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Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 6, 2018

 


 

GMS INC.

(Exact name of registrant as specified in charter)

 


 

Delaware

 

001-37784

 

46-2931287

(State or Other Jurisdiction
of Incorporation)

 

(Commission
File Number)

 

(I.R.S. Employer
Identification No.)

 

100 Crescent Centre Parkway, Suite 800
Tucker, Georgia

 

30084

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (800) 392-4619

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o                                    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  o

 

 

 



 

Item 2.02. Results of Operations and Financial Condition.

 

On March 6, 2018, GMS Inc. (the “Company” or “GMS”) issued a press release, a copy of which is furnished as Exhibit 99.1 hereto and incorporated herein by reference, announcing the Company’s financial results for the three and nine months ended January 31, 2018.

 

The information contained in Item 7.01 concerning the presentation to GMS investors is hereby incorporated into this Item 2.02 by reference.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 7.01. Regulation FD Disclosure.

 

The slide presentation furnished as Exhibit 99.2 hereto, and incorporated herein by reference, will be presented to certain investors of GMS on March 6, 2018 and may be used by GMS in various other presentations to investors on or after March 6, 2018.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit

 

Description

99.1*

 

Press release, dated March 6, 2018.

99.2*

 

GMS Inc. presentation to investors.

 


*Furnished herewith

 

2



 

EXHIBIT INDEX

 

Exhibit

 

Description

99.1*

 

Press release, dated March 6, 2018.

99.2*

 

GMS Inc. presentation to investors.

 


*Furnished herewith

 

3



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

GMS INC.

 

 

Date: March 6, 2018

By:

/s/ H. Douglas Goforth

 

 

Name:

H. Douglas Goforth

 

 

Title:

Chief Financial Officer

 

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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

 

GMS REPORTS RESULTS FOR THIRD QUARTER 2018

- Third Quarter Net Sales Increased 4.1% to $585.5 Million -

- Third Quarter Net Income Improved by 139% to $19.7 Million -

- Third Quarter Adjusted EBITDA Increased 3.8% to $42.2 Million -

 

Tucker, Georgia, March 6, 2018. GMS Inc. (NYSE:GMS), a leading North American distributor of wallboard and suspended ceilings systems, today reported financial results for the third quarter of fiscal 2018 ended January 31, 2018.

 

Third Quarter 2018 Highlights Compared to Third Quarter 2017

 

·                  Net sales increased 4.1% to a record $585.5 million; base business net sales increased 2.9%

 

·                  Net income increased to $19.7 million, or $0.47 per diluted share, compared to $8.2 million, or $0.20 per diluted share

 

·                  Adjusted EBITDA grew 3.8% to a record $42.2 million

 

·                  Gross margin expanded 40 basis points to 33.4%

 

Mike Callahan, President and CEO of GMS, stated, “We delivered record revenue and Adjusted EBITDA performance during the third quarter, topping a very challenging year-over-year comparison. I am particularly encouraged that we delivered solid organic revenue growth despite the impact of adverse weather conditions in the southern U.S. I am also pleased to report we captured approximately three points of wallboard price growth during the third quarter and expanded our overall gross margin on both a sequential and annual basis, which keeps us on track to achieve our previously announced guidance of gross margin in excess of 32.5% for fiscal year 2018.”

 

Mr. Callahan continued, “We generated broad-based sales growth across all of our product groups led by strong double-digit growth in ceilings during the third quarter. We completed one acquisition in the quarter and maintain a very robust pipeline that we anticipate will become more active over the next few quarters. Looking towards the balance of the year, we remain confident in our ability to deliver another year of record net sales and Adjusted EBITDA.”

 

Third Quarter 2018 Results

 

Net sales for the third quarter of fiscal 2018 ended January 31, 2018 were $585.5 million, compared to $562.5 million for the third quarter of fiscal 2017 ended January 31, 2017.

 

·                  Wallboard sales of $256.4 million increased 0.6%, compared to the third quarter of fiscal 2017 with wallboard unit volume decline of 1.9% to 826.3 million square feet offset by pricing improvement of 2.9%. Wallboard volume decline was partially driven by lost shipping days due to abnormal weather conditions across many of our largest markets in the southern U.S. as well as a tough comparison to an extremely strong third quarter of fiscal 2017.

 

·                  Ceilings sales of $90.4 million rose 10.5%, compared to the third quarter of fiscal 2017, mainly due to greater commercial activity, price gains and the positive impact of acquisitions.

 

·                  Steel framing sales of $96.7 million grew 3.5%, compared to the third quarter of fiscal 2017, mainly driven by pricing improvement.

 

·                  Other product sales of $142.0 million were up 7.4%, compared to the third quarter of fiscal 2017, as a result of strategic initiatives, price gains and the positive impact of acquisitions.

 

1



 

Gross profit of $195.4 million grew 5.2%, compared to $185.7 million in the third quarter of fiscal 2017, mainly attributable to higher pricing and increased sales. Gross margin expanded 40 basis points to 33.4%, compared to 33.0% in the third quarter of fiscal 2017 largely due to pricing discipline and purchasing initiatives. On a sequential basis, gross margin improved 60 basis points from 32.8% from the second quarter of fiscal 2018.

 

Net income of $19.7 million, or $0.47 per diluted share, increased by 139% or $11.5 million, compared to $8.2 million, or $0.20 per diluted share, in the third quarter of fiscal 2017. Adjusted net income of $15.3 million, or $0.36 per diluted share, grew $0.5 million, compared to $14.8 million, or $0.36 per diluted share, in the third quarter of fiscal 2017.

 

Adjusted EBITDA of $42.2 million rose 3.8%, compared to $40.7 million in the third quarter of fiscal 2017. Adjusted EBITDA margin was 7.2% as a percentage of net sales, flat compared to the third quarter of fiscal 2017, with improvement in gross margin offset by an increase in SG&A related expenses.

 

Capital Resources

 

As of January 31, 2018, GMS had cash of $28.9 million and total debt of $597.5 million, compared to cash of $19.8 million and total debt of $610.5 million as of October 31, 2017.

 

Tax Legislation Update

 

We recognized an income tax benefit of $4.5 million during the three months ended January 31, 2018 compared to income tax expense of $5.4 million during the three months ended January 31, 2017.  The change over the third quarter of fiscal 2017 is primarily related to the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) which was signed into law on December 22, 2017.  More specifically, we recognized a provisional income tax benefit of $7.8 million, or $0.18 per diluted share, related to the re-measurement of net deferred tax liabilities in connection with the enactment of the Tax Act.  Our Adjusted EPS disclosures exclude the net benefit from this item and reflects an effective tax rate of 34.5% based on our estimated taxes under the Tax Act. For fiscal 2019, we anticipate our full year effective tax rate will be approximately 23% to 25%.

 

Lease Accounting

 

In order to take advantage of the Tax Act’s accelerated depreciation provisions, facilitate the implementation of the new lease accounting standard which we will adopt in fiscal 2020, and improve the comparability of our financial statements with our publicly traded peers, beginning in fiscal 2019 we intend to finance the purchase of new commercial vehicles under capital leases and to convert the majority of our legacy equipment operating leases into capital leases or purchase the equipment outright. We anticipate that this will reduce our SG&A expense and increase our Adjusted EBITDA by approximately $21.0 to $24.0 million per year beginning in fiscal 2019.  The change is also expected to increase the property and equipment and debt accounts by approximately $75 million as of the first quarter of fiscal 2019.

