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GMS Reports Second Quarter Fiscal 2023 Results

General News
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GMS Inc., a leading North American specialty building products distributor, today reported financial results for the fiscal second quarter ended October 31, 2022.

Second Quarter Fiscal 2023 Highlights

(Comparisons are to the second quarter of fiscal 2022)

  • Net sales of $1.43 billion increased 24.4%; organic net sales increased 22.2%.
  • 11.6% volume growth in Wallboard, including the second consecutive quarterly year-over-year expansion in commercial Wallboard volume.
  • Net income of $103.2 million, or $2.41 per diluted share, increased 38.7% compared to net income of $74.4 million, or $1.69 per diluted share; Adjusted net income of $119.5 million, or $2.79 per diluted share, compared to $87.8 million, or $2.00 per diluted share.
  • Adjusted EBITDA of $195.5 million increased $46.0 million, or 30.7%; Adjusted EBITDA margin improved 70 basis points to 13.7% from 13.0%.
  • Cash provided by operating activities increased $109.3 million to $107.3 million; Free cash flow improved $107.8 to $96.5 million.
  • Net debt leverage was 1.6 times, down from 2.4 times a year ago.

“A significant backlog of homes under construction, continued strength in multi-family, and improving levels of commercial activity helped drive exceptional results for our fiscal second quarter,” said John C. Turner, Jr., President and Chief Executive Officer of GMS. “As a result, with favorable pricing across our product categories, positive volume growth in Wallboard, Ceilings and Complementary Products and the benefit of our AMES acquisition, our team achieved another quarter of record levels of net sales, net income and Adjusted EBITDA and generated significant levels of cash flow.”

Turner continued, “With significant scale, a balanced mix of commercial and residential customers and a wide breadth of product offerings, we are confident in our ability to adjust as needed to meet demand in all of our end markets and believe we are well-positioned ahead of the developing slowdown in residential single-family construction. We remain focused on the execution of our strategic priorities to expand share in our core products, grow Complementary Product offerings, expand our platform, and leverage our scale to achieve improved productivity and profitability through the use of technology and shared best practices.”

Second Quarter Fiscal 2023 Results

Net sales for the second quarter of fiscal 2023 of $1.43 billion increased 24.4% as compared with the prior year quarter, primarily due to a favorable pricing environment along with active residential construction and an improving commercial landscape, both of which helped drive volume growth in Wallboard, Ceilings and Complementary Products. The Company also benefited during the quarter from its acquisition of AMES Taping Tools in December 2021 and one additional selling day during the three months ended October 31, 2022 compared to the prior year period. Partially offsetting these increases was the negative impact of foreign currency translation on net sales during the three months ended October 31, 2022. Organic net sales, which exclude the net sales of acquired businesses until the first anniversary of the acquisition date and the impact of foreign currency translation, increased 22.2%.

Excluding the impact from one additional selling day in the second quarter of fiscal 2023 compared to the same period a year ago, net sales and organic net sales were up 22.5% and 20.3%, respectively.

Year-over-year quarterly sales increases by product category were as follows:

  • Wallboard sales of $584.6 million increased 41.0% (up 41.4% on an organic basis).
  • Ceilings sales of $159.6 million increased 13.3% (up 13.6% on an organic basis).
  • Steel Framing sales of $278.2 million increased 2.3% (up 2.5% on an organic basis).
  • Complementary Product sales of $408.7 million increased 26.5% (up 17.8% on an organic basis).

Gross profit of $464.5 million increased 24.9% compared to the second quarter of fiscal 2022 primarily due to the successful pass through of product inflation, continued strength in residential market demand, improving commercial sales, and incremental gross profit from acquisitions. Gross margin of 32.5% increased 20 basis points year-over-year with strong margins in Complementary Products and better-than-expected margins in Steel Framing on focused inventory management and project quoting as steel pricing declined during the quarter.

Selling, general and administrative (“SG&A”) expense as a percentage of net sales improved 50 basis points to 19.5% for the quarter compared to 20.0% in the second quarter of fiscal 2022. Adjusted SG&A expense as a percentage of net sales of 18.9% improved 50 basis points from 19.4% in the prior year quarter as product inflation outpaced increases in operating costs.

Net income increased 38.7% to $103.2 million, or $2.41 per diluted share, compared to net income of $74.4 million, or $1.69 per diluted share, in the second quarter of fiscal 2022. Adjusted net income was $119.5 million, or $2.79 per diluted share, compared to $87.8 million, or $2.00 per diluted share, in the second quarter of the prior fiscal year.

Adjusted EBITDA increased $46.0 million, or 30.7%, to $195.5 million compared to the prior year quarter. Adjusted EBITDA margin of 13.7% improved 70 basis points from 13.0% for the second quarter of fiscal 2022.

Balance Sheet, Liquidity and Cash Flow

As of October 31, 2022, the Company had cash on hand of $124.2 million, total debt of $1.2 billion and $293.8 million of available liquidity under its revolving credit facilities. Net debt leverage was 1.6 times as of the end of the quarter, down from 2.4 times at the end of the second quarter of fiscal 2022.

The Company recorded significantly improved levels of cash flow for the quarter. Cash provided by operating activities and free cash flow were $107.3 million and $96.5 million, respectively, for the quarter ended October 31, 2022. For the quarter ended October 31, 2021, the Company recorded cash used by operating activities and free cash flow of $2.0 million and $11.3 million, respectively.

During the quarter, the Company repurchased common stock of $25.8 million. As of October 31, 2022, the Company had $161.2 million of repurchase authorization remaining.

For the complete press release, click here.

About GMS Inc.

Founded in 1971, GMS (NYSE: GMS) operates a network of approximately 300 distribution centers with extensive product offerings of Wallboard, Ceilings, Steel Framing and Complementary Products. In addition, GMS operates approximately 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.