GMS Reports Fourth Quarter and Fiscal Year 2024 Results

Volume Growth Across All Four Major Product Categories Drove Record Levels of Full Year Net Sales and Strong Cash Flow

GMS Inc., a leading North American specialty building products distributor, reported financial results for the fourth quarter and fiscal year ended April 30, 2024.

Fourth Quarter Fiscal 2024 Highlights

(Comparisons are to the fourth quarter of fiscal 2023 unless otherwise noted)

• Net sales of $1,413.0 million increased 8.4% as volume growth across the major product lines was partially offset by Steel price deflation; organic net sales increased 4.0%. On a per day basis, net sales were up 6.7% and organic net sales increased 2.4%.
• Net income of $56.4 million, which was impacted by an increase of $5.9 million in additional tax and financing expenses, decreased 25.4% from $75.6 million. Net income per diluted share of $1.39, compared to $1.80. Net income margin was 4.0% compared to 5.8%; Adjusted net income of $78.1 million, or $1.93 per diluted share, compared to $88.6 million, or $2.11 per diluted share.
• Adjusted EBITDA of $146.6 million compared to $154.3 million; Adjusted EBITDA margin was 10.4% compared to 11.8%.
• Cash provided by operating activities of $204.2 million, compared to $204.8 million. Free cash flow of $186.7 million, compared with $185.4 million.
• Repurchased 174,555 shares of common stock for $16.0 million at an average cost per share of $91.86, compared to 496,737 shares of common stock for $27.9 million at an average cost per share of $56.15.
• Completed the acquisition of Kamco Supply Corporation (“Kamco”), meaningfully expanding the Company’s presence in New York City.
• Net debt leverage was 1.7 times Adjusted EBITDA as of the end of the fourth quarter of fiscal 2024 following the acquisition of Kamco, up from 1.5 times Adjusted EBITDA at the end of the third quarter of fiscal 2024 and 1.4 times at the end of the fourth quarter of fiscal 2023.

Full Year Fiscal 2024 Highlights

(Comparisons are to the full year of fiscal 2023, unless otherwise noted)

• Net sales of $5,501.9 million increased 3.2%; organic net sales increased 0.3%. On a per day basis, net sales were up 2.4% and organic net sales were down 0.5%.
• Net income of $276.1 million decreased 17.1% compared to net income of $333.0 million. Net income per diluted share of $6.75 decreased from $7.82. Net income margin was 5.0% compared to 6.2%; Adjusted net income of $337.3 million decreased 14.8% compared to $395.7 million. Adjusted net income per diluted share of $8.25 compared to $9.29.
• Adjusted EBITDA of $615.5 million decreased $50.2 million, or 7.5%; Adjusted EBITDA margin decreased 130 basis points to 11.2% from 12.5%.
• Cash provided by operating activities of $433.2 million, compared to $441.7 million. Free cash flow of $376.0 million, compared to $389.1 million.
• Repurchased 1.7 million shares of common stock for $115.6 million at an average cost per share of $67.93, compared to 2.3 million shares of common stock for $110.6 million at an average cost per share of $48.74.
• Successfully repriced the Company’s Term Loan B, resulting in an expected $3.7 million annualized interest expense savings as compared to the prior terms, or an expected annual $2.6 million benefit to net income.
• Demonstrating the continued execution of our strategic priorities, including platform expansion and Complementary Products growth, the Company completed three strategic acquisitions and opened five greenfield yard locations.

“We were pleased to deliver solid results for our fourth quarter and full year fiscal 2024, including record levels of net sales for the year,” said John C. Turner, Jr, President and Chief Executive Officer of GMS. “Versus prior year, despite lower single-family full year demand, we delivered volume growth across all our major product categories, which helped offset significant Steel price deflation that occurred at levels beyond our prior expectations. Solid levels of multi-family construction remained in backlog and commercial project activity continued through the end of our fiscal year. Plus, single-family year-over-year Wallboard volume growth for the fourth quarter turned positive for the first time since the fall of 2022. We believe this indicates the start of a mild recovery in an end market that, with considerable pent-up demand, remains poised for a more robust recovery with the expected eventual relief in mortgage rates.”

Turner continued, “As we move into fiscal 2025, we believe we are well prepared for what we expect to be continued changes in end market dynamics, as an improving single-family end market should help to offset declining multi-family, and likely commercial, demand as we move throughout the year. While we now anticipate some near-term headwinds, particularly in Wallboard and Steel margins, we expect to deliver improvement in our second quarter and solid results for the full fiscal year. With the typical 3-to-6 month lag in the realization of Wallboard price increases, we expect to see benefits from the implementation of the previously announced pricing actions later this summer. Also, we anticipate recent Steel manufacturer price increases to improve stabilization in pricing for that product category, which has softened further into our first fiscal quarter of 2025, pressuring both our top line and our profitability for the quarter. Leveraging the benefits of our scale, a wide breadth of product offerings and a balanced mix of end markets served, we expect to successfully navigate these shifts in end market demand and price movement during the year, all while continuing to focus on providing outstanding service and continuing the execution of our strategic priorities.”