 

Conference Call and Webcast

 

GMS will host a conference call and webcast to discuss its results for the third quarter ended January 31, 2018 at 10:00 a.m. Eastern Time on March 6, 2018. Investors who wish to participate in the call should dial 800-239-9838 (domestic) or 323-794-2551 (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 April 6, 2018 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 2730994.

 

About GMS Inc.

 

Founded in 1971, GMS operates a network of more than 210 distribution centers across the United States. GMS’s extensive product offering of wallboard, suspended ceilings systems, or ceilings, and complementary interior 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.

 

2



 

Use of Non-GAAP Financial Measures

 

GMS reports its financial results in accordance with GAAP. However, it presents Adjusted net income, Adjusted EBITDA, Adjusted EBITDA margin and base business growth, which are not recognized financial measures under GAAP. GMS believes that Adjusted net income, Adjusted EBITDA and Adjusted EBITDA margin assist investors and analysts in comparing its operating performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. The Company’s management believes Adjusted net income, Adjusted EBITDA, Adjusted EBITDA margin and base business growth are helpful in highlighting trends in its operating results, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which the Company operates and capital investments.  In addition, the Company utilizes Adjusted EBITDA in certain calculations under its senior secured asset based revolving credit facility and its senior secured first lien term loan facility.

 

You are encouraged to evaluate each adjustment and the reasons GMS considers it appropriate for supplemental analysis. In addition, in evaluating Adjusted net income and Adjusted EBITDA, you should be aware that in the future, the Company may incur expenses similar to the adjustments in the presentation of Adjusted net income and Adjusted EBITDA. The Company’s presentation of Adjusted net income and Adjusted EBITDA should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. In addition, Adjusted net income and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in GMS’s industry or across different industries.

 

3



 

Forward-Looking Statements and Information:

 

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by the Company’s use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” or “should,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about the markets in which GMS operates, including the potential for growth in the commercial, residential and repair and remodeling, or R&R, markets, statements about its expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance, statements related to net sales, gross profit, gross margins and capital expenditures, as well as non-GAAP financial measures such as Adjusted EBITDA, Adjusted net income and base business growth, statements regarding the impact of the recent tax legislation and anticipated changes related to lease accounting, including the expected impact on the fiscal 2019 effective tax rate, SG&A and Adjusted EBITDA, and statements regarding potential acquisitions and future greenfield locations, demand trends and future SG&A savings contained in this press release are forward-looking statements. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of the Company’s control, that may cause its business, strategy or actual results to differ materially from the forward-looking statements. These risks and uncertainties may include, among other things: changes in the prices, supply, and/or demand for products which GMS distributes; general economic and business conditions in the United States; the activities of competitors; changes in significant operating expenses; changes in the availability of capital and interest rates; adverse weather patterns or conditions; acts of cyber intrusion; variations in the performance of the financial markets, including the credit markets; and other factors described in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2017, and in its other periodic reports filed with the SEC.  In addition, the statements in this release are made as of March 6, 2018. The Company undertakes no obligation to update any of the forward looking statements made herein, whether as a result of new information, future events, changes in expectation or otherwise. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to March 6, 2018.

 

4



 

GMS Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

Three and Nine Months Ended January 31, 2018 and 2017

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

January 31, 

 

January 31, 

 

 

 

2018

 

2017

 

2018

 

2017

 

Net sales

 

$

585,508

 

$

562,523

 

$

1,875,669

 

$

1,704,169

 

Cost of sales (exclusive of depreciation and amortization shown separately below)

 

390,088

 

376,796

 

1,262,885

 

1,146,633

 

Gross profit

 

195,420

 

185,727

 

612,784

 

557,536

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

156,262

 

147,260

 

472,232

 

432,116

 

Depreciation and amortization

 

16,490

 

18,316

 

49,548

 

51,479

 

Total operating expenses

 

172,752

 

165,576

 

521,780

 

483,595

 

Operating income

 

22,668

 

20,151

 

91,004

 

73,941

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

Interest expense

 

(7,871

)

(7,431

)

(23,288

)

(22,162

)

Write-off of debt discount and deferred financing fees

 

 

(211

)

(74

)

(7,103

)

Other income, net

 

401

 

1,081

 

965

 

2,170

 

Total other (expense), net

 

(7,470

)

(6,561

)

(22,397

)

(27,095

)

Income before taxes

 

15,198

 

13,590

 

68,607

 

46,846

 

Provision (benefit) for income taxes

 

(4,488

)

5,363

 

15,555

 

12,232

 

Net income

 

$

19,686

 

$

8,227

 

$

53,052

 

$

34,614

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

41,036

 

40,943

 

41,004

 

40,035

 

Diluted

 

42,228

 

41,578

 

42,167

 

40,670

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.48

 

$

0.20

 

$

1.29

 

$

0.86

 

Diluted

 

$

0.47

 

$

0.20

 

$

1.26

 

$

0.85

 

 

5



 

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

January 31, 2018 and April 30, 2017

(in thousands, except per share data)

 

 

 

January 31, 

 

April 30, 

 

 

 

2018

 

2017

 

Assets

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

28,939

 

$

14,561

 

Trade accounts and notes receivable, net of allowances of $10,665 and $9,851, respectively

 

319,025

 

328,988

 

Inventories, net

 

227,564

 

200,234

 

Prepaid expenses and other current assets

 

18,104

 

11,403

 

Total current assets

 

593,632

 

555,186

 

Property and equipment, net of accumulated depreciation of $81,648 and $71,409, respectively

 

158,013

 

154,465

 

Goodwill

 

426,810

 

423,644

 

Intangible assets, net

 

232,214

 

252,293

 

Other assets

 

7,682

 

7,677

 

Total assets

 

$

1,418,351

 

$

1,393,265

 

Liabilities and Stockholders’ Equity

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

98,924

 

$

102,688

 

Accrued compensation and employee benefits

 

49,043

 

58,393

 

Other accrued expenses and current liabilities

 

40,020

 

37,891

 

Current portion of long-term debt

 

15,949

 

11,530

 

Total current liabilities

 

203,936

 

210,502

 

Non-current liabilities:

 

 

 

 

 

Long-term debt, less current portion

 

581,535

 

583,390

 

Deferred income taxes, net

 

14,256

 

26,820

 

Other liabilities

 

34,958

 

35,371

 

Liabilities to noncontrolling interest holders, less current portion

 

15,381

 

22,576

 

Total liabilities

 

850,066

 

878,659

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01 per share, 500,000 shares authorized; 41,041 and 40,971 shares issued as of January 31, 2018 and April 30, 2017, respectively

 

410

 

410

 

Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued as of January 31, 2018 and April 30, 2017

 

 

 

Additional paid-in capital

 

488,289

 

488,459

 

Retained earnings

 

79,673

 

