Foundation Building Materials, Inc. Announces Third Quarter 2020 Results and Provides Full Year 2020 Guidance

Foundation Building Materials, Inc., one of the largest specialty building products distributors of wallboard, suspended ceiling systems, metal framing and complementary and other products in North America, today reported third quarter 2020 financial results, provided a COVID-19 (the “COVID-19 Pandemic”) business update and issued full year 2020 guidance.

“Despite the challenging market conditions in the third quarter, we have maintained profitability by optimizing our cost structure. We continue to generate strong cash flows to invest in our business while reducing our debt levels to historic lows,” said Ruben Mendoza, President and CEO. “We will continue to navigate this challenging environment by focusing on driving organic growth and maximizing profitability to create long-term value for our Company.”

2020 Third Quarter Results

Net sales for the three months ended September 30, 2020, were $521.3 million, compared to $564.9 million for the three months ended September 30, 2019, representing a decrease of $43.6 million, or 7.7%. Average daily net sales decreased 9.2% over the prior period. Net sales from base business decreased $51.8 million compared to the prior period, and average daily base business net sales decreased by 11.0% over the prior period. There was one additional business day in the current period as compared to the prior period. Net sales from acquired branches and existing branches that were strategically combined increased by $8.1 million, compared to $17.4 million during the three months ended September 30, 2019. Our base business net sales across all of our major product lines decreased during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily as a result of reduced business activity due to the COVID-19 Pandemic.

The COVID-19 Pandemic had a greater impact on commercial construction activity compared to the residential market, and as a result, net sales from our suspended ceiling systems and metal framing product lines have decreased more than our net sales from other product lines. Additionally, our base business in the prior year benefited from a strong commercial construction end-market and product expansion into new geographic areas, with less comparable activity in the current year.

Gross profit for the three months ended September 30, 2020, was $154.4 million, compared to $171.8 million for the three months ended September 30, 2019, representing a decrease of $17.4 million, or 10.1%. The decrease in gross profit was primarily due to lower net sales. Gross margin for the three months ended September 30, 2020, was 29.6%, compared to 30.4% for the three months ended September 30, 2019. The decrease in gross margin was primarily due to COVID-19 Pandemic-related market disruptions.

Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2020, were $115.1 million, compared to $123.9 million for the three months ended September 30, 2019, representing a decrease of $8.8 million, or 7.1%. As a percentage of net sales, SG&A expenses were 22.1% for the three months ended September 30, 2020, compared to 21.9% for the three months ended September 30, 2019. SG&A expenses remained relatively flat as a percentage of net sales primarily due to proactive actions taken to right-size our cost structure in response to a decline in net sales resulting from the COVID-19 Pandemic.

Net income from continuing operations for the three months ended September 30, 2020, was $11.8 million, or $0.27 per share, a decrease of $0.9 million compared to $12.7 million, or $0.30 per share, for the three months ended September 30, 2019. Adjusted net income(1) for the three months ended September 30, 2020, was $13.3 million, or $0.31 per share, a decrease of $1.2 million compared to $14.4 million, or $0.33 per share, for the three months ended September 30, 2019.

Adjusted EBITDA(1) was $41.7 million and adjusted EBITDA margin(1) was 8.0% for the three months ended September 30, 2020, compared to adjusted EBITDA(1) of $50.0 million and adjusted EBITDA margin(1) of 8.9% for the three months ended September 30, 2019.

2020 Year-to-Date Results

Net sales for the nine months ended September 30, 2020, were $1,531.6 million, compared to $1,639.7 million for the nine months ended September 30, 2019, representing a decrease of $108.1 million, or 6.6%. Average daily net sales decreased 7.6% over the prior period. Net sales from base business decreased $130.7 million compared to the prior period, and average daily base business net sales decreased by 9.3% over the prior period. There were two more business days in the current period as compared to the prior period. Net sales from acquired branches and existing branches that were strategically combined increased by $22.6 million, compared to $60.4 million during the nine months ended September 30, 2019. Our base business net sales across all of our major product lines decreased during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily as a result of reduced business activity due to impacts of the COVID-19 Pandemic.

