Net Sales of $1.15 Billion with Record
Levels of Net Income and Adjusted EBITDA
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.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211202005135/en/
Investors: Carey Phelps ir@gms.com 770-723-3369
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