26,621

 

Accumulated other comprehensive loss

 

(87

)

(884

)

Total stockholders’ equity

 

568,285

 

514,606

 

Total liabilities and stockholders’ equity

 

$

1,418,351

 

$

1,393,265

 

 

6



 

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended January 31, 2018 and 2017

(in thousands)

 

 

 

Nine Months Ended

 

 

 

January 31, 

 

 

 

2018

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

53,052

 

$

34,614

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization of property and equipment

 

18,021

 

19,395

 

Write-off, accretion and amortization of debt discount and deferred financing fees

 

2,141

 

9,142

 

Amortization of intangible assets

 

31,527

 

32,084

 

Provision for losses on accounts and notes receivable

 

133

 

(434

)

Provision for obsolescence of inventory

 

113

 

427

 

Increase (decrease) in fair value of contingent consideration

 

195

 

(388

)

Equity-based compensation

 

1,473

 

1,669

 

(Gain) on sale of assets

 

(648

)

(242

)

Changes in assets and liabilities net of effects of acquisitions:

 

 

 

 

 

Trade accounts and notes receivable

 

14,545

 

(3,179

)

Inventories

 

(23,617

)

(25,708

)

Accounts payable

 

(5,723

)

318

 

Deferred income taxes

 

(12,860

)

(14,773

)

Prepaid expenses and other assets

 

(1,719

)

(1,425

)

Accrued compensation and employee benefits

 

(7,140

)

(3,057

)

Accrued expenses and liabilities

 

1,289

 

(321

)

Liabilities to noncontrolling interest holders

 

(2,000

)

908

 

Income tax receivable / payable

 

(5,049

)

(12,690

)

Cash provided by operating activities

 

63,733

 

36,340

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(13,408

)

(6,900

)

Proceeds from sale of assets

 

2,374

 

3,245

 

Acquisition of businesses, net of cash acquired

 

(23,568

)

(145,976

)

Cash used in investing activities

 

(34,602

)

(149,631

)

Cash flows from financing activities:

 

 

 

 

 

Repayments on the revolving credit facility

 

(597,092

)

(817,598

)

Borrowings from the revolving credit facility

 

493,739

 

836,507

 

Payments of principal on long-term debt

 

(4,332

)

(3,381

)

Principal repayments of capital lease obligations

 

(4,530

)

(3,819

)

Proceeds from issuance of common stock in initial public offering, net of underwriting discounts

 

 

156,941

 

Repayment of term loan

 

 

(160,000

)

Borrowings from term loan amendment

 

577,616

 

481,225

 

Repayment of term loan amendment

 

(477,616

)

(381,225

)

Debt issuance costs on revolving credit facility amendment

 

 

(1,342

)

Debt issuance costs

 

(636

)

(2,487

)

Payments for taxes related to net share settlement of equity awards

 

(1,441

)

 

Proceeds from exercises of stock options

 

130

 

 

Other financing activities

 

(591

)

 

Cash (used in) provided by financing activities

 

(14,753

)

104,821

 

Increase (decrease) in cash and cash equivalents

 

14,378

 

(8,470

)

Cash and cash equivalents, beginning of period

 

14,561

 

19,072

 

Cash and cash equivalents, end of period

 

$

28,939

 

$

10,602

 

Supplemental cash flow disclosures:

 

 

 

 

 

Cash paid for income taxes

 

$

35,005

 

$

39,831

 

Cash paid for interest

 

21,192

 

20,038

 

Supplemental schedule of noncash activities:

 

 

 

 

 

Assets acquired under capital lease

 

$

7,953

 

$

6,667

 

Issuance of installment notes associated with equity-based compensation liability awards

 

11,898

 

5,353

 

 

7



 

GMS Inc.

Net Sales by Product Group

Three and Nine Months Ended January 31, 2018 and 2017

(dollars in thousands)

 

 

 

Three Months Ended 

 

Nine Months Ended 

 

 

 

January 31,

 

% of

 

January 31,

 

% of

 

January 31,

 

% of

 

January 31,

 

% of

 

 

 

2018

 

Total

 

2017

 

Total

 

2018

 

Total

 

2017

 

Total

 

 

 

(dollars in thousands)

 

Wallboard

 

$

256,413

 

43.8

%

$

254,979

 

45.3

%

$

829,568

 

44.2

%

$

776,250

 

45.6

%

Ceilings

 

90,360

 

15.4

%

81,768

 

14.6

%

291,716

 

15.6

%

253,518

 

14.8

%

Steel framing

 

96,744

 

16.5

%

93,514

 

16.6

%

304,598

 

16.2

%

273,931

 

16.1

%

Other products

 

141,991

 

24.3

%

132,262

 

23.5

%

449,787

 

24.0

%

400,470

 

23.5

%

Total net sales

 

$

585,508

 

 

 

$

562,523

 

 

 

$

1,875,669

 

 

 

$

1,704,169

 

 

 

 

8



 

GMS Inc.

Reconciliation of Net Income to Adjusted EBITDA

Three and Nine Months Ended January 31, 2018 and 2017

(in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

January 31, 

 

January 31, 

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

19,686

 

$

8,227

 

$

53,052

 

$

34,614

 

Interest expense

 

7,871

 

7,431

 

23,288

 

22,162

 

Write-off of debt discount and deferred financing fees

 

 

211

 

74

 

7,103

 

Interest income

 

(44

)

(23

)

(93

)

(101

)

Provision (benefit) for income taxes

 

(4,488

)

5,363

 

15,555

 

12,232

 

Depreciation expense

 

6,009

 

6,465

 

18,021

 

19,395

 

Amortization expense

 

10,481

 

11,851

 

31,527

 

32,084

 

EBITDA

 

$

39,515

 

$

39,525

 

$

141,424

 

$

127,489

 

Stock appreciation expense or (income)(a)

 

631

 

(498

)

1,863

 

(734

)

Redeemable noncontrolling interests(b)

 

340

 

256

 

1,370

 

3,079

 

Equity-based compensation(c)

 

430

 

622

 

1,277

 

1,981

 

Severance and other permitted costs(d)

 

8

 

57

 

325

 

315

 

Transaction costs (acquisitions and other)(e)

 

75

 

305

 

321

 

2,783

 

(Gain) loss on sale of assets

 

(51

)

(114

)

(648

)

(244

)

Management fee to related party(f)

 

 

 

 

188

 

Effects of fair value adjustments to inventory(g)

 

89

 

155

 

276

 

776

 

Interest rate cap mark-to-market(h)

 

276

 

109

 

710

 

241

 

Secondary public offering costs(i)

 

894

 

 

1,525

 

 

Debt transaction costs(j)

 

 

261

 

758

 

264

 

EBITDA add-backs

 

2,692

 

1,153

 

7,777

 

8,649

 

Adjusted EBITDA

 

$

42,207

 

$

40,678

 

$

149,201

 

$

136,138

 

Adjusted EBITDA margin

 

7.2

%

7.2

%

8.0

%

8.0

%

 


(a)                                 Represents non-cash compensation expenses (income) related to stock appreciation rights agreements.

