Record Levels of Net Sales, Net Income and
Adjusted EBITDA;
Double-Digit Wallboard Volume Growth;
Improved Commercial Activity
GMS Inc. (NYSE: GMS), a leading North American specialty
building products distributor, today reported financial results for
the fiscal second quarter ended October 31, 2022.
Second Quarter Fiscal 2023 Highlights
(Comparisons are to the second quarter of fiscal 2022)
- Net sales of $1.43 billion increased 24.4%; organic net sales
increased 22.2%.
- 11.6% volume growth in Wallboard, including the second
consecutive quarterly year-over-year expansion in commercial
Wallboard volume.
- Net income of $103.2 million, or $2.41 per diluted share,
increased 38.7% compared to net income of $74.4 million, or $1.69
per diluted share; Adjusted net income of $119.5 million, or $2.79
per diluted share, compared to $87.8 million, or $2.00 per diluted
share.
- Adjusted EBITDA of $195.5 million increased $46.0 million, or
30.7%; Adjusted EBITDA margin improved 70 basis points to 13.7%
from 13.0%.
- Cash provided by operating activities increased $109.3 million
to $107.3 million; Free cash flow improved $107.8 to $96.5
million.
- Net debt leverage was 1.6 times, down from 2.4 times a year
ago.
“A significant backlog of homes under construction, continued
strength in multi-family, and improving levels of commercial
activity helped drive exceptional results for our fiscal second
quarter,” said John C. Turner, Jr., President and Chief Executive
Officer of GMS. “As a result, with favorable pricing across our
product categories, positive volume growth in Wallboard, Ceilings
and Complementary Products and the benefit of our AMES acquisition,
our team achieved another quarter of record levels of net sales,
net income and Adjusted EBITDA and generated significant levels of
cash flow.”
Turner continued, “With significant scale, a balanced mix of
commercial and residential customers and a wide breadth of product
offerings, we are confident in our ability to adjust as needed to
meet demand in all of our end markets and believe we are
well-positioned ahead of the developing slowdown in residential
single-family construction. We remain focused on the execution of
our strategic priorities to expand share in our core products, grow
Complementary Product offerings, expand our platform, and leverage
our scale to achieve improved productivity and profitability
through the use of technology and shared best practices.”
Second Quarter Fiscal 2023 Results
Net sales for the second quarter of fiscal 2023 of $1.43 billion
increased 24.4% as compared with the prior year quarter, primarily
due to a favorable pricing environment along with active
residential construction and an improving commercial landscape,
both of which helped drive volume growth in Wallboard, Ceilings and
Complementary Products. The Company also benefited during the
quarter from its acquisition of AMES Taping Tools in December 2021
and one additional selling day during the three months ended
October 31, 2022 compared to the prior year period. Partially
offsetting these increases was the negative impact of foreign
currency translation on net sales during the three months ended
October 31, 2022. Organic net sales, which exclude the net sales of
acquired businesses until the first anniversary of the acquisition
date and the impact of foreign currency translation, increased
22.2%.
Excluding the impact from one additional selling day in the
second quarter of fiscal 2023 compared to the same period a year
ago, net sales and organic net sales were up 22.5% and 20.3%,
respectively.
Year-over-year quarterly sales increases by product category
were as follows:
- Wallboard sales of $584.6 million increased 41.0% (up 41.4% on
an organic basis).
- Ceilings sales of $159.6 million increased 13.3% (up 13.6% on
an organic basis).
- Steel Framing sales of $278.2 million increased 2.3% (up 2.5%
on an organic basis).
- Complementary Product sales of $408.7 million increased 26.5%
(up 17.8% on an organic basis).
Gross profit of $464.5 million increased 24.9% compared to the
second quarter of fiscal 2022 primarily due to the successful pass
through of product inflation, continued strength in residential
market demand, improving commercial sales, and incremental gross
profit from acquisitions. Gross margin of 32.5% increased 20 basis
points year-over-year with strong margins in Complementary Products
and better-than-expected margins in Steel Framing on focused
inventory management and project quoting as steel pricing declined
during the quarter.
Selling, general and administrative (“SG&A”) expense as a
percentage of net sales improved 50 basis points to 19.5% for the
quarter compared to 20.0% in the second quarter of fiscal 2022.
Adjusted SG&A expense as a percentage of net sales of 18.9%
improved 50 basis points from 19.4% in the prior year quarter as
product inflation outpaced increases in operating costs.
Net income increased 38.7% to $103.2 million, or $2.41 per
diluted share, compared to net income of $74.4 million, or $1.69
per diluted share, in the second quarter of fiscal 2022. Adjusted
net income was $119.5 million, or $2.79 per diluted share, compared
to $87.8 million, or $2.00 per diluted share, in the second quarter
of the prior fiscal year.
