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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): December 4, 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 December 4, 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 six months ended October 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 December 4, 2018 and may be used by GMS in various other presentations to investors on or after December 4, 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 December 4, 2018.

99.2*

 

GMS Inc. presentation to investors.

 


*Furnished herewith

 

2


 

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: December 4, 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 SECOND QUARTER 2019

— Second Quarter Net Sales Increased 28.7% to a Record $833.8 Million —

— Second Quarter Net Income Improved by 38.2% to $24.9 Million —

— Second Quarter Adjusted EBITDA Increased by 60.7% to a Record $87.1 Million —

— Announces Authorization of $75 Million Stock Repurchase Program —

 

Tucker, Georgia, December 4, 2018. GMS Inc. (NYSE:GMS), a leading North American distributor of wallboard and suspended ceilings systems, today reported financial results for the second quarter of fiscal 2019 ended October 31, 2018.

 

Net sales for the fiscal second quarter ended October 31, 2018 increased 28.7% to a record $833.8 million from $648.0 million for the fiscal second quarter ended October 31, 2017. Reported net income increased to $24.9 million, or $0.58 per diluted share in the fiscal second quarter ended October 31, 2018, compared to $18.0 million, or $0.43 per diluted share in the fiscal second quarter ended October 31, 2017. Adjusted EBITDA for the fiscal second quarter increased to a record $87.1 million from Adjusted EBITDA of $54.2 million for the second quarter of fiscal 2018.

 

Mike Callahan, President and CEO of GMS, stated, “We delivered a strong fiscal second quarter highlighted by record net sales and adjusted EBITDA. Our organic sales increased 8.7%  year-over-year, reflecting broad-based sales growth across each of our product groups. Adjusted EBITDA increased more than 60%, reflecting contributions from the Titan acquisition, our continued focus on price discipline and our steadfast commitment to operational improvement. Driven by improved profitability, we generated strong free cash flow of $88 million during the second quarter, which allowed us to reduce our net leverage nearly a half turn from 4.2 times to 3.8 times.”

 

Mr. Callahan continued, “As we look toward the second half of the fiscal year, we remain confident in the health of our end markets and see continued growth opportunities across our product portfolio. We feel very good about our leading North American platform with significant scale advantages and a well-balanced portfolio built for growth and value creation. I am also pleased to announce that our Board of Directors has approved the repurchase of up to $75 million of the Company’s common stock. We plan to opportunistically purchase our common stock while at the same time continue with our stated strategy to use expected operating cash flows to reduce our net leverage to under 3.0 times by the end of fiscal 2020.”

 

Second Quarter 2019 Results

 

Net sales for the second quarter of fiscal 2019 ended October 31, 2018 were $833.8 million, compared to $648.0 million for the second quarter of fiscal 2018 ended October 31, 2017.

 

·                  Wallboard sales of $334.7 million increased 16.0% compared to the second quarter of fiscal 2018, with the positive impact of the June 1st acquisition of Titan and pricing improvement.

 

·                  Ceilings sales of $118.4 million rose 16.5% compared to the second quarter of fiscal 2018, mainly due to greater commercial activity, pricing improvement and the positive impact of acquisitions.

 

·                  Steel framing sales of $135.8 million grew 31.5% compared to the second quarter of fiscal 2018, mainly driven by greater commercial activity, pricing improvement and the positive impact of acquisitions.

 

·                  Other product sales of $245.0 million were up 58.4% compared to the second quarter of fiscal 2018, as a result of the positive impact of the acquisition of Titan and pricing improvement.

 

1


 

Gross profit of $268.2 million grew 26.3% compared to $212.3 million in the second quarter of fiscal 2018, mainly attributable to increased sales from the Titan acquisition. Gross margin decreased by approximately 60 basis points to 32.2% compared to 32.8% in the second quarter of fiscal 2018.

 

Selling, general and administrative expense as a percentage of net sales, was 22.2% for the quarter compared to 24.7% in the second quarter of fiscal 2018.  Adjusted Selling, general and administrative expense as a percentage of net sales was 21.8% compared to 24.5% in the prior year quarter. 200 basis points of the 270 basis point reduction is the result of increased cost efficiencies, primarily the result of previously announced cost reduction initiatives taken during the fiscal year, as well as contributions from the Titan acquisition. The remaining 70 basis points was the result of the amendment of certain equipment operating leases that are now being accounted for as capital leases. These improvements were partially offset by continuing inflation pressures, primarily in logistics.