Fourth Quarter Fiscal 2024 Results

(Comparisons are to the fourth quarter of fiscal 2023 unless otherwise noted)

Net sales for the fourth quarter of fiscal 2024 of $1.41 billion increased 8.4%, or 6.7% on a same day basis, primarily due to volume growth in each of the Company’s four primary product categories as commercial, single-family and multi-family each showed improvement in demand over the prior year quarter. This was the first quarter of positive year-over-year growth in single-family Wallboard volume since the fall of 2022. Offsetting the volume growth was significant year-over-year Steel price deflation, which reduced net sales by an estimated $29 million for the quarter. Organic net sales increased 4.0% in total or 2.4% on a same day basis.

Fourth quarter year-over-year sales by product category were as follows¹:

· Wallboard sales of $586.1 million increased 7.6% (up 6.0% on an organic basis).

· Ceilings sales of $188.9 million increased 21.7% (up 11.4% on an organic basis).

· Steel framing sales of $220.5 million decreased 1.5% (down 5.1% on an organic basis).

· Complementary product sales of $417.6 million increased 9.8% (up 3.5% on an organic basis).

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¹ For more details on sales by product category, including per day organic sales change due to volume and/or price, mix and foreign exchange, please refer to the tables included at the back of this press release.

Gross profit of $451.2 million increased 6.3%, primarily due to the favorable impact of our recent acquisitions and the improved volumes we delivered during the quarter. Gross margin decreased 60 basis points to 31.9%, primarily due to the impact of continuing Steel price deflation. Gross margin also includes the negative impact of non-cash purchase accounting adjustments of $1.2 million, compared to $0.5 million.

Selling, general and administrative (“SG&A”) expenses were $315.5 million for the quarter, up from $279.8 million primarily related to our recent acquisitions and greenfield yard openings. Also contributing to the higher SG&A expenses were increased labor costs associated with our improved volume levels across all four of our major product categories, coupled with some inflationary pressures in wages and benefits.

SG&A expense as a percentage of net sales increased 80 basis points to 22.3% for the quarter compared to 21.5%. Reduced revenue from price deflation negatively impacted SG&A leverage by an estimated 55 basis points. Increased wages, benefits and other costs resulting mostly from improved volumes as well as some inflationary pressures in those costs, negatively impacted SG&A leverage by an estimated 15 basis points, and approximately 10 basis points of the remaining variance was primarily due to our recent acquisitions and greenfield yard openings. Adjusted SG&A expense as a percentage of net sales of 21.8% increased 90 basis points from 20.9%.

All in, inclusive of a 4.6% increase in interest expense and a 17.1% increase in income tax expense, net income decreased 25.4% to $56.4 million compared to net income of $75.6 million. Net income per diluted share of $1.39 decreased from $1.80 per diluted share. Adjusted net income was $78.1 million, or $1.93 per diluted share, compared to $88.6 million, or $2.11 per diluted share.

Adjusted EBITDA of $146.6 million compared to $154.3 million. Adjusted EBITDA margin of 10.4% decreased 140 basis points compared to 11.8%.

Balance Sheet, Liquidity and Cash Flow

As of April 30, 2024, the Company had cash on hand of $166.1 million, total debt of $1.3 billion and $655.9 million of available liquidity under its revolving credit facilities. Net debt leverage was 1.7 times Adjusted EBITDA as of the end of the quarter, up from 1.4 times Adjusted EBITDA at the end of the fourth quarter of fiscal 2023.

The Company generated cash from operating activities and free cash flow of $204.2 million and $186.7 million, respectively, for the quarter ended April 30, 2024. For the quarter ended April 30, 2023, the Company generated cash from operating activities and free cash flow of $204.8 million and $185.4 million, respectively.

During the quarter, the Company repurchased 174,555 shares of common stock for $16.0 million. As of April 30, 2024, the Company had $200.5 million of share repurchase authorization remaining.

Platform Expansion Activities

During the fourth quarter of fiscal 2024, the Company continued the execution of its platform expansion activities with the closing of its previously announced acquisition of Kamco Supply Corporation, representing a meaningful expansion for GMS into the New York City market.

Subsequent Event – Platform Expansion

On May 16, 2024, GMS announced that it had entered into an agreement to acquire Yvon Building Supply, Inc. and affiliated companies (“Yvon”) for an aggregate purchase price up to CAD$196.5 million. With seven locations across Ontario, Canada, Yvon provides Wallboard, insulation, Steel Framing, Ceilings and other Complementary Products and related services. This transaction is expected to close in July 2024. Also in May 2024, the Company acquired Howard & Sons Building Materials, Inc., a single location distributor of Wallboard, Steel framing and Complementary Products in Pomona, California.

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About GMS, Inc.

Founded in 1971, GMS operates a network of more than 300 distribution centers with extensive product offerings of Wallboard, Ceilings, Steel Framing and Complementary Products. In addition, GMS operates more than 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.

Contact:

Carey Phelps – Investor Relations – ir@gms.com – (770) 723-3369

Source: GMS, Inc.