GMS Reports Record Sales and Adjusted EBITDA for Second Quarter 2018

GMS Inc. a North American distributor of wallboard and suspended ceilings systems, reported financial results for the second quarter of fiscal 2018 ended October 31, 2017.

Second Quarter 2018 Highlights Compared to Second Quarter 2017

Net sales increased 9.5% to a record $648.0 million; base business net sales increased 5.1%
Wallboard unit volume grew 4.3% to a record 929 million square feet
Net income increased to $18.0 million, or $0.43 per diluted share, compared to $17.2 million, or $0.42 per diluted share
Adjusted EBITDA grew 9.5% to a record $54.2 million
Gross margin expanded 20 basis points to 32.8%
Acquired ASI Building Products, LLC in Michigan and Washington Builders Supply, Inc. in Pennsylvania during the second quarter

Mike Callahan, President and CEO of GMS, said, “We are pleased to report a solid quarter highlighted by record Adjusted EBITDA of $54.2 million and net sales of $648.0 million, despite the negative impact of hurricanes Harvey and Irma. Our results reflect broad-based growth across all of our product categories, driven by strong commercial activity highlighted by 19.0 percent increase in our ceilings business, as well as 10.2 percent increase in our other product sales. As expected, gross margin rebounded from the first quarter to 32.8 percent, and we remain confident in our previously issued outlook of full-year gross margin of 32.5 percent for fiscal 2018.”

Mr. Callahan continued, “Our third quarter is off to a good start as underlying demand remains solid, pricing is up across all of our product categories and we continue to execute well against our growth strategy, all of which should drive above market net sales growth in the second half of the fiscal year. This coupled with improving gross margins and modest SG&A leverage expected in the second half of the fiscal year will help us deliver another record year of Adjusted EBITDA.”

Second Quarter 2018 Results

Net sales for the second quarter of fiscal 2018 ended October 31, 2017 were $648.0 million, compared to $591.8 million for the second quarter of fiscal 2017 ended October 31, 2016.

Wallboard sales of $288.5 million increased 6.9 percent, compared to the second quarter of fiscal 2017 driven by wallboard unit volume growth of 4.3 percent to 929 million square feet and pricing improvement. Wallboard volumes benefitted from steady end market demand and the positive impact of acquisitions.
Ceilings sales of $101.6 million rose 19.0 percent, compared to the second quarter of fiscal 2017, mainly due to greater commercial activity, price gains and the positive impact of acquisitions.
Steel framing sales of $103.2 million grew 7.4 percent, compared to the second quarter of fiscal 2017, due to strong commercial activity and the positive impact of acquisitions, offset by lower steel prices.
Other product sales of $154.7 million were up 10.2 percent, compared to the second quarter of fiscal 2017, as a result of strategic initiatives, price gains and the positive impact of acquisitions.

Gross profit of $212.3 million grew 9.9 percent, compared to $193.2 million in the second quarter of fiscal 2017, mainly attributable to higher pricing and increased sales. Gross margin was 32.8 percent, compared to 32.6 percent in the second quarter of fiscal 2017 largely due to pricing discipline and purchasing initiatives. On a sequential basis, gross margin improved 90 basis points from 31.9 percent from the first quarter of fiscal 2018.

Net income of $18.0 million, or $0.43 per diluted share, increased by 4.6 percent or $0.8 million, compared to $17.2 million, or $0.42 per diluted share, in the second quarter of fiscal 2017. Adjusted net income of $21.6 million, or $0.51 per diluted share, grew $1.5 million, compared to $20.1 million, or $0.49 per diluted share, in the second quarter of fiscal 2017.

Adjusted EBITDA of $54.2 million rose 9.5 percent, compared to $49.5 million in the second quarter of fiscal 2017. Adjusted EBITDA margin was 8.4 percenta as a percentage of net sales, compared to 8.4% in the second quarter of fiscal 2017, with slight improvement in gross margin offset by an increase in SG&A related expenses.

Capital Resources

At October 31, 2017, GMS had cash of $19.8 million and total debt of $610.5 million, as compared to cash of $19.7 million and total debt of $602.9 million at July 31, 2017.

Acquisition Activity

During the second quarter of fiscal 2018, the Company acquired ASI Building Products, LLC, or ASI, a provider of ceilings and quality building products serving residential and commercial projects in Eastern Michigan, and Washington Builders Supply, Inc., or WBS, a provider of drywall, steel, insulation along with a full range of commercial and residential services in the Western Pennsylvania market.

Conference Call and Webcast

GMS will host a conference call and webcast to discuss its results for the second quarter ended October 31, 2017 at 10:00 a.m. Eastern Time on December 7, 2017. Investors who wish to participate in the call should dial 800-259-2693 (domestic) or 323-794-2551 (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. 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 7, 2018 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 5463988.