 

Net income of $24.9 million, or $0.58 per diluted share, increased by 38.2% or $6.9 million compared to $18.0 million, or $0.43 per diluted share, in the second quarter of fiscal 2018.  Adjusted net income of $38.3 million, or $0.89 per diluted share, increased 40.4% or $11.0 million, compared to $27.3 million, or $0.65 per diluted share, in the second quarter of fiscal 2018.  Second quarter net income was positively impacted by an increase of $16.4 million in operating income, partially offset by a $11.3 million increase in interest expense related to the June 1, 2018 acquisition of Titan.

 

Adjusted EBITDA of $87.1 million increased from $54.2 million in the second quarter of fiscal 2018, representing an Adjusted EBITDA margin of 10.5%. This improvement was driven by the contribution of a full quarter of Titan results, benefits from the restructuring actions taken earlier this fiscal year, continued pricing improvement, and favorable lease accounting changes.

 

Capital Resources

 

As of October 31, 2018, GMS had cash of $52.9 million and total debt of $1.24 billion, compared to cash of $19.8 million and total debt of $610.5 million, as of October 31, 2017.

 

Acquisition Activity

 

On August 7, 2018, the Company acquired Charles G. Hardy, Inc. a leading distributor of interior building products that serves residential and non-residential customers in the Los Angeles market. The acquisition marks GMS’ entry into the Los Angeles area, the second largest metropolitan area nationwide.

 

Stock Repurchase Program

 

The Company announced that its Board of Directors has approved on November 30, 2018 the repurchase of up to $75 million of the Company’s common stock.  The repurchases will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market. The Company has approximately 41.9 million shares of common stock outstanding on a fully diluted basis as of October 31, 2018.

 

Conference Call and Webcast

 

GMS will host a conference call and webcast to discuss its results for the fiscal second quarter ended October 31, 2018 and other information related to its business at 8:30 a.m. Eastern Time on December 4, 2018. Investors who wish to participate in the call should dial 877-407-3982 (domestic) or 201-493-6780 (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 January 4, 2019 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13682840.

 

About GMS Inc.

 

Founded in 1971, GMS operates a network of more than 245 distribution centers across the United States and Canada. GMS’s extensive product offering of wallboard, suspended ceilings systems, or ceilings, and complementary construction products is designed to provide a comprehensive one-stop-shop for our core customer, the interior contractor who installs these products in commercial and residential buildings.

 

2


 

Use of Non-GAAP Financial Measures

 

GMS reports its financial results in accordance with GAAP. However, it presents Adjusted net income, free cash flow, Adjusted SG&A, Adjusted EBITDA and Adjusted EBITDA margin, which are not recognized financial measures under GAAP. GMS believes that Adjusted net income, free cash flow, Adjusted SG&A, 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 SG&A, free cash flow, Adjusted EBITDA and Adjusted EBITDA margin 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, Adjusted SG&A 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, Adjusted SG&A and Adjusted EBITDA. The Company’s presentation of Adjusted net income, Adjusted SG&A 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, free cash flow, Adjusted SG&A and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in GMS’s industry or across different industries.  Please see the tables at the end of this release for a reconciliation of Adjusted EBITDA, free cash flow, Adjusted SG&A and Adjusted net income to the most directly comparable GAAP financial measures.

 

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, statements about its expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance, statements related to net sales, gross profit and gross margins, as well as non-GAAP financial measures such as Adjusted EBITDA, Adjusted net income and base business growth, statements about growth potential across the Company’s product portfolio and the ability to deliver growth and value creation, demand trends and the anticipated benefits of the Company’s cost reduction and operational improvements plan, including future SG&A savings, and the Titan acquisition, including potential synergies, contained in this press release are forward-looking statements. In addition, forward looking statements may include statements regarding the Company’s expectations concerning management’s plans for execution of a stock repurchase program, including the maximum amount, manner and duration of purchases of the Company’s common stock under its authorized stock repurchase program.  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 and Canada; 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; the possibility that the expected synergies and cost savings and final impacts from the Titan acquisition will not be realized, or will not be realized within the expected time period; the risk that the GMS and Titan businesses will not be integrated successfully; disruption from the transaction making it more difficult to maintain business and operational relationships and to accomplish other GMS objectives; the risk of customer attrition; our ability to efficiently manage and control our costs and the success of our previously announced cost reduction plan; 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, 2018, and in its other periodic reports filed with the SEC.  In addition, the statements in this release are made as of December 4, 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 December 4, 2018.

