Net Sales of $1.15 Billion with Significant
Year-Over-Year Growth in Net Income and Adjusted
EBITDA
GMS Inc. (NYSE: GMS), a leading North American specialty
building products distributor, today reported financial results for
the fiscal third quarter ended January 31, 2022.
Third Quarter Fiscal 2022 Highlights
(Comparisons are to the third quarter of fiscal 2021)
- Net sales of $1,153.6 million increased 53.6%; organic net
sales increased 41.5%.
- Net income of $61.4 million, or $1.40 per diluted share,
compared to net income of $16.1 million, or $0.37 per diluted
share; Adjusted net income of $76.5 million, or $1.74 per diluted
share, compared to $25.9 million, or $0.60 per diluted share.
- Adjusted EBITDA of $135.1 million increased $72.5 million, or
115.8%; Adjusted EBITDA margin improved 340 basis points to 11.7%
from 8.3%.
- Net debt leverage was 2.3 times as of the end of the third
quarter of fiscal 2022, down from 2.9 times a year ago.
- Completed the acquisition of AMES Taping Tools Holding LLC
(“AMES”), the nation’s foremost provider of automatic taping and
finishing tools to the professional drywall finishing
industry.
“Carrying our momentum into the new calendar year, we achieved
record-setting results with higher levels of sales, net income and
Adjusted EBITDA than we have ever recorded for our fiscal third
quarter,” said John C. Turner, Jr., President and Chief Executive
Officer of GMS. “Leveraging our significant scale advantages to
deliver outstanding customer service in a solid residential market,
coupled with an inflationary pricing environment and successful
platform expansion activities, helped us more than triple our net
income and double our Adjusted EBITDA as compared to the prior year
quarter.”
Turner continued, “The team remains fully focused on the
continued execution of our strategic priorities. Looking ahead to
close out our fiscal year in April, similar market dynamics as we
experienced in the third quarter along with indications of
improving levels of commercial activity, serve as a positive
backdrop as we are confident we will continue to deliver
exceptional levels of service to provide value to customers and to
drive strong results for our stakeholders.”
Third Quarter Fiscal 2022 Results
Net sales for the third quarter of fiscal 2022 of $1.15 billion
increased 53.6% 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, Westside Building Material
and AMES. Organic net sales increased 41.5%.
Excluding the impact from one additional selling day in the
third quarter of fiscal 2022 compared to the same period a year
ago, net sales and organic net sales were up 51.1% and 39.2%,
respectively. While the sales growth was, in large part, due to
product inflation, the Company also achieved year-over-year volume
growth in each of its four product categories.
Year-over-year sales increases by product category were as
follows:
- Wallboard sales of $415.1 million increased 33.4% (up 28.1% on
an organic basis).
- Ceilings sales of $139.9 million increased 34.9% (up 26.8% on
an organic basis).
- Steel framing sales of $282.8 million increased 172.0% (up
151.0% on an organic basis).
- Complementary product sales of $315.8 million increased 35.9%
(up 17.1% on an organic basis).
Gross profit of $367.8 million increased 51.1% compared to the
third quarter of fiscal 2021 primarily due to the successful pass
through of product inflation, continued strength in residential
market demand and incremental gross profit from acquisitions. Gross
margin of 31.9%, declined 50 basis points year-over-year primarily
due to the timing and elasticity of inflationary price-cost
dynamics in the market. On a product line basis, wallboard and
steel margins were unfavorably impacted by these dynamics while
complementary products and ceilings benefited.
Selling, general and administrative (“SG&A”) expense as a
percentage of net sales improved 370 basis points to 20.9% for the
quarter compared to 24.6% in the third quarter of fiscal 2021.
Adjusted SG&A expense as a percentage of net sales of 20.4%
improved 380 basis points from 24.2% in the prior year quarter as
product inflation outpaced increases in operating costs.
Net income increased 280.6% to $61.4 million, or $1.40 per
diluted share, compared to net income of $16.1 million, or $0.37
per diluted share, in the third quarter of fiscal 2021. Adjusted
net income was $76.5 million, or $1.74 per diluted share, compared
to $25.9 million, or $0.60 per diluted share, in the third quarter
of the prior fiscal year.
Adjusted EBITDA increased $72.5 million, or 115.8%, to $135.1
million compared to the prior year quarter. Adjusted EBITDA margin
of 11.7% improved 340 basis points from 8.3% for the third quarter
of fiscal 2021.
