GMS Inc., a North American distributor of wallboard and suspended ceilings systems, reported financial results for the first quarter of fiscal 2017 ended July 31, 2016.
First Quarter Fiscal 2017 Highlights Compared to First Quarter Fiscal 2016
- Net sales increased 21.5 percent to $549.8 million; base business net sales up 9.2 percent despite one fewer shipping day
- Wallboard unit volume grew 20 percent to 818 million square feet
- Net income increased to $9.2 million, or $0.24 per share, compared to $3.0 million, or $0.09 per share
- Gross margin expanded 140 basis points to 32.5 percent
- Adjusted EBITDA margin improved approximately 80 basis points to 8.4 percent as a percentage of net sales
- Completed four acquisitions as of Sept. 1, 2016, adding eight branches in five states
Mike Callahan, president and CEO of GMS, stated, “We are excited to produce our 20th straight quarter of double-digit growth in net sales, with strong results across all of our product categories to start the current fiscal year. Residential demand continued to outpace commercial activity in many markets, which particularly benefitted our wallboard and other product categories. The modest improvement in wallboard price compared to Q4 of last fiscal year was in line with expectations. Beyond our base business improvement, we completed four acquisitions during fiscal 2017 as of Sept. 1, 2016, representing $134.9 million of combined trailing twelve month net sales. In June 2016, we used the proceeds from our successful initial public offering to further reduce debt and strengthen our balance sheet. In all, we are pleased with our progress and the dedication of the entire GMS family which is driving our continued success.”
First Quarter Fiscal 2017 Results
Net sales for the first quarter ended July 31, 2016 were $549.8 million, compared to $452.4 million for the first quarter ended July 31, 2015.
- Wallboard sales of $251.3 million increased 19.1 percent, compared to the first quarter of fiscal 2016. Wallboard unit volume grew 20.0 percent million to 818 million square feet, helped by greater end market demand and the positive contribution from acquisitions.
- Ceiling sales of $86.3 million rose 9.3%, compared to the first quarter of fiscal 2016, helped by improved pricing and acquisitions.
- Steel framing sales of $84.3 million grew 25.3%, compared to the first quarter of fiscal 2016, due to greater commercial activity and pricing gains as industry steel prices increased year-over-year, along with the benefit from accretive acquisitions.
- Other product sales of $127.8 million were up 34.2%, compared to the first quarter of fiscal 2016, attributable to greater end market demand, price gains, retail showrooms, acquisitions and other initiatives.
Gross profit of $178.6 million grew 26.8 percent, compared to $140.9 million in the first quarter of fiscal 2016. Gross margin of 32.5 percent expanded by 140 basis points, compared to 31.1 percent in the first quarter of fiscal 2016 mainly attributable to increased product margins.
Net income of $9.2 million, or $0.24 per share, increased $6.2 million, compared to $3.0 million, or $0.09 per share, in the first quarter of fiscal 2016. Adjusted net income of $17.8 million, or $0.47 per share, grew $6.5 million, compared to $11.3 million, or $0.35 per share, in the first quarter of fiscal 2016.
Adjusted EBITDA of $45.9 million rose 34.7 percent, compared to $34.1 million in the first quarter of fiscal 2016. Adjusted EBITDA margin was 8.4 percent as a percentage of net sales for the first quarter of fiscal 2017, compared to 7.5 percent in the first quarter of fiscal 2016, largely reflecting a higher gross margin.
Capital Resources
On June 1, 2016, GMS completed the initial public offering of its common stock, raising net proceeds of approximately $157.2 million, including the full exercise of the underwriters’ option to purchase additional shares. Following completion of the offering, GMS had 40,942,905 of basic and 41,605,076 of diluted shares of common stock outstanding.
GMS used all of the net proceeds from its initial public offering, together with cash on hand, to repay, in full, its outstanding indebtedness of $160.0 million plus accrued and unpaid interest under its 7.75 percent senior secured second lien term loan facility due April 2022.
At July 31, 2016, GMS had cash of $9.8 million and total debt of $546.7 million, as compared to cash of $19.1 million and total debt of $644.6 million at April, 30, 2016.
Acquisition Activity
During the first quarter of fiscal 2017, the Company acquired Wall & Ceiling Supply Co., Inc., or Wall & Ceiling Supply, and Rockwise, LLC, or Rockwise, for a total purchase price of approximately $26.0 million. Wall & Ceiling Supply and Rockwise distribute wallboard and related building materials from four locations in Washington, Arizona and Colorado. For the twelve months ended April 30, 2016, the combined companies generated approximately $35.2 million in net sales and the earnings of these entities would have contributed approximately $4.5 million to Adjusted EBITDA for that period, including operating synergies.
Subsequent to July 31, 2016, the Company acquired Steven F. Kempf Building Materials, Inc., or SKBM, and Olympia Building Supplies, LLC, or Olympia, for a total purchase price of approximately $75.6 million. SKBM and Olympia distribute wallboard and related building materials from four locations in Pennsylvania and Florida. For the twelve months ended July 31, 2016, the combined companies generated approximately $99.7 million in net sales and the earnings of these entities would have contributed approximately $10.9 million to Adjusted EBITDA for that period, including operating synergies.
Conference Call and Webcast
The Company hosted a conference call and webcast to discuss its results for the first quarter ended July 31, 2016 at 11:00 a.m. Eastern Time on September 13, 2016. 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 Company’s first quarter results available on that page of the website as well. Replays of the call will be available through October 13, 2016 and can be accessed at 877-870-5176 (domestic) or 858-384-5517 (international) and entering the pass code 13644496