 

4


 

GMS Inc.

Condensed Consolidated Statements of Operations (Unaudited)

Three and Six Months Ended October 31, 2018 and 2017

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31, 

 

October 31, 

 

 

 

2018

 

2017

 

2018

 

2017

 

Net sales

 

$

833,837

 

$

648,004

 

$

1,611,981

 

$

1,290,161

 

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

 

565,687

 

435,744

 

1,099,015

 

872,797

 

Gross profit

 

268,150

 

212,260

 

512,966

 

417,364

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

185,268

 

159,898

 

370,703

 

315,970

 

Depreciation and amortization

 

30,787

 

16,713

 

57,109

 

33,058

 

Total operating expenses

 

216,055

 

176,611

 

427,812

 

349,028

 

Operating income

 

52,095

 

35,649

 

85,154

 

68,336

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

Interest expense

 

(19,182

)

(7,917

)

(35,370

)

(15,417

)

Change in fair value of financial instruments

 

(376

)

(238

)

(6,395

)

(434

)

Write-off of debt discount and deferred financing fees

 

 

 

 

(74

)

Other income, net

 

434

 

512

 

1,068

 

998

 

Total other expense, net

 

(19,124

)

(7,643

)

(40,697

)

(14,927

)

Income before taxes

 

32,971

 

28,006

 

44,457

 

53,409

 

Provision for income taxes

 

8,059

 

9,983

 

10,895

 

20,043

 

Net income

 

$

24,912

 

$

18,023

 

$

33,562

 

$

33,366

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

41,149

 

41,006

 

41,121

 

40,988

 

Diluted

 

41,918

 

42,146

 

41,996

 

42,137

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.59

 

$

0.44

 

$

0.80

 

$

0.81

 

Diluted

 

$

0.58

 

$

0.43

 

$

0.78

 

$

0.79

 

 


(1) The following table sets forth the computation of basic and diluted earnings per share of common stock for the three and six months ended October 31, 2018 and 2017:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

(in thousands, except per share data)

 

Net income

 

$

24,912

 

$

18,023

 

$

33,562

 

$

33,366

 

Less: Net income allocated to participating securities

 

665

 

 

751

 

 

Net income attributable to common stockholders

 

$

24,247

 

$

18,023

 

$

32,811

 

$

33,366

 

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

41,149

 

41,006

 

41,121

 

40,988

 

Basic earnings per common share

 

$

0.59

 

$

0.44

 

$

0.80

 

$

0.81

 

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

41,149

 

41,006

 

41,121

 

40,988

 

Add: Common Stock Equivalents

 

769

 

1,140

 

875

 

1,149

 

Diluted weighted average common shares outstanding

 

41,918

 

42,146

 

41,996

 

42,137

 

Diluted earnings per common share

 

$

0.58

 

$

0.43

 

$

0.78

 

$

0.79

 

 

5


 

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

October 31, 2018 and April 30, 2018

(in thousands, except per share data)

 

 

 

October 31,

 

April 30,

 

 

 

2018

 

2018

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

52,878

 

$

36,437

 

Trade accounts and notes receivable, net of allowances of $8,016 and $9,633, respectively

 

479,327

 

346,450

 

Inventories, net

 

300,737

 

239,223

 

Prepaid expenses and other current assets

 

15,964

 

11,726

 

Total current assets

 

848,906

 

633,836

 

Property and equipment, net of accumulated depreciation of $103,426 and $85,761, respectively

 

277,626

 

163,582

 

Goodwill

 

622,732

 

427,645

 

Intangible assets, net

 

473,686

 

222,682

 

Other assets

 

13,302

 

6,766

 

Total assets

 

$

2,236,252

 

$

1,454,511

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

157,181

 

$

116,168

 

Accrued compensation and employee benefits

 