 

(b)                                 Represents non-cash compensation expense related to changes in the redemption values of noncontrolling interests.

 

(c)                                  Represents non-cash equity-based compensation expense related to the issuance of share-based awards.

 

(d)                                 Represents severance expenses and other costs permitted in calculations under the ABL Facility and the First Lien Facility.

 

(e)                                  Represents one-time costs related to our IPO and acquisitions paid to third party advisors.

 

(f)                                   Represents management fees paid by us to AEA. Following our IPO, AEA no longer receives management fees from us.

 

(g)                                  Represents the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value.

 

(h)                                 Represents the mark-to-market adjustments for the interest rate cap.

 

(i)                                     Represents one-time costs related to our secondary offerings paid to third party advisors.

 

(j)                                    Represents expenses paid to third party advisors related to debt refinancing activities.

 

9



 

GMS Inc.

Reconciliation of Income Before Taxes to Adjusted Net Income

Three and Nine Months Ended January 31, 2018 and 2017

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

January 31, 

 

January 31, 

 

 

 

2018

 

2017

 

2018

 

2017

 

Income before taxes

 

$

15,198

 

$

13,590

 

$

68,607

 

$

46,846

 

EBITDA add-backs

 

2,692

 

1,153

 

7,777

 

8,649

 

Write-off of debt discount and deferred financing fees

 

 

211

 

74

 

7,103

 

Purchase accounting depreciation and amortization (1)

 

5,493

 

7,615

 

16,038

 

23,264

 

Adjusted pre-tax income

 

23,383

 

22,569

 

92,496

 

85,862

 

Adjusted income tax expense

 

8,067

 

7,786

 

31,912

 

29,622

 

Adjusted net income

 

$

15,316

 

$

14,782

 

$

60,584

 

$

56,240

 

Effective tax rate (2)

 

34.5

%

34.5

%

34.5

%

34.5

%

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

41,036

 

40,943

 

41,004

 

40,035

 

Diluted

 

42,228

 

41,578

 

42,167

 

40,670

 

Adjusted net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.37

 

$

0.36

 

$

1.48

 

$

1.40

 

Diluted

 

$

0.36

 

$

0.36

 

$

1.44

 

$

1.38

 

 


(1)   Depreciation and amortization from the increase in value of certain long-term assets associated with the April 1, 2014 acquisition of the predecessor company. Full year projected amounts are $21.8 million and $15.6 million for FY18 and FY19, respectively.

 

(2)   Normalized cash tax rate determined based on our estimated taxes for fiscal 2018 under the Tax Cuts and Jobs Act of 2017, excluding the impact of purchase accounting and certain other deferred tax accounts.

 

Contact Information:

 

Investor Relations:

ir@gms.com

678-353-2883

 

Media Relations:

marketing@gms.com

770-723-3378

 

10


(Back To Top)

Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

 

GMS Quarterly Review Fiscal Q3 2018

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Safe Harbor and Basis of Presentation Forward-Looking Statement Safe Harbor - This presentation includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Examples of forward-looking statements include those related to net sales, gross profit, gross margins, capital expenditures and market share growth, as well as non-GAAP financial measures such as Adjusted EBITDA, the ratio of debt-to-Adjusted EBITDA, adjusted net income and base business sales, including any management expectations or outlook for fiscal 2018 and beyond. In addition, statements regarding potential acquisitions and future greenfield locations and statements regarding the impact of the recent tax legislation, fiscal 2018 and 2019 effective tax rates and the expected use of tax savings are forward-looking statements, as well as statements regarding the markets in which the Company operates and the potential for growth in the commercial, residential and repair and remodeling, or R&R, markets. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. These risks and uncertainties may include, among other things: changes in the prices, margin, supply, and/or demand for products which we distribute; general economic and business conditions in the United States; the activities of competitors; changes in significant operating expenses; changes in the availability of capital and interest rates; adverse weather patterns or conditions; acts of cyber intrusion; variations in the performance of the financial markets, including the credit markets; and other factors described in the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017, and in our other periodic reports filed with the SEC. In addition, the statements in this presentation are made as of March 6, 2018. We undertake no obligation to update any of the forward looking statements made herein, whether as a result of new information, future events, changes in expectation or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to March 6, 2018. Use of Non-GAAP and Adjusted Financial Information - To supplement GAAP financial information, we use adjusted measures of operating results which are non-GAAP measures. This non-GAAP adjusted financial information is provided as additional information for investors. These adjusted results exclude certain costs, expenses, gains and losses, and we believe their exclusion can enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of our operating performance by excluding non-recurring, infrequent or other non-cash charges that are not believed to be material to the ongoing performance of our business. The presentation of this additional information is not meant to be considered in isolation or as a substitute for GAAP measures of net income, diluted earnings per share or net cash provided by (used in) operating activities prepared in accordance with generally accepted accounting principles in the United States. 2

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GMS at a Glance GMS Overview Net Sales Breakdown (LTM FY18 Q3) (2) Wallboard 46% Ceilings 15% Steel Framing 16% Other 23% CAGR: 37.7% (3) ($ in millions, April FYE) #1 North American specialty distributor of interior construction products (1) More than 210 branches across 42 states 14.4% market share in wallboard 17.9% market share in ceilings Balanced mix of commercial new construction, commercial R&R, residential new construction and residential R&R Critical link between suppliers and highly fragmented customer base National scale drives purchasing advantages over peers while local expertise enhances service capabilities One-stop-shop for the interior contractor with broad product offering of 20,000+ SKUs Since June 2016 IPO, GMS has continued to execute on its strategy Increased market share in wallboard by ~130 bps Executed 10 acquisitions and opened 7 new greenfields Increased LTM Q3 18 net sales by 34.0% and Adj. EBITDA(3) by 45.7% compared to FY16 Expanded Adj. EBITDA(3) margins by 70 bps compared to FY16 Based on sales of wallboard and ceilings. Wallboard share based on LTM 12/31/17 volume. Ceilings share based on LTM 12/31/17 sales. Net sales do not reflect net sales attributable to acquired entities for any period prior to their respective dates of acquisition. Breakdown based on 3Q18 LTM Net Sales. FY2015, FY2016, FY2017 and 3Q18 LTM PF Adj. EBITDA includes approximately $8.1 million, $12.1 million, $10.0 million and $2.2 million, respectively, from entities acquired in FY2015, FY2016, FY2017 and 3Q18 LTM respectively, for the period prior to their respective dates of acquisition. However, Adj. EBITDA margin and the 5.75-year CAGR exclude the impact of the entities acquired for the period prior to their respective dates of acquisition. For a reconciliation of PF Adj. EBITDA to Net Income (loss), the most directly comparable GAAP measure, see Appendix. PF Adjusted EBITDA (3) 3 Net Sales (2) ($ in millions, April FYE) % Margin (3) 3.3% 5.0% 6.4% 6.7% 7.4% 8.1% 8.1% +480bps +370bps Residential ~40% Commercial ~60% $106 $138 $188 $201 $8 $12 $10 $2 $32 $57 $87 $114 $150 $198 $204 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 LTM Q3 18

