GMS Inc., a leading North American distributor of wallboard and suspended ceilings systems, reported financial results for the first quarter of fiscal 2018 ended July 31, 2017.
First Quarter 2018 Highlights Compared to First Quarter 2017
- Net sales increased 16.8% to a record $642.2 million; base business net sales increased 7.8%
- Wallboard unit volume grew 11.8% to a record 914 million square feet
- Net income increased to $15.3 million, or $0.36 per diluted share, compared to $9.2 million, or $0.24 per diluted share
- Adjusted EBITDA grew 14.8% to a record $52.8 million
- Net debt to LTM Pro Forma Adjusted EBITDA improved to 2.9x from 3.4x
- Reduced the interest rate on the Company’s first lien term loan by 50 basis points and extended the maturity to April 2023
- In August 2017, acquired a leading provider of ceilings and other quality building products in Eastern Michigan
Mike Callahan, President and CEO of GMS, stated, “We were pleased to start the year with another quarter of double digit percentage growth in Adjusted EBITDA to $52.8 million supported by a record sales performance. Stronger commercial activity drove an 11% and 10% increase in ceilings and steel framing base business net sales, respectively, while wallboard base business sales were up mid-single digits. Our first quarter gross margin of 31.9% was down 60 basis points versus the first quarter of the prior year, but was at the top end of our expected range. Due to a variety of purchasing initiatives executed during the quarter, our gross margin improved each month throughout the quarter, and we continue to believe that we will be able to deliver a full year gross margin of 32.5% in fiscal 2018. Combined with our ability to capitalize on healthy demand trends, execute on our attractive acquisition pipeline and generate additional SG&A savings, our focus for full year fiscal 2018 will be geared towards delivering a record year of Adjusted EBITDA and at a higher margin year-over-year.”
First Quarter 2018 Results
Net sales for the first quarter of fiscal 2018 ended July 31, 2017 were $642.2 million, compared to $549.8 million for the first quarter of fiscal 2017 ended July 31, 2016.
- Wallboard sales of $284.7 million increased 13.3%, compared to the first quarter of fiscal 2017 driven by wallboard unit volume growth of 11.8% to 914 million square feet and price gains. Wallboard volumes benefitted from steady end market demand and the positive contribution from acquisitions.
- Ceilings sales of $99.7 million rose 15.5%, compared to the first quarter of fiscal 2017, mainly due to greater commercial activity, price gains and the positive impact of acquisitions.
- Steel framing sales of $104.7 million grew 24.1%, compared to the first quarter of fiscal 2017, due to strong commercial activity, price gains as a result of higher industry steel prices and acquisitions.
- Other product sales of $153.1 million were up 19.8%, compared to the first quarter of fiscal 2017, as a result of strategic initiatives, price gains and acquisitions.
Gross profit of $205.1 million grew 14.8%, compared to $178.6 million in the first quarter of fiscal 2017, mainly attributable to higher pricing and increased sales. Gross margin was 31.9%, compared to 32.5% in the first quarter of fiscal 2017 largely due to higher cost material purchases in wallboard, along with product mix. Gross margin improved sequentially from May 2017 to July 2017 due to improved purchasing opportunities.
Net income of $15.3 million, or $0.36 per diluted share, increased by 67.4% or $6.2 million, compared to $9.2 million, or $0.24 per diluted share, in the first quarter of fiscal 2017. Adjusted net income of $19.7 million, or $0.47 per diluted share, grew $1.9 million, compared to $17.8 million, or $0.46 per diluted share, in the first quarter of fiscal 2017.
Adjusted EBITDA of $52.8 million rose 14.8%, compared to $45.9 million in the first quarter of fiscal 2017. Adjusted EBITDA margin was 8.2% as a percentage of net sales, compared to 8.4% in the first quarter of fiscal 2017, reflecting a lower gross margin which outweighed an improvement in SG&A as a percent of net sales.
On June 7, 2017, the Company amended its First Lien Credit Agreement with new borrowings consisting of a $578 million term loan facility due in 2023. Borrowings under the new term loan bear interest at a floating rate based on LIBOR, with a 1.00% floor, plus 3.00%, representing a 50 basis point improvement compared to the previous term loan’s interest rate. Net proceeds from the new term loan and cash on hand were used to repay the Company’s previous first lien term loan of $478 million and approximately $94 million of loans under the asset based revolving credit facility as well as related expenses.
At July 31, 2017, GMS had cash of $19.7 million and total debt of $602.9 million, as compared to cash of $14.6 million and total debt of $594.9 million at April 30, 2017.
Subsequent to July 31, 2017, the Company acquired ASI Building Products, LLC, or ASI, a leading provider of ceilings and other quality building products serving residential and commercial projects of all sizes in the Eastern Michigan market through three locations. GMS now has a total of 16 locations in Michigan.
Conference Call and Webcast
GMS will host a conference call and webcast to discuss its results for the first quarter ended July 31, 2017 at 10:00 a.m. Eastern Time on September 6, 2017. Investors who wish to participate in the call should dial 888-601-3878 (domestic) or 719-325-4782 (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 6, 2017 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 6813639.
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- First Quarter Net Sales Increased 16.8% to $642.2 Million
- First Quarter Net Income Improved by 67.4% to $15.3 Million
- First Quarter Adjusted EBITDA Increased 14.8% to $52.8 Million
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