46,744

 

56,323

 

Other accrued expenses and current liabilities

 

66,727

 

45,146

 

Current portion of long-term debt

 

37,725

 

16,284

 

Total current liabilities

 

308,377

 

233,921

 

Non-current liabilities:

 

 

 

 

 

Long-term debt, less current portion

 

1,207,503

 

579,602

 

Deferred income taxes, net

 

19,933

 

10,742

 

Other liabilities

 

47,615

 

35,088

 

Liabilities to noncontrolling interest holders, less current portion

 

11,566

 

15,707

 

Total liabilities

 

1,594,994

 

875,060

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01 per share, 500,000 shares authorized; 41,157 and 41,069 shares issued and outstanding as of October 31, 2018 and April 30, 2018, respectively

 

412

 

411

 

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

 

 

 

Exchangeable shares

 

33,194

 

 

Additional paid-in capital

 

492,260

 

489,007

 

Retained earnings

 

123,154

 

89,592

 

Accumulated other comprehensive income (loss)

 

(7,762

)

441

 

Total stockholders’ equity

 

641,258

 

579,451

 

Total liabilities and stockholders’ equity

 

$

2,236,252

 

$

1,454,511

 

 

6


 

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended October 31, 2018 and 2017

(in thousands)

 

 

 

Six Months Ended

 

 

 

October 31,

 

 

 

2018

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

33,562

 

$

33,366

 

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

 

 

 

 

 

Depreciation and amortization

 

57,109

 

33,058

 

Write-off and amortization of debt discount and debt issuance costs

 

1,665

 

1,412

 

Provision for losses on accounts and notes receivable

 

81

 

873

 

Provision for obsolescence of inventory

 

229

 

483

 

Effects of fair value adjustments to inventory

 

4,129

 

187

 

Increase in fair value of contingent consideration

 

460

 

 

Equity-based compensation

 

3,204

 

3,019

 

Gain on sale and disposal of assets

 

(295

)

(598

)

Change in fair value of financial instruments

 

6,395

 

434

 

Changes in assets and liabilities net of effects of acquisitions:

 

 

 

 

 

Trade accounts and notes receivable

 

(45,355

)

(21,837

)

Inventories

 

(4,553

)

(7,553

)

Prepaid expenses and other assets

 

(342

)

(5,805

)

Accounts payable

 

9,516

 

14,590

 

Accrued compensation and employee benefits

 

(9,550

)

(16,352

)

Derivative liability

 

(10,778

)

 

Other accrued expenses and liabilities

 

5,325

 

2,170

 

Deferred income taxes

 

(5,145

)

(5,437

)

Cash provided by operating activities

 

45,657

 

32,010

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(9,156

)

(8,442

)

Proceeds from sale of assets

 

638

 

1,928

 

Acquisition of businesses, net of cash acquired

 

(578,917

)

(18,375

)

Cash used in investing activities

 

(587,435

)

(24,889

)

Cash flows from financing activities:

 

 

 

 

 

Repayments on the revolving credit facility

 

(469,647

)

(443,920

)

Borrowings from the revolving credit facility

 

623,117

 

352,567

 

Payments of principal on long-term debt

 

(4,984

)

(2,888

)

Payments of principal on capital lease obligations

 

(8,820

)

(2,936

)

Borrowings from term loan

 

996,840

 

577,616

 

Repayments of term loan

 

(571,840

)

(477,616

)

Debt issuance costs

 

(7,933

)

(3,283

)

Proceeds from exercises of stock options

 

973

 

 

Other financing activities

 

873

 

(1,441

)

Cash provided by (used in) financing activities

 

558,579

 

(1,901

)

Effect of exchange rates on cash and cash equivalents

 

(360

)

 

Increase in cash and cash equivalents

 

16,441

 

5,220

 

Cash and cash equivalents, beginning of period

 

36,437

 

14,561

 

Cash and cash equivalents, end of period

 

$

52,878

 

$

19,781

 

Supplemental cash flow disclosures:

 

 

 

 

 

Cash paid for income taxes

 

$

10,469

 

$

28,455

 

Cash paid for interest

 

30,966

 

14,104

 

Supplemental schedule of noncash activities:

 

 

 

 

 

Assets acquired under capital lease

 

$

91,005

 

$

6,378

 

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

 

4,001

 

11,898

 

 

7


 

GMS Inc.