Adjusted EBITDA increased $46.0 million, or 30.7%, to $195.5
million compared to the prior year quarter. Adjusted EBITDA margin
of 13.7% improved 70 basis points from 13.0% for the second quarter
of fiscal 2022.
Balance Sheet, Liquidity and Cash Flow
As of October 31, 2022, the Company had cash on hand of $124.2
million, total debt of $1.2 billion and $293.8 million of available
liquidity under its revolving credit facilities. Net debt leverage
was 1.6 times as of the end of the quarter, down from 2.4 times at
the end of the second quarter of fiscal 2022.
The Company recorded significantly improved levels of cash flow
for the quarter. Cash provided by operating activities and free
cash flow were $107.3 million and $96.5 million, respectively, for
the quarter ended October 31, 2022. For the quarter ended October
31, 2021, the Company recorded cash used by operating activities
and free cash flow of $2.0 million and $11.3 million,
respectively.
During the quarter, the Company repurchased common stock of
$25.8 million. As of October 31, 2022, the Company had $161.2
million of repurchase authorization remaining.
Conference Call and Webcast
GMS will host a conference call and webcast to discuss its
results for the second quarter of fiscal 2023 ended October 31,
2022 and other information related to its business at 8:30 a.m.
Eastern Time on Thursday, December 8, 2022. 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 8, 2023 and can be accessed at 844-512-2921 (domestic) or
412-317-6671 (international) and entering the pass code
13733586.
About GMS Inc.
Founded in 1971, GMS operates a network of approximately 300
distribution centers with extensive product offerings of Wallboard,
Ceilings, Steel Framing and Complementary Products. In addition,
GMS operates approximately 100 tool sales, rental and service
centers, providing a comprehensive selection of building products
and solutions for its residential and commercial contractor
customer base across the United States and Canada. The Company’s
unique operating model combines the benefits of a national platform
and strategy with a local go-to-market focus, enabling GMS to
generate significant economies of scale while maintaining high
levels of customer service.
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, pricing, the
demand for the Company’s products, the Company’s strategic
priorities and the results thereof, performance, service levels and
the ability to drive value and results 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 8,
2022. 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 8, 2022.
GMS Inc.
Condensed Consolidated
Statements of Operations (Unaudited)
(in thousands, except per
share data)
Three Months Ended
Six Months Ended
October 31,
October 31,
2022
2021
2022
2021
Net sales
$
1,430,979
$
1,150,551
$
2,790,532
$
2,192,627
Cost of sales (exclusive of depreciation
and amortization shown separately below)
966,479
778,681
1,891,311
1,484,924
Gross profit
464,500
371,870
899,221
707,703
Operating expenses:
Selling, general and administrative
278,994
230,531
546,683
444,612
Depreciation and amortization
32,226
29,403
64,666
57,117
Total operating expenses
311,220
259,934
611,349
501,729
Operating income
153,280
111,936
287,872
205,974
Other (expense) income:
Interest expense
(16,055
)
(14,744
)
(30,716
)
(28,401
)
Other income, net
1,923
938
3,492
1,730
Total other expense, net
(14,132
)
(13,806
)
(27,224
)
(26,671
)
Income before taxes
139,148
98,130
260,648
179,303
Provision for income taxes
35,995
23,769
68,025
43,740
Net income
$
103,153
$
74,361
$
192,623
$
135,563
Weighted average common shares
outstanding:
Basic
42,232
43,135
42,390
43,112
Diluted
42,887
43,894
43,102
43,933
Net income per common share:
Basic
$
2.44
$
1.72
$
4.54
$
3.14
Diluted
$
2.41
$
1.69
$
4.47
$
3.09
GMS Inc.
