income before taxes  $98,130   $36,746   $179,303   $73,569 
EBITDA add-backs   7,289    5,020    12,824    10,110 
Purchase accounting depreciation and amortization (1)   10,811    10,121    21,129    20,256 
Adjusted pre-tax income   116,230    51,887    213,256    103,935 
Adjusted income tax expense   28,476    11,674    52,248    23,385 
Adjusted net income  $87,754   $40,213   $161,008   $80,550 
Effective tax rate (2)   24.5%   22.5%   24.5%   22.5%
                     
Weighted average shares outstanding:                    
Basic   43,135    42,723    43,112    42,674 
Diluted   43,894    43,174    43,933    43,096 
Adjusted net income per share:                    
Basic  $2.03   $0.94   $3.73   $1.89 
Diluted  $2.00   $0.93   $3.66   $1.87 

 

 

 

(1) Depreciation and amortization from the increase in value of certain long-term assets associated with the April 1, 2014 acquisition of the predecessor company and amortization from the acquisition of Titan and the acquisition of Westside Building Material.

 

(2) Normalized cash tax rate excluding the impact of purchase accounting and certain other deferred tax amounts.