Net Sales by Product Group (Unaudited)

Three and Six Months Ended October 31, 2018 and 2017

(dollars in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

% of

 

October 31,

 

% of

 

October 31,

 

% of

 

October 31,

 

% of

 

 

 

2018

 

Total

 

2017

 

Total

 

2018

 

Total

 

2017

 

Total

 

 

 

(dollars in thousands)

 

Wallboard

 

$

334,688

 

40.1

%

$

288,498

 

44.5

%

$

652,423

 

40.5

%

$

573,155

 

44.4

%

Ceilings

 

118,376

 

14.2

%

101,646

 

15.7

%

234,231

 

14.5

%

201,356

 

15.6

%

Steel framing

 

135,760

 

16.3

%

103,203

 

15.9

%

264,872

 

16.4

%

207,854

 

16.1

%

Other products

 

245,013

 

29.4

%

154,657

 

23.9

%

460,455

 

28.6

%

307,796

 

23.9

%

Total net sales

 

$

833,837

 

 

 

$

648,004

 

 

 

$

1,611,981

 

 

 

$

1,290,161

 

 

 

 

8


 

GMS Inc.

Reconciliation of Net Income to Adjusted EBITDA (Unaudited)

Three and Six Months Ended October 31, 2018 and 2017

(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

24,912

 

$

18,023

 

$

33,562

 

$

33,366

 

Interest expense

 

19,182

 

7,917

 

35,370

 

15,417

 

Write-off of debt discount and deferred financing fees

 

 

 

 

74

 

Interest income

 

203

 

(26

)

(33

)

(49

)

Provision for income taxes

 

8,059

 

9,983

 

10,895

 

20,043

 

Depreciation expense

 

11,538

 

6,023

 

22,148

 

12,013

 

Amortization expense

 

19,249

 

10,690

 

34,961

 

21,045

 

EBITDA

 

$

83,143

 

$

52,610

 

$

136,903

 

$

101,909

 

Stock appreciation expense (a)

 

649

 

642

 

983

 

1,232

 

Redeemable noncontrolling interests(b)

 

282

 

164

 

813

 

1,030

 

Equity-based compensation(c)

 

1,094

 

375

 

1,498

 

847

 

Severance and other permitted costs(d)

 

882

 

113

 

5,718

 

317

 

Transaction costs (acquisitions and other)(e)

 

841

 

88

 

5,594

 

246

 

Gain on disposal of assets

 

(173

)

(207

)

(294

)

(597

)

Effects of fair value adjustments to inventory(f)

 

 

187

 

4,129

 

187

 

Change in fair value of financial instruments(g)

 

376

 

238

 

6,395

 

434

 

Secondary public offering costs(h)

 

 

 

 

631

 

Debt transaction costs(i)

 

51

 

35

 

678

 

758

 

EBITDA add-backs

 

4,002

 

1,635

 

25,514

 

5,085

 

Adjusted EBITDA

 

$

87,145

 

$

54,245

 

$

162,417

 

$

106,994

 

Adjusted EBITDA margin

 

10.5

%

8.4

%

10.1

%

8.3

%

 


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

 

(g)                                  Represents the mark-to-market adjustments for derivative financial instruments.

 

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

 

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

 

9


 

GMS Inc.

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)

Three and Six Months Ended October 31, 2018 and 2017

(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31, 

 

October 31, 

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

93,481

 

$

23,485

 

$

45,657

 

$

32,010

 

Purchases of property and equipment

 

(5,363

)

(2,931

)

(9,156

)

(8,442

)

Free cash flow(a)

 

$

88,118

 

$

20,554

 

$

36,501

 

$

23,568

 

 


(a)           Free cash flow is a non-GAAP financial measure defined as net cash provided by operations less capital expenditures.

 

GMS Inc.

