GMS Reports Fourth Quarter and Fiscal Year 2021 Results

GMS Inc., a leading North American specialty distributor of interior building products, reported financial results for the fourth quarter and fiscal year ended April 30, 2021.

Fourth Quarter Fiscal 2021 Highlights

(Comparisons are to the fourth quarter of fiscal 2020, except where noted.)

-Net sales of $932.2 million increased 20.9%; organic net sales increased 17.1%. On a per day basis, net sales increased 19.1% and organic net sales increased 15.3%.Net income of $33.7 million, or -$0.77 per diluted share; adjusted net income of $46.9 million, or $1.07 per diluted share.
-Gross margin of 31.5% compared to 32.6%.
-SG&A and Adjusted SG&A as a percentage of sales were 22.2% and 21.9%, representing 320 and 260 basis points of improvement, respectively.
-Adjusted EBITDA of $91.2 million increased 43.5%; Adjusted EBITDA margin improved 160 basis points to 9.8% from 8.2%.
-The Company completed one business acquisition and four greenfield location openings.
-Cash provided by operating activities and free cash flow of $84.8 million and $72.8 million, respectively.
-Net debt leverage was reduced to 2.5 times as of the end of the fourth quarter of fiscal 2021 from 2.9 times as of the end of the third quarter of fiscal 2021.

Full Year Fiscal 2021 Highlights

(Comparisons are to the full year of fiscal 2020, except where noted.)

-Net sales of $3.3 billion increased 1.8%; organic net sales increased 0.4%. On a per day basis, net sales increased 2.2% and organic net sales increased 0.8%.
-Net income of $105.6 million, or $2.44 per diluted share; adjusted net income of $153.3 million, or $3.54 per diluted share.
-Gross margin of 32.2% compared to 32.8%.
-SG&A and Adjusted SG&A as a percentage of sales were 23.1% and 22.7%, representing 110 and 100 basis points of improvement, respectively.
-Adjusted EBITDA of $319.4 million increased 6.5%; Adjusted EBITDA margin improved 50 basis points to 9.7% from 9.2%.
-The Company completed one business acquisition and six greenfield location openings.
-Cash provided by operating activities and free cash flow of $153.3 million and $123.4 million, respectively.

“We delivered a strong finish to fiscal 2021 as evidenced by record levels of net sales, net income and Adjusted EBITDA,” said John C. Turner, Jr., President and Chief Executive Officer. “During the fourth quarter, our entire team continued to effectively navigate what remains a very dynamic operating landscape. Through a sharpened focus on execution, we successfully capitalized on opportunities created by tailwinds from a strong residential market and robust demand in complementary products while also continuing to address challenges presented by a continued soft commercial market, supply constraints and meaningful inflation. At the same time, we further optimized our capital structure with a senior notes offering and term loan repricing. We also advanced our platform expansion with an acquisition in Canada and the opening of four greenfield locations in the U.S. and continued this momentum in May with the signing of a definitive agreement to acquire Westside Building Material, affording us a unique opportunity to expand our reach and capture significant growth opportunities in strategically important West Coast markets.”

Turner continued, “As we look ahead to our new fiscal year, I would like to share my appreciation for all of our teammates who met and overcame the numerous challenges presented by the COVID-19 pandemic throughout the past year. Moving forward, we believe there is fundamental support for continued strength in residential construction and, while timing remains uncertain, early, but encouraging, indications of improvement in commercial construction are emerging. I am confident that our team’s continued drive to execute and our relentless commitment to our strategic growth priorities of expanding share in core products, growing our complementary products offering, platform expansion, and improved productivity and profitability, position us to generate value for our shareholders well into the future.”

Fourth Quarter Fiscal 2021 Results

Net sales for the fourth quarter of fiscal 2021 of $932.2 million increased 20.9% year over year, primarily due to strong residential end markets, favorable pricing across product categories and the acquisition of D.L. Building Materials, coupled with the negative impact of COVID-19 related shutdowns in the prior year period. Organic net sales increased 17.1%. As there was one more selling day in the fourth quarter of fiscal 2021 than the same period a year ago, net sales and organic net sales on a per day basis were up 19.1% and 15.3%, respectively.