Balance Sheet, Liquidity and Cash Flow
As of January 31, 2022, the Company had cash on hand of $87.0
million, total debt of $1.3 billion and $183.2 million of available
liquidity under its revolving credit facilities. Net debt leverage
was 2.3 times as of the end of the quarter, down from 2.9 times at
the end of the third quarter of fiscal 2021.
The Company recorded cash provided by operating activities and
free cash flow of $57.2 million and $40.2 million, respectively,
for the quarter ended January 31, 2022. For the quarter ended
January 31, 2021, the Company recorded cash provided by operating
activities and free cash flow of $44.4 million and $38.4 million,
respectively.
Platform Expansion Activities
During the third quarter of fiscal 2022, GMS acquired two
companies.
On December 1, 2021, GMS completed the acquisition of AMES
Taping Tools Holding LLC (“AMES”). With more than 90 company-owned
AMES® stores and a fleet of approximately 100,000 automatic taping
and finishing (“ATF”) tools available for rent, AMES is the
nation’s leading provider of ATF tools and related products to the
professional drywall finishing industry. Its portfolio provides a
distinctive complement to GMS’s other product offerings and
includes the industry-leading finishing tool brand, TapeTech®, as
well as the country’s most widely used specialty interior finishing
e-commerce platform, All-Wall.com®.
Also on December 1, 2021, the Company completed the acquisition
of Kimco Supply Company (“Kimco”), a highly-respected distributor
of drywall and related construction products and architectural
elements with two locations in the Greater Tampa and Central
Florida markets. Kimco adds density for the Company in the growing
Tampa-St. Petersburg-Clearwater market for both core and
complementary products.
Also, during the period, the Company opened a new greenfield
location in Fort Myers, FL, bringing service to this Top 100
Metropolitan Statistical Area.
In addition, since acquiring AMES in early December, that
business has continued to grow and execute against its growth
strategy by adding two new stores in Pflugerville, TX and
Greenville, SC during the Company’s fiscal third quarter.
Conference Call and Webcast
GMS will host a conference call and webcast to discuss its
results for the third quarter of fiscal 2022 ended January 31, 2022
and other information related to its business at 8:30 a.m. Eastern
Time on Thursday, March 3, 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 April 3,
2022 and can be accessed at 844-512-2921 (domestic) or 412-317-6671
(international) and entering the pass code 13725846.
About GMS Inc.
Founded in 1971, GMS operates a network of nearly 300
distribution centers with extensive product offerings of wallboard,
ceilings, steel framing and complementary construction products. In
addition, GMS operates more than 90 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, supply chain issues and related
project timing, the Company’s strategic priorities and the results
thereof, 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
March 3, 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 March 3, 2022.
GMS Inc. Condensed
Consolidated Statements of Operations (Unaudited) (in thousands,
except per share data)
Three Months Ended
Nine Months Ended
January 31,
January 31,
2022
2021
2022
2021
Net sales
$
1,153,595
$
751,191
$
3,346,222
$
2,366,620
Cost of sales (exclusive of depreciation
and amortization shown separately below)
785,823
507,867
2,270,747
1,597,767
Gross profit
367,772
243,324
1,075,475
768,853
Operating expenses:
Selling, general and administrative
241,040
184,844
685,652
556,308
Depreciation and amortization
29,750
25,562
86,867
79,904
Total operating expenses
270,790
210,406
772,519
636,212
Operating income
96,982
32,918
302,956
132,641
Other (expense) income:
Interest expense
(15,429
)
(13,454
)
(43,830
)
(41,060
)
Gain on legal settlement
—
1,382
—
1,382
Other income, net
1,041
989
2,771
2,441
Total other expense, net
(14,388
)
(11,083
)
(41,059
)
(37,237
)
Income before taxes
82,594
21,835
261,897
95,404
Provision for income taxes
21,211
5,709
64,951
23,590
Net income
$
61,383
$