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Includes the wallboard volume from entities acquired in calendar 2014 assuming that the entities were acquired on January 1, 2014. Includes the wallboard volume from entities acquired in calendar 2015 assuming that the entities were acquired on January 1, 2015. Includes the wallboard volume from entities acquired in calendar 2016 assuming that the entities were acquired on January 1, 2016. Includes the wallboard volume from entities acquired in calendar 2017 assuming that the entities were acquired on January 1, 2017. Market Leader with Scale Advantages National Scale Combined With Local Expertise 4 Market Leader with Significant Scale Advantages – #1 North American Distributor of Wallboard and Ceilings Differentiated Service Model Drives Market Leadership Multiple Levers to Drive Market Leading Growth– Market Share, Greenfields, M&A, Operating Leverage Capitalizing on Large, Diverse End Markets Poised for Continued Growth Entrepreneurial Culture with Dedicated Employees and Experienced Leadership Driving Superior Execution GMS Wallboard Market Share ’10–’17 Q3 share gain: ~580 bps (1) (2) (3) (4) 8.6% 8.8% 9.4% 9.9% 11.1% 13.1% 14.3% 14.4% CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017

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Q3 2018 Highlights Above-Market Growth Attractive Capital Structure Accretive Acquisitions and Greenfield Openings Continued Profit Improvement Net sales increased 4.1% to a record $585.5 million Base business net sales up 2.9% Wallboard price increased 2.9% Net income increased 139.3% to $19.7 million, or EPS of $0.47 per diluted share Gross profit increased 5.2% to a record $195.4 million, with gross margin up 40 basis points Adjusted EBITDA grew 3.8% to a record $42.2 million Acquired Southwest Building Materials, Ltd. in Texas Opened up a greenfield location in Hartford, CT on February 1, 2018 Completed 10 acquisitions representing 20 branches since June 2016 IPO (26 acquisitions representing 59 branches since FY2013) 2.8x leverage (net debt(1) / LTM PF Adjusted EBITDA(2)) as of January 31, 2018 Standard & Poor’s upgraded GMS corporate debt in November to BB- from B+ No major maturities until 2023 5 Includes unamortized discount and deferred financing costs. Numbers may not add up due to rounding. PF Adjusted EBITDA includes the earnings of acquired entities from the beginning of the periods presented to the date of such acquisitions, as well as certain purchasing synergies and cost savings, as defined in and permitted by the ABL Facility and the First Lien Facility, and which is used in the calculation of certain baskets to covenants in the Company’s debt agreements, including in connection with the Company’s ability to incur additional indebtedness. FY2016, FY2017 and 3Q18 LTM PF Adj. EBITDA includes approximately $12.1 million, $9.5 million and $2.2 million, respectively, from entities acquired in FY2016, FY2017 and 3Q18 LTM, respectively, for the period prior to their respective dates of acquisition. For a reconciliation of PF Adjusted EBITDA to net income, the most directly comparable GAAP metric, see Appendix.

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Attractive Acquirer with Significant Consolidation Opportunity Acquisition Strategy Recent GMS Acquisitions Acquisition Rationale Industry Structure: Large, highly fragmented industry comprised of hundreds of competitors Similar business operations enable efficient integration Limited number of scaled players Acquisition Strategy: Criteria: leading capabilities in targeted new markets / increase existing network density / enhance strategic capabilities Fit GMS culture and platform Deliver scale benefits Attractive purchase price multiples Dedicated M&A team Pipeline: Significant portion of the market is comprised of local, independent competitors representing significant opportunity Maintain active dialogue with many potential targets One branch with LTM Sales of $46.8 million Strategic entrance into the greater Philadelphia metropolitan area Founded in 1994 Sept 1, 2016 Aug 29, 2016 Three branches with LTM Sales of $52.9 million Strategic entrance into south Florida Founded in 2008 and headquartered in Pompano, FL Oct 3, 2016 Three branches with LTM Sales of $30.0 million Strategic entrance into south central Ohio Founded in 1996 and headquartered in Dayton, OH Quarter FY17 Q3 FY17 Q3 FY17 Q3 FY17 Q3 Oct 31, 2016 Three branches with LTM Sales of $27.0 million Nice geographic fit with FY16 Q3 MI acquisition Founded in 1965 and headquartered in Southfield, MI FY17 Q3 One branch with LTM sales of $12.3 million Strategic entrance into northeastern Indiana Founded in 1984 Dec 5, 2016 FY17 Q4 One branch with LTM sales of $11.7 million Expands existing presence in Hawaii Founded in 1974 Feb 1, 2017 6 FY18 Q2 Aug 1, 2017 Three branches with LTM sales of $24.5 million Expands existing presence in Michigan Founded in 1988 FY18 Q2 Oct 2, 2017 Expansion of Ohio Valley brand Expands existing presence in Western Pennsylvania Founded in 1988 Expands Cowtown brand in Northwest Texas Founded in 1984 FY18 Q3 Dec 4, 2017

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Profitable Sales Expansion in Fiscal Q3 2018 Gross Profit ($ mm) Fiscal Q3 2018 Gross Profit & Margin Adj. EBITDA(2) ($ mm) Fiscal Q3 2018 Adjusted EBITDA (2) When calculating our “base business” results, we exclude any branches that were acquired in the current fiscal year, prior fiscal year and three months prior to the start of the prior fiscal year. For a reconciliation of Adj. EBITDA to Net Income, the most directly comparable GAAP metric, see Appendix. Margin (2): 7.2% 7.2% 2.9% organic sales growth, led by ceilings (+7.4%) and other products (+7.2%) Fiscal Q3 2017 was exceptionally strong with 15.5% organic sales growth, including double digit growth in all categories Gross margin improved 40 bps from prior year and 60 bps on a sequential basis Adjusted EBITDA grew 3.8% to $42.2 million reflecting higher sales and improved gross margins Commentary +3.8% YOY Fiscal Q3 2018 Performance 7 $40.7 $42.2 - 10.0 20.0 30.0 40.0 50.0 Fiscal Q3 2017 Fiscal Q3 2018 ($ in millions) Fiscal Q3 YOY Base FY17 FY18 Growth Business (1) WB Volume (MSF) 842 826 (1.9%) (3.2%) WB Price ($ / MSF) 303 $ 312 $ 2.9% Net Sales Wallboard 255.0 $ 256.4 $ 0.6% (1.0%) Ceilings 81.8 90.4 10.5% 7.4% Steel Framing 93.5 96.7 3.5% 3.6% Other Products 132.3 142.0 7.4% 7.2% Total Net Sales 562.5 $ 585.5 $ 4.1% 2.9%