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands, except per
share data)
October 31,
2022
April 30, 2022
Assets
Current assets:
Cash and cash equivalents
$
124,201
$
101,916
Trade accounts and notes receivable, net
of allowances of $10,751 and $9,346, respectively
872,882
750,046
Inventories, net
576,388
550,953
Prepaid expenses and other current
assets
23,191
20,212
Total current assets
1,596,662
1,423,127
Property and equipment, net of accumulated
depreciation of $245,974 and $227,288, respectively
362,983
350,679
Operating lease right-of-use assets
149,544
153,271
Goodwill
690,288
695,897
Intangible assets, net
411,200
454,747
Deferred income taxes
21,168
17,883
Other assets
14,100
8,795
Total assets
$
3,245,945
$
3,104,399
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
366,143
$
367,315
Accrued compensation and employee
benefits
90,253
107,925
Other accrued expenses and current
liabilities
137,404
127,938
Current portion of long-term debt
47,618
47,605
Current portion of operating lease
liabilities
39,349
38,415
Total current liabilities
680,767
689,198
Non-current liabilities:
Long-term debt, less current portion
1,166,544
1,136,585
Long-term operating lease liabilities
108,762
112,161
Deferred income taxes, net
47,625
46,802
Other liabilities
58,308
55,155
Total liabilities
2,062,006
2,039,901
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01 per share,
500,000 shares authorized; 41,851 and 42,773 shares issued and
outstanding as of October 31, 2022 and April 30, 2022,
respectively
418
428
Preferred stock, par value $0.01 per
share, 50,000 shares authorized; 0 shares issued and outstanding as
of October 31, 2022 and April 30, 2022
—
—
Additional paid-in capital
477,558
522,136
Retained earnings
740,600
547,977
Accumulated other comprehensive loss
(34,637
)
(6,043
)
Total stockholders' equity
1,183,939
1,064,498
Total liabilities and stockholders'
equity
$
3,245,945
$
3,104,399
GMS Inc.
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(in thousands)
Six Months Ended
October 31,
2022
2021
Cash flows from operating
activities:
Net income
$
192,623
$
135,563
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization
64,666
57,117
Amortization of debt discount and debt
issuance costs
802
1,392
Equity-based compensation
13,322
7,951
Gain on disposal and impairment of
assets
(203
)
(222
)
Deferred income taxes
(2,925
)
(718
)
Other items, net
4,662
1,682
Changes in assets and liabilities net of
effects of acquisitions:
Trade accounts and notes receivable
(133,445
)
(147,359
)
Inventories
(32,270
)
(168,519
)
Prepaid expenses and other assets
(4,913
)
(216
)
Accounts payable
3,821
16,608
Accrued compensation and employee
benefits
(17,859
)
(3,561
)
Other accrued expenses and liabilities
14,580
23,187
Cash provided by (used in) operating
activities
102,861
(77,095
)
Cash flows from investing
activities:
Purchases of property and equipment
(21,670
)
(16,119
)
Proceeds from sale of assets
896
466
Acquisition of businesses, net of cash
acquired
(2,620
)
(124,976
)
Cash used in investing activities
(23,394
)
(140,629
)
Cash flows from financing
activities:
Repayments on revolving credit
facilities
(251,247
)
(442,442
)
Borrowings from revolving credit
facilities
280,113
583,233
Payments of principal on long-term
debt
(2,555
)
(2,555
)
Payments of principal on finance lease
obligations
(16,450
)
(15,154
)
Repurchases of common stock
(49,571
)
(13,124
)
Payment of acquisition holdback
liability
(13,500
)
—
Proceeds from exercises of stock
options
701
1,840
Payments for taxes related to net share
settlement of equity awards
(3,960
)
(2,835
)
Proceeds from issuance of stock pursuant
to employee stock purchase plan
1,329
1,140
Cash (used in) provided by financing
activities
(55,140
)
110,103
Effect of exchange rates on cash and cash
equivalents
(2,042
)
(81
)
Increase (decrease) in cash and cash
equivalents
22,285
(107,702
)
Cash and cash equivalents, beginning of
period
101,916
167,012
Cash and cash equivalents, end of
period
$
124,201
$
59,310
Supplemental cash flow disclosures:
Cash paid for income taxes
$
60,792
$
37,784
Cash paid for interest
29,268
17,596
GMS Inc.
Net Sales by Product Group
(Unaudited)
(dollars in thousands)
Three Months Ended
Six Months Ended
October 31, 2022
% of Total
October 31, 2021
% of Total
October 31, 2022
% of Total
October 31, 2021
% of Total
Wallboard
$
584,557
40.9
%
$
414,522
36.0
%
$
1,106,111
39.6
%
$
804,657
36.7
%
Ceilings
159,601
11.2
%
140,866
12.2
%
326,876
11.7
%
278,937
12.7
%
Steel framing
278,152
19.4
%
272,000
23.6
%
553,048
19.8
%
468,276
21.4
%
Complementary products
408,669
28.6
%
323,163
28.2
%
804,497
28.8
%
640,757
29.2
%
Total net sales
$
1,430,979
$
1,150,551
$
2,790,532
$
2,192,627
GMS Inc.
