Net Sales Top $1 Billion Record
Levels of Net Sales, 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 first quarter ended July 31, 2021.
First Quarter Fiscal 2022 Highlights
(Comparisons are to the first quarter of fiscal 2021, except
where noted.)
- Net sales of $1.04 billion increased 29.8%; organic net sales
increased 23.2%. On a per day basis, net sales increased 31.9% and
organic net sales increased 25.2%.
- Net income of $61.2 million, or $1.39 per diluted share;
adjusted net income of $73.3 million, or $1.67 per diluted
share.
- Gross margin of 32.2%, down slightly.
- SG&A and Adjusted SG&A as a percentage of sales were
20.5% and 20.2%, representing 230 and 200 basis points of
improvement, respectively.
- Adjusted EBITDA of $128.1 million increased 54.2%; Adjusted
EBITDA margin improved 200 basis points to 12.3% from 10.3%.
- Completed two business acquisitions and five greenfield
location openings.
- Net debt leverage was 2.7 times as of the end of the first
quarter of fiscal 2022, down from 3.0 times a year ago.
“GMS’s outstanding performance continued, as we delivered
another quarter of record net sales, net income and Adjusted
EBITDA, including recording more than a billion dollars in
quarterly net sales for the first time in the Company’s history,”
said John C. Turner, Jr., President and Chief Executive Officer.
“We are continuing to benefit from a robust residential market, an
inflationary environment and strong demand for our complementary
products, while our team’s solid execution of our strategic growth
priorities helped offset continuing softness in many commercial
markets. We successfully navigated a very dynamic business
environment, while leveraging our scale and operational strength to
ensure the continuity of supply needed to provide best-in-class
service to our customers. This resulted in greater profitability,
including more than double the net income and 200 basis points of
improvement in Adjusted EBITDA margin compared to the first quarter
of fiscal 2021.”
Turner continued, “As we look ahead to the remainder of fiscal
2022 and beyond, we expect to continue both greenfields and
acquisitions to enter underserved markets and boost our product
offerings. I am confident that our focus on our strategic
priorities and our team’s continued drive to execute will position
us to generate value for our shareholders well into the
future.”
First Quarter Fiscal 2022 Results
Net sales for the first quarter of fiscal 2022 of $1.04 billion
increased 29.8% as compared with the COVID-19 impacted prior year
quarter, primarily due to strong residential end markets,
inflationary pricing, solid demand for our complementary products
and the acquisitions of D.L. Building Materials and Westside
Building Material. Organic net sales increased 23.2%.
Including the impact from one less selling day in the first
quarter of fiscal 2022 than the same period a year ago, net sales
and organic net sales were up 31.9% and 25.2%, respectively.
Year-over-year sales increases by product category, which in all
cases resulted from both higher volumes and higher price and mix
combined, were as follows:
- Wallboard sales of $390.1 million increased 18.9% (up 14.0% on
an organic basis).
- Ceilings sales of $138.1 million increased 20.4% (up 16.7% on
an organic basis).
- Steel framing sales of $196.3 million increased 77.6% (up 68.7%
on an organic basis).
- Complementary product sales of $317.6 million increased 27.4%
(up 18.1% on an organic basis).
Gross profit of $335.8 million increased 28.9% compared to the
first quarter of fiscal 2021. Gross margin of 32.2% declined 30
basis points year-over-year primarily due to price-cost dynamics
related to the timing of the implementation of price actions,
particularly in wallboard.
Selling, general and administrative (“SG&A”) expense as a
percentage of net sales improved 230 basis points to 20.5% for the
quarter compared to 22.8% in the first quarter of fiscal 2021.
Adjusted SG&A expense as a percentage of net sales of 20.2%
improved 200 basis points from 22.2 % in the prior year quarter as
significant product inflation outpaced increases in operating
costs.
Net income more than doubled to $61.2 million, or $1.39 per
diluted share, compared to net income of $27.2 million, or $0.63
per diluted share, in the first quarter of fiscal 2021. Adjusted
net income was $73.3 million, or $1.67 per diluted share, compared
to $40.3 million, or $0.94 per diluted share, in the first quarter
of the prior fiscal year.
Adjusted EBITDA increased 54.2% to $128.1 million compared to
the prior year quarter. Adjusted EBITDA margin of 12.3% improved
200 basis points from 10.3% for the first quarter of fiscal
2021.
Platform Expansion Activity
During the first quarter of fiscal 2022, the Company completed
two acquisitions, including the previously announced acquisition of
Westside Building Material (“Westside”), one of the largest
independent distributors of interior building products in the U.S.
The transaction closed on July 1, 2021, expanding and enhancing
GMS’s presence in multiple California metro areas and providing
entry into the Las Vegas market. In addition, on June 3, 2021, the
Company purchased Architectural Coatings Distributors, Inc. to
further expand its complementary product offerings and add an
EIFS/Stucco product line in the Cleveland, Ohio market, a top 40
Metropolitan Statistical Area (“MSA”.)
During the first quarter of fiscal 2022, the Company also opened
five new greenfield locations, furthering its platform expansion
activities to better serve its customers and to expand its service
territory and product offerings.