Gross profit for the nine months ended September 30, 2020, was $462.2 million, compared to $496.3 million for the nine months ended September 30, 2019, representing a decrease of $34.1 million, or 6.9%. The decrease in gross profit was primarily due to lower net sales. Gross margin for the nine months ended September 30, 2020, was 30.2% compared to 30.3% for the nine months ended September 30, 2019. The slight decrease in gross margin was primarily due to COVID-19 Pandemic-related market disruptions.

SG&A expenses for the nine months ended September 30, 2020, were $344.5 million, compared to $363.9 million for the nine months ended September 30, 2019, representing a decrease of $19.4 million, or 5.3%. As a percentage of net sales, SG&A expenses were 22.5% for the nine months ended September 30, 2020, compared to 22.2% for the nine months ended September 30, 2019. The increase in SG&A expenses as a percentage of net sales was primarily due to the loss of sales leverage resulting from the COVID-19 Pandemic and our continued investment in various company-wide initiatives, partially offset by actions taken to right-size our cost structure in response to the decline in net sales.

Net income from continuing operations for the nine months ended September 30, 2020, was $36.0 million, or $0.83 per share, an increase of $3.8 million compared to $32.3 million, or $0.75 per share, for the nine months ended September 30, 2019. Adjusted net income(1) for the nine months ended September 30, 2020, was $34.6 million, or $0.81 per share, a decrease of $1.7 million compared to $36.3 million, or $0.84 per share, for the nine months ended September 30, 2019.

Adjusted EBITDA(1) was $124.3 million and adjusted EBITDA margin(1) was 8.1% for the nine months ended September 30, 2020, compared to adjusted EBITDA(1) of $137.8 million and adjusted EBITDA margin(1) of 8.4% for the nine months ended September 30, 2019.

2020 Full Year Guidance

Due to the COVID-19 Pandemic’s impact and the resulting economic uncertainty, on April 8, 2020, we withdrew our 2020 full-year guidance. Although the effects of the COVID-19 Pandemic have adversely impacted our financial results in 2020, we believe we have greater visibility into our business prospects than earlier in the year. As a result, we are providing select full-year 2020 financial guidance. We expect our profitability to remain at current levels through the balance of the year. Please be aware that our decision to provide guidance at this time does not confirm our intention or obligation to provide guidance for any future period. This decision will be based upon information available to management at the time.

COVID-19 Pandemic Business Update

Through October 2020, the COVID-19 Pandemic has had a negative impact on most of the markets in which the Company operates. As a result, October 2020 average daily net sales were down approximately 6% year-over-year. The Company continues to monitor the current environment and anticipates its future financial performance will be adversely impacted due to the effects of the COVID-19 Pandemic.

For the full third quarter results, click here.

(1) Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted EPS and net debt leverage ratio are non-GAAP financial measures. See the supplementary schedules at the end of this press release, as well as the information provided under the heading “Non-GAAP Financial Measures” for a discussion of how we define and calculate these measures, why we believe they are important and a reconciliation thereof to the most directly comparable GAAP measures. For a calculation of our net debt leverage ratio as of September 30, 2020, see Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Quarterly Report on Form 10-Q for the three months ended September 30, 2020.

About Foundation Building Materials

Foundation Building Materials, Inc. is a specialty building products distributor of wallboard, suspended ceiling systems, metal framing, and complementary and other products throughout North America. Based in Santa Ana, California, the Company employs more than 3,400 employees and operates more than 170 branches across the United States and Canada. Learn more at www.fbmsales.com or follow us on LinkedIn, Twitter, Instagram or Facebook.

Contact:

John Moten – Investor Relations – investors@fbmsales.com – (657) 900-3200

Source: Foundation Building Materials, Inc.