Record Levels of Net Sales, Net Income and Adjusted EBITDA
Announces Expanded Share Repurchase Authorization
TUCKER, Ga.--(BUSINESS WIRE )--GMS Inc. (NYSE: GMS), a leading North American specialty building products distributor, today reported financial results for the fourth quarter and fiscal year ended April 30, 2022.
(Comparisons are to the fourth quarter of fiscal 2021 unless otherwise noted)
(Comparisons are to the full year of fiscal 2021, unless otherwise noted.)
“GMS achieved outstanding results for the fourth quarter and full year fiscal 2022,” said John C. Turner, Jr., President and Chief Executive Officer of GMS. “Our scale, balanced mix of products and customers, commitment to delivering best-in-class service and continued execution of our growth strategy, coupled with strong residential demand and an inflationary pricing environment, enabled us to deliver record levels of net sales, net income and Adjusted EBITDA. We remain optimistic about the year ahead, which, despite rising rates, is supported by a continuing fundamental underbuild of residential housing stock as well as signs of an improving commercial market.”
Turner continued, “We are also very pleased to announce that our Board of Directors has approved the repurchase of up to $200 million of the Company’s common stock. This expanded authorization demonstrates our Board’s continued confidence in the strength and future prospects of our business. We remain focused on the execution of our strategic priorities, including expanding our platform through both acquisitions and greenfield opportunities, as well as enhancing our product and service offerings and delivering improved profitability as we leverage technology and best practices to achieve advancements in productivity. Looking ahead, we are committed to driving long-term shareholder value with a disciplined capital allocation strategy that balances investing in our organic growth initiatives, pursuing accretive M&A transactions and opportunistically leveraging favorable market conditions for share repurchases as they arise.
Net sales for the fourth quarter of fiscal 2022 of $1.29 billion increased 38.2% as compared with the prior year quarter, primarily due to inflationary pricing, healthy residential end market demand, strong performance from our complementary products and the acquisitions of Westside Building Material and AMES Taping Tools. Organic net sales increased 28.9%.
Excluding the impact from one less selling day in the fourth quarter of fiscal 2022 compared to the same period a year ago, net sales and organic net sales were up 40.4% and 30.9%, respectively.
Fourth quarter year-over-year sales increases by product category were as follows:
Gross profit of $412.8 million increased 40.5% compared to the fourth quarter of fiscal 2021, and gross margin improved 50 basis points to 32.0%, both primarily due to the successful pass through of product price inflation, continued strength in residential market demand and incremental gross profit dollars along with accretive gross margins from acquisitions.
Selling, general and administrative (“SG&A”) expense as a percentage of net sales improved 170 basis points to 20.5% for the quarter compared to 22.2% in the fourth quarter of fiscal 2021. Adjusted SG&A expense as a percentage of net sales of 20.2% improved 170 basis points from 21.9% in the prior year quarter as product price inflation outpaced increases in operating costs.
Net income increased 126.7% to $76.5 million, or $1.75 per diluted share, compared to net income of $33.7 million, or $0.77 per diluted share, in the fourth quarter of fiscal 2021. Adjusted net income was $91.3 million, or $2.09 per diluted share, compared to $46.9 million, or $1.07 per diluted share, in the fourth quarter of the prior fiscal year.
Adjusted EBITDA increased $63.0 million, or 69.1%, to $154.2 million compared to the prior year quarter. Adjusted EBITDA margin of 12.0% improved 220 basis points from 9.8% for the fourth quarter of fiscal 2021.
Balance Sheet, Liquidity and Cash Flow
As of April 30, 2022, the Company had cash on hand of $101.9 million, total debt of $1.2 billion and $330.7 million of available liquidity under its revolving credit facilities. Net debt leverage was 1.8 times as of the end of the quarter, down from 2.5 times at the end of the fourth quarter of fiscal 2021.
The Company generated cash from operating activities and free cash flow of $199.5 million and $191.6 million, respectively, for the quarter ended April 30, 2022. For the quarter ended April 30, 2021, the Company generated cash from operating activities and free cash flow of $84.8 million and $72.8 million, respectively.
The Company’s Board of Directors has approved an expanded share repurchase program under which the Company is authorized to repurchase up to $200 million of its outstanding common stock. This expanded program replaces the Company’s previous share repurchase authorization of $75 million, which commenced in 2018, and reflects the Board’s confidence in the business going forward. The repurchases will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market.