Balance Sheet, Liquidity and Cash Flow
As of July 31, 2021, the Company had cash on hand of $43.6
million, total debt of $1.1 billion and $354.6 million of available
liquidity under its revolving credit facilities. Net debt leverage
was 2.7 times as of the end of the quarter, down from 3.0 times at
the end of the first quarter of fiscal 2021 but up slightly from
the fourth quarter of fiscal 2021 due principally to the funding of
the Westside acquisition.
As is typical during its fiscal first quarter, the Company
recorded a use of cash from operating activities and free cash
flow, which totaled $75.1 million and $81.9 million, respectively,
for the quarter ended July 31, 2021. This compared to a use of cash
from operating activities and free cash flow of $15.7 million and
$20.5 million, respectively, in the first quarter of the prior
fiscal year. This increase in the use of cash was related to the
Company’s discipline in ensuring product availability and managing
price inflation amid an environment of tight and less reliable
supply, coupled with the impact of increasing sales on accounts
receivable.
Conference Call and Webcast
GMS will host a conference call and webcast to discuss its
results for the first quarter of fiscal 2022 ended July 31, 2021
and other information related to its business at 8:30 a.m. Eastern
Time on Thursday, September 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
October 2, 2021 and can be accessed at 844-512-2921 (domestic) or
412-317-6671 (international) and entering the pass code
13722281.
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.
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, the continuity of supply of
products, service quality, our ability to continue successfully
navigating the evolving business environment, strategic growth
priorities, growth opportunities from acquisitions and greenfields,
and the ability to generate value for our shareholders 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 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
September 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 September 2, 2021.
GMS Inc.
Condensed Consolidated
Statements of Operations (Unaudited)
(in thousands, except per
share data)
Three Months Ended
July 31,
2021
2020
Net sales
$
1,042,076
$
802,573
Cost of sales (exclusive of depreciation
and amortization shown separately below)
706,243
542,115
Gross profit
335,833
260,458
Operating expenses:
Selling, general and administrative
214,081
183,112
Depreciation and amortization
27,714
27,097
Total operating expenses
241,795
210,209
Operating income
94,038
50,249
Other (expense) income:
Interest expense
(13,657
)
(14,081
)
Other income, net
792
655
Total other expense, net
(12,865
)
(13,426
)
Income before taxes
81,173
36,823
Provision for income taxes
19,971
9,604
Net income
$
61,202
$
27,219
Weighted average common shares
outstanding:
Basic
43,089
42,624
Diluted
43,972
43,017
Net income per common share:
Basic
$
1.42
$
0.64
Diluted
$
1.39
$
0.63
GMS Inc.
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands, except per
share data)
July 31, 2021
April 30, 2021
Assets
Current assets:
Cash and cash equivalents
$
43,590
$
167,012
Trade accounts and notes receivable, net
of allowances of $6,989 and $6,282, respectively
656,878
558,661
Inventories, net
470,249
357,054
Prepaid expenses and other current
assets
21,812
19,525
Total current assets
1,192,529
1,102,252
Property and equipment, net of accumulated
depreciation of $201,441 and $193,364, respectively
323,967
311,326
Operating lease right-of-use assets
138,279
118,413
Goodwill
587,331
576,330
Intangible assets, net
395,647
350,869
Deferred income taxes
17,584
15,715
Other assets
8,744
8,993
Total assets
$
2,664,081
$
2,483,898
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
329,452
$
322,965
Accrued compensation and employee
benefits
48,589
72,906
Other accrued expenses and current
liabilities
117,107
87,138
Current portion of long-term debt
46,687
46,018
Current portion of operating lease
liabilities
36,437
33,474
Total current liabilities
578,272
562,501
Non-current liabilities:
Long-term debt, less current portion
1,016,036
932,409
Long-term operating lease liabilities
102,196
90,290
Deferred income taxes, net
15,055
12,728
Other liabilities
75,279
63,508
Total liabilities
1,786,838
1,661,436
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01 per share,
500,000 shares authorized; 43,083 and 43,073 shares issued and
outstanding as of July 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 July 31, 2021 and April 30, 2021
—
—
Additional paid-in capital
542,587
542,737
Retained earnings
335,737
274,535
Accumulated other comprehensive income
(loss)
(1,512
)
4,759
Total stockholders' equity
877,243
822,462
Total liabilities and stockholders'
equity
$
2,664,081
$
2,483,898
GMS Inc.