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Attractive Capital Structure Leverage of 2.8x Net Debt / LTM Pro Forma Adj. EBITDA as of 1/31/18, down from 3.1x Net Debt / LTM Pro Forma Adj. EBITDA as of 1/31/17 Substantial liquidity, with $28.9 million of cash on hand and an additional $333.6 million undrawn on the ABL Facility Moody’s and Standard & Poor’s current rating of B1/BB- (Moody’s upgraded GMS to B1 in July of 2017, Standard & Poor’s upgraded GMS to BB- in November of 2017) In Q1 2018, expanded First Lien Term Loan by $100 million, extended maturity to 2023, reduced the rate by 50 bps and used the net proceeds to pay down ABL facility Company expects Fiscal 2018 capital expenditures to be approximately $18.0 million to $20.0 million. Includes ~$8-9 million of January – April new fleet purchases Expect to finance new equipment in Fiscal 2019 under capital leases Commentary Leverage Summary Net Debt / PF Adjusted EBITDA Includes unamortized discount and deferred financing costs. Numbers may not add up due to rounding. PF Adjusted EBITDA includes the earnings of acquired entities from the beginning of the periods presented to the date of such acquisitions, as well as certain purchasing synergies and cost savings, as defined in and permitted by the ABL Facility and the First Lien Facility, and which is used in the calculation of certain baskets to covenants in the Company’s debt agreements, including in connection with the Company’s ability to incur additional indebtedness. FY2016, FY2017 and 3Q18 LTM PF Adj. EBITDA includes approximately $12.1 million, $9.5 million and $2.2 million, respectively, from entities acquired in FY2016, FY2017 and 3Q18 LTM, respectively, for the period prior to their respective dates of acquisition. For a reconciliation of PF Adjusted EBITDA to net income, the most directly comparable GAAP metric, see Appendix. 8 4.9x 4.3x 2.9x 2.8x 4/30/15 4/30/16 4/30/17 LTM 1/31/18 ($ mm) 4/30/15 4/30/16 4/30/17 1/31/18 FYE FYE FYE LTM Cash and cash equivalents $12 $19 $15 $29 Asset-Based Revolver 17 102 103 - First Lien Term Loan 386 382 478 573 Second Lien Term Loan 160 160 - - Capital Lease and Other 10 14 14 24 Total Debt $573 $658 $595 $598 PF Adj. EBITDA (1) $114 $150 $198 $204 Total Debt / PF Adj. EBITDA 5.0x 4.4x 3.0x 2.9x Net Debt / PF Adj. EBITDA 4.9x 4.3x 2.9x 2.8x

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Tax Legislation Update 9 We expect our estimated effective tax rate to be 34-35% in FY 2018. We expect our estimated effective tax rate to be 23-25% in FY 2019. Assuming the effects of tax reform were in place for FY 2017, the table below reflects the estimated impact of tax reform on Adjusted Net Income: We expect to utilize our tax savings to continue our strategic investments in talent, technology and expansion to support our growing base of business and Adjusted EBITDA. Commentary As reported in the company's June 29, 2017 earnings release statement. Calculated assuming all equipment was acquired under capital leases or purchased as opposed to operating leases and were, accordingly, 100% year-one tax deductible. Normalized cash tax rate based on the Tax Cuts and Jobs Act of 2017. Tax Savings ($ in thousands, except share and pro share data) FY17-Pro Forma FY17 As Reported Inc/(Dec) % Inc/(Dec) Pre-Tax Income 71,540 $ 71,540 $ Add-backs 11,138 11,138 Write-off of discount and deferred financing fees 7,103 7,103 Purchase Acct-Depr & Amort. 30,518 30,518 Adjusted Pre-Tax Income (1) 120,299 120,299 - 0.0% Adjusted Income Tax Expense (2) 27,068 50,405 (23,337) -46.3% Adjusted Net Income 93,231 $ 69,894 $ 23,337 $ 33.4% Effective Tax Rate (3) 22.5% 41.9% Weighted average shares outstanding-Diluted 41,070,025 41,070,025 Adjusted Net income per share-Diluted 2.27 $ 1.70 $ 0.57 $ 33.4%

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Leading Specialty Distributor Poised for Continued Growth Market Leader with Significant Scale Advantages – #1 North American Distributor of Wallboard and Ceilings Differentiated Service Model Drives Market Leadership Multiple Levers to Drive Market Leading Growth – Market Share, Greenfields, M&A, Operating Leverage Capitalizing on Large, Diverse End Markets Poised for Continued Growth Entrepreneurial Culture with Dedicated Employees and Experienced Leadership Driving Superior Execution 10

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5 :4 2 2 / 4 1 0 /2 /6 2 / t n e m Docu d ve Unsa Appendix

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Summary Quarterly Financials Note: Fiscal year end April 30. 12 (In millions, except per share data) 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18 (Unaudited) Wallboard Volume (MSF) 818 891 842 906 3,458 914 929 826 Wallboard Price ($ / '000 Sq. Ft.) 307 $ 303 $ 303 $ 311 $ 306 $ 311 $ 311 $ 312 $ Wallboard 251 $ 270 $ 255 $ 282 $ 1,058 $ 285 $ 288 $ 256 $ Ceilings 86 85 82 87 341 100 102 90 Steel framing 84 96 94 100 374 105 103 97 Other products 128 140 132 145 546 153 155 142 Net sales 550 592 563 615 2,319 642 648 586 Cost of sales 371 399 377 414 1,561 437 436 390 Gross profit 179 193 186 201 759 205 212 195 Gross margin 32.5% 32.6% 33.0% 32.7% 32.7% 31.9% 32.8% 33.4% Operating expenses: Selling, general and administrative expenses 135 150 147 153 585 156 160 156 Depreciation and amortization 16 17 18 18 69 16 17 16 Total operating expenses 151 167 166 171 654 172 177 173 Operating income 28 26 20 30 104 33 36 23 Other (expense) income: Interest expense (8) (7) (7) (7) (29) (8) (8) (8) Write-off of discount and deferred financing costs (5) (1) (0) - (7) (0) - - Other income, net 1 0 1 2 4 0 0 0 Total other (expense), net (12) (8) (7) (6) (33) (7) (8) (7) Income from continuing operations, before tax 15 18 14 25 72 25 28 15 Income tax expense (benefit) 6 1 5 10 23 10 10 (4) Net income 9 $ 17 $ 8 $ 14 $ 49 $ 15 $ 18 $ 20 $ Weighted average shares outstanding: Basic 38,201 40,943 40,943 40,956 40,260 40,971 41,006 41,036 Diluted 38,602 41,320 41,578 41,759 41,070 42,128 42,146 42,228 Net income per share: Basic 0.24 $ 0.42 $ 0.20 $ 0.35 $ 1.21 $ 0.37 $ 0.44 $ 0.48 $ Diluted 0.24 $ 0.42 $ 0.20 $ 0.34 $ 1.19 $ 0.36 $ 0.43 $ 0.47 $