Reconciliation of Net Income
to Adjusted EBITDA (Unaudited)
(in thousands)
Three Months Ended
Six Months Ended
October 31,
October 31,
2022
2021
2022
2021
Net income
$
103,153
$
74,361
$
192,623
$
135,563
Interest expense
16,055
14,744
30,716
28,401
Interest income
(154
)
(27
)
(210
)
(27
)
Provision for income taxes
35,995
23,769
68,025
43,740
Depreciation expense
15,058
13,703
30,051
26,628
Amortization expense
17,168
15,700
34,615
30,489
EBITDA
$
187,275
$
142,250
$
355,820
$
264,794
Stock appreciation expense(a)
3,230
983
5,574
1,875
Redeemable noncontrolling interests and
deferred compensation(b)
340
593
835
903
Equity-based compensation(c)
3,781
3,215
6,913
5,173
Severance and other permitted costs(d)
379
249
731
396
Transaction costs (acquisitions and
other)(e)
292
2,393
678
2,968
(Gain) loss on disposal of assets(f)
81
(144
)
(203
)
(222
)
Effects of fair value adjustments to
inventory(g)
135
—
179
1,731
EBITDA addbacks
8,238
7,289
14,707
12,824
Adjusted EBITDA
$
195,513
$
149,539
$
370,527
$
277,618
Net sales
$
1,430,979
$
1,150,551
$
2,790,532
$
2,192,627
Adjusted EBITDA Margin
13.7
%
13.0
%
13.3
%
12.7
%
___________________________________
(a) Represents changes in the fair
value of stock appreciation rights.
(b) Represents changes in the fair
values of noncontrolling interests and deferred compensation
agreements.
(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.
(e) Represents costs related to
acquisitions paid to third parties.
(f) Includes gains and losses
from the sale and disposal of assets.
(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
Provided By (Used In) Operating Activities to Free Cash Flow
(Unaudited)
(in thousands)
Three Months Ended
Six Months Ended
October 31,
October 31,
2022
2021
2022
2021
Cash provided by (used in) operating
activities
$
107,264
$
(2,018
)
$
102,861
$
(77,095
)
Purchases of property and equipment
(10,727
)
(9,305
)
(21,670
)
(16,119
)
Free cash flow (a)
$
96,537
$
(11,323
)
$
81,191
$
(93,214
)
________________________________________
(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,
2022
2021
2022
2021
Selling, general and administrative
expense
$
278,994
$
230,531
$
546,683
$
444,612
Adjustments
Stock appreciation expense(a)
(3,230
)
(983
)
(5,574
)
(1,875
)
Redeemable noncontrolling interests and
deferred compensation(b)
(340
)
(593
)
(835
)
(903
)
Equity-based compensation(c)
(3,781
)
(3,215
)
(6,913
)
(5,173
)
Severance and other permitted costs(d)
(411
)
(251
)
(748
)
(412
)
Transaction costs (acquisitions and
other)(e)
(292
)
(2,393
)
(678
)
(2,968
)
Gain (loss) on disposal of assets(f)
(81
)
144
203
222
Adjusted SG&A
$
270,859
$
223,240
$
532,138
$
433,503
Net sales
$
1,430,979
$
1,150,551
$
2,790,532
$
2,192,627
Adjusted SG&A margin
18.9
%
19.4
%
19.1
%
19.8
%
___________________________________
(a) Represents changes in the fair
value of stock appreciation rights.
(b) Represents changes in the fair
values of noncontrolling interests and deferred compensation
agreements.
(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.
(e) Represents costs related to
acquisitions paid to third parties.
(f) Includes gains and losses
from the sale and disposal of assets.
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,
2022
2021
2022
2021
Income before taxes
$
139,148
$
98,130
$
260,648
$
179,303
EBITDA add-backs
8,238
7,289
14,707
12,824
Acquisition accounting depreciation and
amortization (1)
13,057
10,811
26,335
21,129
Adjusted pre-tax income
160,443
116,230
301,690
213,256
Adjusted income tax expense
40,913
28,476
76,931
52,248
Adjusted net income
$
119,530
$
87,754
$
224,759
$
161,008
Effective tax rate (2)
25.5
%
24.5
%
25.5
%
24.5
%
Weighted average shares outstanding:
Basic
42,232
43,135
42,390
43,112
Diluted
42,887
43,894
43,102
43,933
Adjusted net income per share:
Basic
$
2.83
$
2.03
$
5.30
$
3.73
Diluted
$
2.79
$
2.00
$
5.21
$
3.66
________________________________________
(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 of intangible assets from the acquisitions of Titan,
Westside Building Material and Ames Taping Tools.
(2)
Normalized cash tax rate excluding the
impact of acquisition accounting and certain other deferred tax
amounts.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221208005095/en/
Investors: Carey Phelps ir@gms.com 770-723-3369
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