GMS Reports Excellent Third Quarter
Georgia’s GMS Inc. reported financial results for the third quarter of fiscal 2017 that ended Jan. 31, 2017. For this reporting, highlights include of same quarter fiscal 2017 compared to third quarter fiscal 2016:
•Net sales increased 33.8 percent to $562.5 million; base business net sales increased 15.5 percent
•Wallboard unit volume grew 30.5 percent to 842 million square feet
•Net income increased to $8.2 million, or $0.20 per share, compared to a net loss of ($2.2) million, or ($0.07) per share
•Adjusted EBITDA margin improved 110 basis points to 7.2 percent as a percentage of net sales
•Net debt to Adjusted EBITDA declined from 4.5x to 3.1x
•Entered Indiana market through acquisition of Interior Products Supply
“Our multi-faceted growth strategy drove improvement across all metrics during the third quarter,” said Mike Callahan, president and CEO of GMS. “Stronger residential and commercial activity, coupled with accretive share gains allowed us to generate double-digit organic revenue growth in each product group. Acquisitions further augmented this operating momentum, including our recent expansion into Indiana. On higher net sales, our national scale advantages and efficiently managed costs drove stronger gross margin and modest SG&A leverage, resulting in nearly 60 percent growth in Adjusted EBITDA. In addition to this progress, during the third quarter we further improved our leverage metrics and expanded our capital base on more favorable terms. Into the fourth quarter of fiscal 2017, we expect to expand our industry leading positions at attractive margins and continue to pursue accretive acquisitions.”
Third Quarter Fiscal 2017 Results
Net sales for the third quarter of fiscal 2017 ended January 31, 2017 were $562.5 million, compared to $420.5 million for the third quarter of fiscal 2016 ended January 31, 2016.
•Wallboard sales of $255.0 million increased 29.5 percent, compared to the third quarter of fiscal 2016. Wallboard unit volume grew 30.5 percent million to 842 million square feet, driven by greater end market demand, market share gains, and the positive contribution from acquisitions.
•Ceilings sales of $81.8 million rose 25.1 percent, compared to the third quarter of fiscal 2016, mainly due to increased commercial activity, price gains and the positive impact from acquisitions.
•Steel framing sales of $93.5 million grew 41.8 percent, compared to the third quarter of fiscal 2016, due to increased commercial activity and price gains, along with the benefit from acquisitions.
•Other product sales of $132.3 million were up 43.4 percent, compared to the third quarter of fiscal 2016, as a result of strong demand pull through, pricing improvements, additional retail showrooms, and targeted acquisitions.
Gross profit of $185.7 million grew 38.4 percent, compared to $134.2 million in the third quarter of fiscal 2016. Gross margin of 33.0 percent expanded by 110 basis points, compared to 31.9 percent in the third quarter of fiscal 2016 mainly attributable to pricing discipline, improved purchasing opportunities and product mix.
Net income of $8.2 million, or $0.20 per share, increased $10.4 million, compared to a net loss of ($2.2) million, or ($0.07) per share, in the third quarter of fiscal 2016. Adjusted net income of $13.1 million, or $0.32 per diluted share, grew $7.1 million, compared to $6.0 million, or $0.18 per diluted share, in the third quarter of fiscal 2016.
Adjusted EBITDA of $40.7 million rose 58.4 percent, compared to $25.7 million in the third quarter of fiscal 2016. Adjusted EBITDA margin was 7.2 percent as a percentage of net sales for the third quarter of fiscal 2017, compared to 6.1 percent in the third quarter of fiscal 2016, largely reflecting increased profitability on higher net sales.
In November 2016, the Company amended its existing ABL Credit Agreement. As a result of the amendment, the ABL Facility has, among other things, expanded to $345 million from $300 million, lowered the applicable rate per annum by 0.25 percent, reduced the unused line fees and extended the term until November 2021.
At Jan. 31, 2017, GMS had cash and cash equivalents of $10.6 million and total debt of $612.3 million, as compared to cash and cash equivalents of $19.1 million and total debt of $644.6 million at April, 30, 2016.
In December 2016, the Company acquired Interior Products Supply, or IPS. IPS distributes wallboard and related building materials from a single location in Fort Wayne, Ind.
Subsequent to January 31, 2017, the Company acquired the Hawaiian distribution assets of Grabber Construction Products, Inc., or Grabber, a highly regarded supplier of fasteners and drywall related products based in Honolulu, Hawaii.
The Company’s eight acquisitions completed during fiscal 2017 to date, including Grabber, generated an aggregate of approximately $215.9 million in net sales for the twelve month period prior to the date of acquisition, and the earnings of the entities would have contributed approximately $24.3 million to Adjusted EBITDA for that period, including operating synergies.