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Quarterly Net Sales Note: Fiscal year end April 30. When calculating our “base business” results, we exclude any branches that were acquired in the current fiscal year, prior fiscal year and three months prior to the start of the prior fiscal year. FY17 quarterly sales from acquisitions have been updated in accordance with our presentation of base business for the FY18 vs. FY17 comparative period. Total business days for FY18 are 254. Includes greenfields, which we consider extensions of “base business.” FY17 acquired branches have been updated to reflect the number of acquired branches that are included within the sales from acquisitions FY18 Business Days 1Q18 64 days (+1) 2Q18 65 days 3Q18 62 days 4Q18 63 days FY18 254 days (+1) 13 ($ in millions) 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18 (Unaudited) Base Business (1) (2) 544 $ 561 $ 511 $ 558 $ 2,173 $ 586 $ 589 $ 525 $ Acquisitions (2) 6 31 52 57 146 56 59 60 Total Net Sales 550 $ 592 $ 563 $ 615 $ 2,319 $ 642 $ 648 $ 586 $ Business Days (3) 63 65 62 63 253 64 65 62 Net Sales by Business Day 8.7 $ 9.1 $ 9.1 $ 9.8 $ 9.2 $ 10.0 $ 10.0 $ 9.4 $ Base Business Branches (4) (5) 185 188 188 189 189 190 190 191 Acquired Branches (5) 5 15 16 16 16 16 20 21 Total Branches 190 203 204 205 205 206 210 212

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Quarterly Net Income to Adjusted EBITDA Adjusted EBITDA Reconciliation Commentary Represents non-cash compensation expenses related to stock appreciation rights agreements Represents non-cash compensation expense related to changes in the fair values of noncontrolling interests Represents non-cash equity-based compensation expense related to the issuance of share-based awards Represents severance and other costs permitted in calculations under the ABL Facility and the First Lien Facility Represents one-time costs related to our initial public offering and acquisitions paid to third party advisors, including fees to financial advisors, accountants, attorneys and other professionals as well as costs related to the retirement of corporate stock appreciation rights. Represents management fees paid to AEA, which were discontinued after the IPO. 1Q17 includes fees paid for the month of May Non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value Mark-to-market adjustments for certain financial instruments Represents costs paid to third party advisors related to the secondary public offerings of our common stock Represents costs paid to third party advisors related to debt refinancing activities 14 ( $ in 000s) 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18 (Unaudited) Net Income 9,163 $ 17,224 $ 8,227 $ 14,272 $ 48,886 $ 15,343 $ 18,023 $ 19,686 $ Add: Interest Expense 7,577 7,154 7,431 7,198 29,360 7,500 7,917 7,871 Add: Write off of debt discount and deferred financing fees 5,426 1,466 211 - 7,103 74 - - Less: Interest Income (43) (35) (23) (51) (152) (23) (26) (44) Add: Income Tax Expense (Benefit) 6,159 710 5,363 10,422 22,654 10,060 9,983 (4,488) Add: Depreciation Expense 6,382 6,548 6,465 6,170 25,565 5,990 6,023 6,009 Add: Amortization Expense 9,413 10,820 11,851 11,591 43,675 10,355 10,690 10,481 EBITDA 44,077 $ 43,887 $ 39,525 $ 49,602 $ 177,091 $ 49,299 $ 52,610 $ 39,515 $ Adjustments Stock appreciation rights expense (income) (A) (92) (144) (498) 882 148 590 642 631 Redeemable noncontrolling interests (B) 292 2,531 256 457 3,536 866 164 340 Equity-based compensation (C) 673 686 622 553 2,534 473 375 430 Severance and other permitted costs (D) 140 118 57 (472) (157) 205 113 8 Transaction costs (acquisition and other) (E) 654 1,827 305 (798) 1,988 159 88 75 Loss (gain) on disposal of assets (198) 68 (114) (94) (338) (390) (207) (51) AEA management fee (F) 188 - - - 188 - - - Effects of fair value adjustments to inventory (G) 164 457 155 170 946 - 187 89 Interest rate swap / cap mark-to-market (H) 43 89 109 141 382 196 238 276 Secondary public offerings (I) - - - 1,385 1,385 631 - 894 Debt transaction costs (J) - - 261 265 526 723 35 - Total Add-Backs 1,864 $ 5,632 $ 1,153 $ 2,489 $ 11,138 $ 3,453 $ 1,635 $ 2,692 $ Adjusted EBITDA 45,941 $ 49,519 $ 40,678 $ 52,091 $ 188,229 $ 52,752 $ 54,245 $ 42,207 $

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LTM Net Income to Pro Forma Adjusted EBITDA Pro Forma Adjusted EBITDA Reconciliation Commentary 15 Represents non-cash compensation expenses related to stock appreciation rights agreements Represents non-cash compensation expense related to changes in the fair values of noncontrolling interests Represents non-cash equity-based compensation expense related to the issuance of share-based awards Represents non-recurring expenses related specifically to the AEA acquisition of GMS Represents severance and other costs permitted in calculations under the ABL Facility and the First Lien Facility Represents one-time costs related to our initial public offering and acquisitions (including the Acquisition) paid to third party advisors, including fees to financial advisors, accountants, attorneys and other professionals as well as costs related to the retirement of corporate stock appreciation rights. Also included are one-time bonuses paid to certain employees in connection with the Acquisition Represents management fees paid to AEA, which were discontinued after the IPO Non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value Mark-to-market adjustments for certain financial instruments Represents costs paid to third party advisors related to the secondary public offerings of our common stock Represents costs paid to third party advisors related to debt refinancing activities Pro forma impact of earnings from acquisitions from the beginning of the LTM period to the date of acquisition ( $ in 000s) 3Q18 LTM 2017 2016 2015 (Unaudited) Net Income (Loss) 67,324 $ 48,886 $ $ 12,564 $ (11,697) Add: Interest Expense 30,486 29,360 37,418 36,396 Add: Write off of debt discount and deferred financing fees 74 7,103 - - Less: Interest Income (144) (152) (928) (1,010) Add: Income Tax Expense 25,977 22,654 12,584 (6,626) Add: Depreciation Expense 24,192 25,565 26,667 32,208 Add: Amortization Expense 43,117 43,675 37,548 31,957 EBITDA 191,026 $ 177,091 $ $ 125,853 $ 81,228 Adjustments Stock appreciation rights expense (A) 2,745 148 1,988 2,268 Redeemable noncontrolling interests (B) 1,827 3,536 880 1,859 Equity-based compensation (C) 1,831 2,534 2,699 6,455 AEA transaction related costs (D) - - - 837 Severance and other permitted costs (E) (146) (157) 379 413 Transaction costs (acquisition and other) (F) (476) 1,988 3,751 1,891 (Gain) loss on disposal of assets (742) (338) (645) 1,089 AEA management fee (G) - 188 2,250 2,250 Effects of fair value adjustments to inventory (H) 446 946 1,009 5,012 Interest rate swap / cap mark-to-market (I) 851 382 - - Secondary public offerings (J) 2,910 1,385 19 2,494 Debt transaction costs (K) 1,023 526 - - Total Add-Backs 10,269 $ 11,138 $ 12,330 $ 24,568 $ Adjusted EBITDA 201,295 $ 188,229 $ 138,183 $ 105,796 $ Contributions from acquisitions (L) 2,238 9,500 12,093 8,064 Pro Forma Adjusted EBITDA 203,533 $ 197,729 $ 150,276 $ 113,860 $