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(in thousands)
Three Months Ended July
31,
2021
2020
Cash flows from operating
activities:
Net income
$
61,202
$
27,219
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization
27,714
27,097
Amortization of debt discount and debt
issuance costs
642
753
Equity-based compensation
3,160
2,619
(Gain) loss on disposal and impairment of
assets
(78
)
394
Deferred income taxes
(140
)
(5,241
)
Other items, net
1,573
247
Changes in assets and liabilities net of
effects of acquisitions:
Trade accounts and notes receivable
(73,479
)
(23,013
)
Inventories
(87,313
)
14,008
Prepaid expenses and other assets
(1,491
)
(3,782
)
Accounts payable
(4,265
)
(33,887
)
Accrued compensation and employee
benefits
(24,219
)
(36,062
)
Other accrued expenses and liabilities
21,617
13,937
Cash used in operating activities
(75,077
)
(15,711
)
Cash flows from investing
activities:
Purchases of property and equipment
(6,814
)
(4,745
)
Proceeds from sale of assets
287
342
Acquisition of businesses, net of cash
acquired
(123,049
)
(210
)
Cash used in investing activities
(129,576
)
(4,613
)
Cash flows from financing
activities:
Repayments on revolving credit
facilities
(102,872
)
(58,083
)
Borrowings from revolving credit
facilities
195,049
14,421
Payments of principal on long-term
debt
(1,278
)
(2,492
)
Payments of principal on finance lease
obligations
(7,397
)
(7,521
)
Repurchases of common stock
(3,855
)
—
Proceeds from exercises of stock
options
863
691
Payments for taxes related to net share
settlement of equity awards
(256
)
(105
)
Proceeds from issuance of stock pursuant
to employee stock purchase plan
1,140
1,270
Cash provided by (used in) financing
activities
81,394
(51,819
)
Effect of exchange rates on cash and cash
equivalents
(163
)
943
Decrease in cash and cash equivalents
(123,422
)
(71,200
)
Cash and cash equivalents, beginning of
period
167,012
210,909
Cash and cash equivalents, end of
period
$
43,590
$
139,709
Supplemental cash flow disclosures:
Cash paid for income taxes
$
1,007
$
3,478
Cash paid for interest
8,616
13,115
GMS Inc.
Net Sales by Product Group
(Unaudited)
(dollars in thousands)
Three Months Ended
July 31, 2021
% of Total
July 31, 2020
% of Total
Wallboard
$
390,135
37.4
%
$
328,085
40.9
%
Ceilings
138,071
13.2
%
114,643
14.3
%
Steel framing
196,276
18.8
%
110,532
13.8
%
Complementary products
317,594
30.6
%
249,313
31.0
%
Total net sales
$
1,042,076
$
802,573
GMS Inc.
Reconciliation of Net Income
to Adjusted EBITDA (Unaudited)
(in thousands)
Three Months Ended
July 31,
2021
2020
Net income
$
61,202
$
27,219
Interest expense
13,657
14,081
Interest income
—
(37
)
Provision for income taxes
19,971
9,604
Depreciation expense
12,925
12,827
Amortization expense
14,789
14,270
EBITDA
$
122,544
$
77,964
Stock appreciation expense(a)
892
792
Redeemable noncontrolling interests(b)
310
252
Equity-based compensation(c)
1,958
1,605
Severance and other permitted costs(d)
147
1,947
Transaction costs (acquisitions and
other)(e)
575
100
(Gain) loss on disposal and impairment of
assets(f)
(78
)
394
Effects of fair value adjustments to
inventory(g)
1,731
—
EBITDA addbacks
5,535
5,090
Adjusted EBITDA
$
128,079
$
83,054
Net sales
$
1,042,076
$
802,573
Adjusted EBITDA Margin
12.3
%
10.3
%
___________________________________
(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
Operating Activities to Free Cash Flow (Unaudited)
(in thousands)
Three Months Ended
July 31,
2021
2020
Cash used in operating activities
$
(75,077
)
$
(15,711
)
Purchases of property and equipment
(6,814
)
(4,745
)
Free cash flow (a)
$
(81,891
)
$
(20,456
)
________________________________________
(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
July 31,
2021
2020
Selling, general and administrative
expense
$
214,081
$
183,112
Adjustments
Stock appreciation expense(a)
(892
)
(792
)
Redeemable noncontrolling interests(b)
(310
)
(252
)
Equity-based compensation(c)
(1,958
)
(1,605
)
Severance and other permitted costs(d)
(161
)
(1,881
)
Transaction costs (acquisitions and
other)(e)
(575
)
(100
)
Gain (loss) on disposal and impairment of
assets(f)
78
(394
)
Adjusted SG&A
$
210,263
$
178,088
Net sales
$
1,042,076
$
802,573
Adjusted SG&A margin
20.2
%
22.2
%
___________________________________
(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.
GMS Inc.
Reconciliation of Income
Before Taxes to Adjusted Net Income (Unaudited)
(in thousands, except per
share data)
Three Months Ended
July 31,
2021
2020
Income before taxes
$
81,173
$
36,823
EBITDA add-backs
5,535
5,090
Purchase accounting depreciation and
amortization (1)
10,318
10,135
Adjusted pre-tax income
97,026
52,048
Adjusted income tax expense
23,771
11,711
Adjusted net income
$
73,255
$
40,337
Effective tax rate (2)
24.5
%
22.5
%
Weighted average shares outstanding:
Basic
43,089
42,624
Diluted
43,972
43,017
Adjusted net income per share:
Basic
$
1.70
$
0.95
Diluted
$
1.67
$
0.94
________________________________________
(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, 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/20210902005112/en/
Investors: Carey Phelps ir@gms.com 770-723-3369
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