Year-over-year sales increases by product category, which in all cases resulted from both higher volumes and higher price and mix combined, were as follows:

-Wallboard sales of $376.9 million increased 16.6% (up 13.3% on an organic basis).
-Ceilings sales of $121.3 million increased 9.1% (up 7.0% on an organic basis).
-Steel framing sales of $143.3 million increased 24.2% (up 21.4% on an organic basis).
-Complementary product sales of $290.7 million increased 31.4% (up 25.4% on an organic basis).

Gross profit of $293.9 million increased 16.8% compared to the fourth quarter of fiscal 2020. As anticipated, gross margin of 31.5% declined from 32.6% a year ago primarily due to a continuation of unfavorable mix and pressured price-cost dynamics for certain product categories.

Selling, general and administrative (“SG&A”) expense as a percentage of net sales was 22.2% for the quarter compared to 25.4% in the fourth quarter of fiscal 2020. Adjusted SG&A expense as a percentage of net sales of 21.9% improved 260 basis points from 24.5 % in the prior year quarter as a result of continued cost discipline as well as favorable operating leverage from higher pricing broadly across the Company’s product lines.

Net income of $33.7 million, or $0.77 per diluted share, compared to a net loss of $41.5 million, or $0.98 per diluted share, in the fourth quarter of the prior fiscal year. Adjusted net income of $46.9 million, or $1.07 per diluted share, compared to $24.0 million, or $0.56 per diluted share, in the fourth quarter of the prior fiscal year. Adjusted EBITDA of $91.2 million increased 43.5% from the prior year quarter. Adjusted EBITDA margin of 9.8% improved 160 basis points from 8.2% a year ago.

Platform Expansion Activity

During the fourth quarter of fiscal 2021, the Company completed the previously announced acquisition of D.L. Building Materials, Inc., providing entrance to the Ottawa-Gatineau market in Canada, and also established four new locations, expanding its presence to two additional markets, Atlantic City, NJ, and Memphis, TN.

Subsequent to the end of the fourth quarter, on May 11, 2021, the Company announced a definitive agreement to acquire substantially all the assets of Westside Building Material, one of the largest independent distributors of interior building products in the U.S., for $135.0 million in cash. The transaction, which expands and enhances GMS’s presence in multiple California metro areas and marks its entry into the Las Vegas market, is expected to close early in the third calendar quarter of 2021, subject to the satisfaction of customary closing conditions.

Balance Sheet, Liquidity and Cash Flow

As of April 30, 2021, the Company had cash on hand of $167.0 million, total debt of $978.4 million and $453.8 million of available liquidity under its revolving credit facilities. Net debt leverage was 2.5 times as of the end of the quarter, down from 2.9 times at the end of both the third quarter of fiscal 2021 and the fourth quarter of fiscal 2020.

During the fourth quarter of fiscal 2021, the Company issued $350.0 million aggregate principal amount of senior unsecured notes due May 2029 (the “Senior Notes”) in a private offering. The Senior Notes bear interest at 4.625% per annum and mature on May 1, 2029. Proceeds from the Senior Notes were used to repay a portion of outstanding borrowings under the Company’s senior secured first lien term loan facility (the “Term Loan Facility”) and to pay related transaction premiums, fees, and expenses. As of April 30, 2021, $509.7 million remained outstanding under the Term Loan Facility. The Company also entered into the Fourth Amendment to its First Lien Credit Agreement (the “Fourth Amendment”) that, among other things, reduced the interest rate to LIBOR plus 2.50%, with a 0% floor, representing a 25 basis point improvement. As a result of the Fourth Amendment, the Company recorded a write-off of debt discount and deferred financing fees of $4.6 million during the fourth quarter of fiscal 2021.

The Company generated cash provided by operating activities and free cash flow of $84.8 million and $72.8 million, respectively, in the fourth quarter of 2021 compared to $167.7 million and $163.4 million, respectively, a year ago. The decrease from the prior year quarter was primarily due to the Company’s efforts to preserve liquidity at the end of fiscal 2020 in response to the COVID-19 pandemic.

For the full press release, click here.

About GMS Inc.

Celebrating the 50th anniversary of its founding in 1971, GMS operates a network of more than 265 distribution centers across the United States and Canada. GMS’s extensive product offering of wallboard, suspended ceilings systems, or ceilings, and complementary construction products is designed to provide a comprehensive one-stop-shop for our core customer, the interior contractor who installs these products in commercial and residential buildings.

Contact:

Leslie H. Kratcoski – ir@gms.com – (770) 723-3306

Source: GMS, Inc.