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Net Income to Adjusted EBITDA Adjusted EBITDA Reconciliation Commentary Represents compensation paid to certain executives who were majority owners prior to the AEA acquisition of GMS. Following the acquisition, these executives’ compensation agreements were amended and, going forward, GMS does not anticipate additional adjustments Represents non-cash compensation expenses related to stock appreciation rights agreements Represents non-cash compensation expense related to changes in the fair values of noncontrolling interests Represents non-cash equity-based compensation expense related to the issuance of stock options Represents non-recurring expenses related specifically to the AEA acquisition of GMS Represents severance and other costs permitted in calculations under the ABL Facility and the First Lien Facility Represents one-time costs related to our initial public offering and acquisitions (including the Acquisition) paid to third party advisors, including fees to financial advisors, accountants, attorneys and other professionals as well as costs related to the retirement of corporate stock appreciation rights. Also included are one-time bonuses paid to certain employees in connection with the Acquisition Represents management fees paid to AEA, which were discontinued after the IPO Non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value Mark-to-market adjustments for certain financial instruments Represents costs incurred in connection with withdrawal from a multi-employer pension plan 16 FY14 is comprised of 11 month period (predecessor) and one month period (successor) ($ in 000s) (Unaudited) 2015 2014 (1) 2013 2012 Net income (loss) $ (11,697) $(219,814) $(182,627) $ (7,830) Income tax expense (benefit) (6,626) (240) 11,534 2,658 Discountinued operations, net of tax - - - (362) Interest income (1,010) (922) (798) (885) Interest expense 36,396 7,180 4,413 2,966 Change in fair value of mandatorily redeemable shares - 200,004 198,212 8,952 Depreciation expense 32,208 16,042 11,665 7,840 Amortization expense 31,957 2,556 72 732 EBITDA $ 81,228 $ 4,806 $ 42,471 $ 14,071 Adjustments Executive compensation (A) $ - $ 2,447 $ 13,420 $ 8,266 Stock appreciation rights expense (benefit) (B) 2,268 1,368 1,061 253 Redeemable noncontrolling interests (C) 1,859 3,028 2,195 407 Equity-based compensation (D) 6,455 28 82 (154) AEA transaction related costs (E) 837 67,964 230 133 Severance costs and other permitted costs (F) 413 - (30) (205) Transaction costs (acquisition and other) (G) 1,891 - - - Loss (gain) on disposal of assets 1,089 (864) (2,231) (556) AEA management fee (H) 2,250 188 - - Effects of fair value adjustments to inventory (I) 5,012 8,289 - - Interest rate swap / cap mark-to-market (J) 2,494 (192) 313 - Pension withdrawal (K) - - - 10,179 Total Add-Backs 24,568 82,256 15,040 18,323 Adjusted EBITDA $105,796 $ 87,062 $ 57,511 $ 32,394

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Quarterly Cash Flows 17 ($ in millions) (Unaudited) 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18 Net income $ 9.2 $ 17.2 $ 8.2 $ 14.3 $ 48.9 15.3 $ 18.0 $ 19.7 Non-cash changes & other changes (5.0) 11.5 23.8 30.1 60.4 (2.8) 13.3 14.8 Changes in primary working capital components: Trade accounts and notes receivable (19.4) 0.0 16.1 (17.2) (20.4) (12.9) (8.9) 36.4 Inventories (17.1) 3.7 (12.3) 7.3 (18.4) (3.3) (4.0) (16.3) Accounts payable 1.7 (1.1) (0.3) (4.1) (3.8) 9.5 5.1 (20.3) Cash provided by (used in) operating activities (30.6) 31.3 35.6 30.4 66.7 5.9 23.5 34.4 Purchases of property and equipment (2.6) (2.4) (1.9) (4.2) (11.1) (5.5) (2.9) (5.0) Proceeds from sale of assets 0.8 0.5 1.9 0.8 4.0 1.4 0.5 0.4 Acquisitions of businesses, net of cash acquired (26.6) (113.4) (6.0) (4.5) (150.4) (3.1) (15.3) (5.2) Cash (used in) provided by investing activities (28.3) (115.3) (6.0) (7.9) (157.5) (7.2) (17.7) (9.7) Cash provided by (used in) financing activities 49.7 90.5 (35.4) (18.5) 86.3 6.5 (5.8) (15.5) Increase (decrease) in cash and cash equivalents (9.2) 6.6 (5.8) 4.0 (4.5) 5.2 0.0 9.2 Balance, beginning of period 19.1 9.8 16.4 10.6 19.1 14.6 19.7 19.8 Balance, end of period $ 9.8 $ 16.4 $ 10.6 $ 14.6 $ 14.6 19.7 $ 19.8 28.9 Supplemental cash flow disclosures: Cash paid for income taxes $ 6.5 $ 24.3 $ 9.0 $ 9.3 $ 49.2 $ 1.8 $ 26.7 $ 6.6 Cash paid for interest $ 6.6 $ 6.6 $ 6.9 $ 6.4 $ 26.4 $ 6.8 $ 7.3 $ 7.1 Historical

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Reconciliation of SG&A to Adjusted SG&A GAAP SG&A Reconciliation Commentary Represents non-cash compensation expenses related to stock appreciation rights agreements Represents non-cash compensation expense related to changes in the fair values of noncontrolling interests Represents non-cash equity-based compensation expense related to the issuance of stock options Represents severance and other costs permitted in calculations under the ABL Facility and the First Lien Facility Represents one-time costs related to our initial public offering and acquisitions (including the Acquisition) paid to third party advisors, including fees to financial advisors, accountants, attorneys and other professionals as well as costs related to the retirement of corporate stock appreciation rights. Also included are one-time bonuses paid to certain employees in connection with the Acquisition Represents management fees paid to AEA, which were discontinued after the IPO. 1Q17 includes fees paid for the month of May Represents costs paid to third party advisors related to the secondary public offerings of our common stock Represents costs paid to third party advisors related to debt refinancing activities 18 (Unaudited) 1Q17 2Q17 3Q17 4Q17 FY2017 1Q18 2Q18 3Q18 ($ in millions) SG&A - Reported 135.1 $ 149.8 $ 147.3 $ 153.0 $ 585.1 $ 156.1 $ 159.9 $ 156.3 $ Adjustments Stock appreciation rights expense (benefit) (A) 0.1 0.1 0.5 (0.9) (0.1) (0.6) (0.6) (0.6) Redeemable noncontrolling interests (B) (0.3) (2.5) (0.3) (0.5) (3.5) (0.9) (0.2) (0.3) Equity-based compensation (C) (0.7) (0.7) (0.6) (0.6) (2.5) (0.5) (0.4) (0.4) Severance and other permitted costs (D) (0.1) (0.1) (0.1) 0.5 0.2 (0.2) (0.1) (0.0) Transaction costs (acquisition and other) (E) (0.7) (1.8) (0.6) 0.8 (2.2) (0.2) (0.1) (0.1) Loss (gain) on disposal of assets 0.2 (0.1) 0.1 0.1 0.3 0.4 0.2 0.1 AEA management fee (F) (0.2) - - - (0.2) - - - Secondary Public Offering (G) - - - (1.4) (1.4) (0.6) - (0.9) Debt Related Costs (H) - - - (0.3) (0.3) (0.7) (0.0) - SG&A - Adjusted 133.4 $ 144.7 $ 146.4 $ 150.8 $ 575.3 $ 152.8 $ 158.7 $ 153.9 $

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