GMS will host a conference call and webcast to discuss its results for the fourth quarter of fiscal year 2022, which ended on April 30, 2022, and other information related to its business at 8:30 a.m. Eastern Time on Thursday, June 23, 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 July 23, 2022 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13728027.
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 nearly 100 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.
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, 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. In addition, forward looking statements may include statements regarding the Company’s expectations concerning management’s plans for execution of a stock repurchase program, including the maximum amount, manner and duration of the purchase of the Company’s common stock under its authorized stock repurchase program. 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, economic issues and geopolitical 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 June 23, 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 June 23, 2022.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
Cost of sales (exclusive of depreciation and amortization shown separately below)
Write-off of debt discount and deferred financing fees
Weighted average common shares outstanding:
Net income per common share:
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data)
Trade accounts and notes receivable, net of allowances of $9,346 and $6,282, respectively
Prepaid expenses and other current assets
Property and equipment, net of accumulated depreciation of $227,288 and $193,364, respectively
Accrued compensation and employee benefits
Other accrued expenses and current liabilities
Current portion of long-term debt
Current portion of operating lease liabilities
Long-term debt, less current portion
Common stock, par value $0.01 per share, 500,000 shares authorized; 42,773
and 43,073 shares issued and outstanding as of April 30, 2022 and 2021, respectively
Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued
and outstanding as of April 30, 2022 and 2021
Accumulated other comprehensive income (loss)
Total liabilities and stockholders' equity
Condensed Consolidated Statements of Cash Flows (Unaudited)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Write-off and amortization of debt discount and debt issuance costs
Gain on disposal of assets
Changes in assets and liabilities net of effects of acquisitions:
Trade accounts and notes receivable
Prepaid expenses and other assets
Accrued compensation and employee benefits
Other accrued expenses and liabilities
Cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Proceeds from sale of assets
Acquisition of businesses, net of cash acquired
Cash used in investing activities
Cash flows from financing activities:
Repayments on revolving credit facilities
Borrowings from revolving credit facilities
Payments of principal on long-term debt
Payments of principal on finance lease obligations
Proceeds from exercises of stock options
Payments for taxes related to net share settlement of equity awards
Proceeds from issuance of stock pursuant to employee stock purchase plan
Cash provided by (used in) financing activities
Effect of exchange rates on cash and cash equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash paid for income taxes
Net Sales by Product Group (Unaudited)
Reconciliation of Net Income to Adjusted EBITDA (Unaudited)
Write-off of debt discount and deferred financing fees
Severance and other permitted costs(d)
Transaction costs (acquisitions and other)(e)
Gain on disposal of assets(f)
Effects of fair value adjustments to inventory(g)
Represents changes in the fair value of stock appreciation rights.
Represents changes in the fair values of noncontrolling interests.
Represents non-cash equity-based compensation expense related to the issuance of share-based awards.
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.
Represents costs related to acquisitions paid to third parties.
Includes gains from the sale of assets.
Represents the non-cash cost of sales impact of acquisition accounting adjustments to increase inventory to its estimated fair value.
Represents costs paid to third-party advisors related to debt refinancing activities.
Reconciliation of Cash Provided By Operating Activities to Free Cash Flow (Unaudited)
Cash provided by operating activities
Purchases of property and equipment
(a) Free cash flow is a non-GAAP financial measure that we define as net cash provided by (used in) operations less capital expenditures.
Reconciliation of Selling, General and Administrative Expense to Adjusted SG&A (Unaudited)
Selling, general and administrative expense
Severance and other permitted costs(d)
Transaction costs (acquisitions and other)(e)
Gain on disposal of assets(f)
Adjusted SG&A margin
Represents changes in the fair value of stock appreciation rights.
Represents changes in the fair values of noncontrolling interests.
Represents non-cash equity-based compensation expense related to the issuance of share-based awards.
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.
Represents costs related to acquisitions paid to third parties.
Includes gains from the sale of assets.
Represents costs paid to third-party advisors related to debt refinancing activities.
Reconciliation of Income Before Taxes to Adjusted Net Income (Unaudited)
(in thousands, except per share data)
Write-off of debt discount and deferred financing fees
Acquisition accounting depreciation and amortization (1)
Adjusted net income per share:
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.
Normalized cash tax rate excluding the impact of acquisition accounting and certain other deferred tax amounts.
Investors: Carey Phelps ir@gms.com 770-723-3369
Investors: Carey Phelps ir@gms.com 770-723-3369