16,126
$
196,946
$
71,814
Weighted average common shares
outstanding:
Basic
43,094
42,726
43,106
42,691
Diluted
43,945
43,361
43,937
43,184
Net income per common share:
Basic
$
1.42
$
0.38
$
4.57
$
1.68
Diluted
$
1.40
$
0.37
$
4.48
$
1.66
GMS Inc. Condensed
Consolidated Balance Sheets (Unaudited) (in thousands, except per
share data)
January 31,
2022
April 30,
2021
Assets
Current assets:
Cash and cash equivalents
$
86,975
$
167,012
Trade accounts and notes receivable, net
of allowances of $9,683 and $6,282, respectively
700,255
558,661
Inventories, net
585,351
357,054
Prepaid expenses and other current
assets
19,055
19,525
Total current assets
1,391,636
1,102,252
Property and equipment, net of accumulated
depreciation of $216,541 and $193,364, respectively
342,995
311,326
Operating lease right-of-use assets
146,762
118,413
Goodwill
693,942
576,330
Intangible assets, net
480,312
350,869
Deferred income taxes
20,536
15,715
Other assets
9,997
8,993
Total assets
$
3,086,180
$
2,483,898
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
293,485
$
322,965
Accrued compensation and employee
benefits
79,031
72,906
Other accrued expenses and current
liabilities
129,927
87,138
Current portion of long-term debt
44,624
46,018
Current portion of operating lease
liabilities
40,413
33,474
Total current liabilities
587,480
562,501
Non-current liabilities:
Long-term debt, less current portion
1,281,737
932,409
Long-term operating lease liabilities
107,002
90,290
Deferred income taxes, net
47,174
12,728
Other liabilities
59,511
63,508
Total liabilities
2,082,904
1,661,436
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01 per share,
500,000 shares authorized; 43,095 and 43,073 shares issued and
outstanding as of January 31, 2022 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 January 31, 2022 and April 30, 2021
—
—
Additional paid-in capital
536,635
542,737
Retained earnings
471,481
274,535
Accumulated other comprehensive income
(loss)
(5,271
)
4,759
Total stockholders' equity
1,003,276
822,462
Total liabilities and stockholders'
equity
$
3,086,180
$
2,483,898
GMS Inc. Condensed
Consolidated Statements of Cash Flows (Unaudited) (in
thousands)
Nine Months Ended
January 31,
2022
2021
Cash flows from operating
activities:
Net income
$
196,946
$
71,814
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization
86,867
79,904
Amortization of debt discount and debt
issuance costs
2,037
2,257
Equity-based compensation
12,461
10,318
(Gain) loss on disposal and impairment of
assets
(474
)
(529
)
Deferred income taxes
(1,740
)
(9,645
)
Other items, net
5,357
105
Changes in assets and liabilities net of
effects of acquisitions:
Trade accounts and notes receivable
(109,948
)
(15,381
)
Inventories
(191,103
)
(24,391
)
Prepaid expenses and other assets
2,215
1,040
Accounts payable
(46,310
)
(41,371
)
Accrued compensation and employee
benefits
3,618
(11,932
)
Other accrued expenses and liabilities
20,187
6,307
Cash (used in) provided by operating
activities
(19,887
)
68,496
Cash flows from investing
activities:
Purchases of property and equipment
(33,161
)
(17,857
)
Proceeds from sale of assets
1,124
1,233
Acquisition of businesses, net of cash
acquired
(345,376
)
(51
)
Cash used in investing activities
(377,413
)
(16,675
)
Cash flows from financing
activities:
Repayments on revolving credit
facilities
(823,583
)
(102,189
)
Borrowings from revolving credit
facilities
1,182,774
14,750
Payments of principal on long-term
debt
(3,832
)
(7,476
)
Payments of principal on finance lease
obligations
(23,154
)
(22,662
)
Repurchases of common stock
(17,858
)
(2,000
)
Proceeds from exercises of stock
options
4,024
3,656
Payments for taxes related to net share
settlement of equity awards
(2,850
)
(807
)
Proceeds from issuance of stock pursuant
to employee stock purchase plan
2,332
2,076
Cash provided by (used in) financing
activities
317,853
(114,652
)
Effect of exchange rates on cash and cash
equivalents
(590
)
2,495
Decrease in cash and cash equivalents
(80,037
)
(60,336
)
Cash and cash equivalents, beginning of
period
167,012
210,909
Cash and cash equivalents, end of
period
$
86,975
$
150,573
Supplemental cash flow disclosures:
Cash paid for income taxes
$
61,066
$
31,942
Cash paid for interest
35,721
38,114
GMS Inc. Net Sales by Product
Group (Unaudited) (dollars in thousands)
Three Months Ended
Nine Months Ended
January 31,
2022
% of
Total
January 31,
2021
% of
Total
January 31,
2022
% of
Total
January 31,
2021
% of
Total
Wallboard
$
415,132
36.0
%
$
311,122
41.4
%
$
1,219,789
36.5
%
$
969,722
41.0
%
Ceilings
139,894
12.1
%
103,711
13.8
%
418,831
12.5
%
330,480
14.0
%
Steel framing
282,764
24.5
%
103,957
13.8
%
751,040
22.4
%
325,782
13.8
%
Complementary products
315,805
27.4
%
232,401
31.0
%
956,562
28.6
%
740,636
31.2
%
Total net sales
$
1,153,595
$
751,191
$
3,346,222
$
2,366,620
GMS Inc. Reconciliation of Net
Income to Adjusted EBITDA (Unaudited) (in thousands)
Three Months Ended
Nine Months Ended
January 31,
January 31,
2022
2021
2022
2021
Net income
$
61,383
$
16,126
$
196,946
$
71,814
Interest expense
15,429
13,454
43,830
41,060
Interest income
(40
)
(6
)
(67
)
(57
)
Provision for income taxes
21,211
5,709
64,951
23,590
Depreciation expense
13,816
11,371
40,444
36,908
Amortization expense
15,934
14,191
46,423
42,996
EBITDA
$
127,733
$
60,845
$
392,527
$
216,311
Stock appreciation expense(a)
1,251
1,446
3,126
2,552
Redeemable noncontrolling interests(b)
182
624
1,085
1,062
Equity-based compensation(c)
3,077
1,877
8,250
6,734
Severance and other permitted costs(d)
273
(83
)
669
2,626
Transaction costs (acquisitions and
other)(e)
921
664
3,889
789
Gain on disposal of assets(f)
(252
)
(1,404
)
(474
)
(529
)
Effects of fair value adjustments to
inventory(g)
1,870
—
3,601
—
Gain on legal settlement
—
(1,382
)
—
(1,382
)
EBITDA addbacks
7,322
1,742
20,146
11,852
Adjusted EBITDA
$
135,055
$
62,587
$
412,673
$
228,163
Net sales
$
1,153,595
$
751,191
$
3,346,222
$
2,366,620
Adjusted EBITDA Margin
11.7
%
8.3
%
12.3
%
9.6
%
___________________________________
(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.
(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
Nine Months Ended
January 31,
January 31,
2022
2021
2022
2021
Cash provided by (used in) operating
activities
$
57,208
$
44,448
$
(19,887
)
$
68,496
Purchases of property and equipment
(17,042
)
(6,012
)
(33,161
)
(17,857
)
Free cash flow (a)
$
40,166
$
38,436
$
(53,048
)
$
50,639
___________________________________
(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
Nine Months Ended
January 31,
January 31,
2022
2021
2022
2021
Selling, general and administrative
expense
$
241,040
$
184,844
$
685,652
$
556,308
Adjustments
Stock appreciation expense(a)
(1,251
)
(1,446
)
(3,126
)
(2,552
)
Redeemable noncontrolling interests(b)
(182
)
(624
)
(1,085
)
(1,062
)
Equity-based compensation(c)
(3,077
)
(1,877
)
(8,250
)
(6,734
)
Severance and other permitted costs(d)
(273
)
104
(685
)
(2,589
)
Transaction costs (acquisitions and
other)(e)
(921
)
(664
)
(3,889
)
(789
)
Gain on disposal of assets(f)
252
1,404
474
529
Adjusted SG&A
$
235,588
$
181,741
$
669,091
$
543,111
Net sales
$
1,153,595
$
751,191
$
3,346,222
$
2,366,620
Adjusted SG&A margin
20.4
%
24.2
%
20.0
%
22.9
%
___________________________________
(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.
GMS Inc. Reconciliation of
Income Before Taxes to Adjusted Net Income (Unaudited) (in
thousands, except per share data)
Three Months Ended
Nine Months Ended
January 31,
January 31,
2022
2021
2022
2021
Income before taxes
$
82,594
$
21,835
$
261,897
$
95,404
EBITDA add-backs
7,322
1,742
20,146
11,852
Acquisition accounting depreciation and
amortization (1)
11,424
9,798
32,553
30,054
Adjusted pre-tax income
101,340
33,375
314,596
137,310
Adjusted income tax expense
24,828
7,510
77,076
30,895
Adjusted net income
$
76,512
$
25,865
$
237,520
$
106,415
Effective tax rate (2)
24.5
%
22.5
%
24.5
%
22.5
%
Weighted average shares outstanding:
Basic
43,094
42,726
43,106
42,691
Diluted
43,945
43,361
43,937
43,184
Adjusted net income per share:
Basic
$
1.78
$
0.61
$
5.51
$
2.49
Diluted
$
1.74
$
0.60
$
5.41
$
2.46
___________________________________
(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/20220303005115/en/
Investors: Carey Phelps ir@gms.com 770-723-3369
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