Reconciliation of Selling, General and Administrative Expense to Adjusted SG&A (Unaudited)

Three and Six Months Ended October 31, 2018 and 2017

(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31, 

 

October 31, 

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

$

185,268

 

$

159,898

 

$

370,703

 

$

315,970

 

 

 

 

 

 

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

 

 

Stock appreciation expense (b)

 

(649

)

(642

)

(983

)

(1,232

)

Redeemable noncontrolling interests(c)

 

(282

)

(164

)

(813

)

(1,030

)

Equity-based compensation(d)

 

(1,094

)

(375

)

(1,498

)

(847

)

Severance and other permitted costs(e)

 

(882

)

(113

)

(5,718

)

(317

)

Transaction costs (acquisitions and other)(f)

 

(841

)

(88

)

(5,594

)

(246

)

Gain on disposal of assets

 

173

 

207

 

294

 

597

 

Secondary public offering costs(g)

 

 

 

 

(631

)

Debt transaction costs(h)

 

(51

)

(35

)

(678

)

(758

)

Adjusted SG&A

 

$

181,642

 

$

158,688

 

$

355,713

 

$

311,506

 

Adjusted SG&A margin

 

21.8

%

24.5

%

22.1

%

24.1

%

 


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

 

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

 

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

 

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

 

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

 

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

 

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

 

10


 

GMS Inc.

Reconciliation of Income Before Taxes to Adjusted Net Income (Unaudited)

Three and Six Months Ended October 31, 2018 and 2017

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31, 

 

October 31, 

 

 

 

2018

 

2017

 

2018

 

2017

 

Income before taxes

 

$

32,971

 

$

28,006

 

$

44,457

 

$

53,409

 

EBITDA add-backs

 

4,002

 

1,635

 

25,514

 

5,088

 

Write-off of debt discount and deferred financing fees

 

 

 

 

74

 

Purchase accounting depreciation and amortization (1)

 

12,399

 

5,521

 

24,854

 

10,545

 

Adjusted pre-tax income

 

49,372

 

35,162

 

94,825

 

69,116

 

Adjusted income tax expense

 

11,109

 

7,911

 

21,336

 

15,551

 

Adjusted net income

 

$

38,263

 

$

27,251

 

$

73,489

 

$

53,565

 

Effective tax rate (2)

 

22.5

%

22.5

%

22.5

%

22.5

%

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

41,149

 

41,006

 

41,121

 

40,988

 

Diluted (3)

 

43,047

 

42,146

 

43,125

 

42,137

 

Adjusted net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.93

 

$

0.66

 

$

1.79

 

$

1.31

 

Diluted

 

$

0.89

 

$

0.65

 

$

1.70

 

$

1.27

 

 


(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 and the acquisition of Titan. Full year projected amount for FY19 is $49.7 million.

(2)   Normalized cash tax rate determined based on our estimated taxes for fiscal 2019 excluding the impact of purchase accounting and certain other deferred tax accounts. Fiscal Q2 2018 normalized cash tax rate updated to reflect this rate.

(3)   Includes the effect of 1.1 million shares of equity issued in connection with the acquisition of Titan that are exchangeable for the Company’s common stock.

 

Contact Information:

 

Investor Relations:

ir@gms.com

678-353-2883

 

Media Relations:

marketing@gms.com

770-723-3378

11


(Back To Top)

Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

 

GMS Quarterly Review Fiscal Q2 2019

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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, Adjusted gross profit, Adjusted SG&A and base business sales, including any management expectations or outlook for fiscal 2019 and beyond. In addition, statements regarding the markets in which the Company operates, our ability to continue to drive profitable growth while managing our business for the long-term and our ability to deliver record sales and strong earnings in fiscal 2019, demand trends and the anticipated benefits of our cost reduction plan, including future SG&A savings, the Titan acquisition, margin improvement, expected accretion and its expected contribution to the Company’s Adjusted EBITDA for the eleven months ending April 30, 2019, are forward-looking statements. 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 and Canada; 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; the possibility that the expected synergies and cost savings and financial impacts from the Titan acquisition will not be realized, or will not be realized within the expected time period; the risk that the GMS and Titan businesses will not be integrated successfully; disruption from the transaction making it more difficult to maintain business and operational relationships and to accomplish other GMS objectives; the risk of customer attrition; our ability to efficiently manage and control our costs and the success of our previously announced cost reduction plan, and other factors described in the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended April 30, 2018, and in our other periodic reports filed with the SEC. In addition, the statements in this presentation are made as of December 4, 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 December 4, 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. Please see the Appendix to this presentation for a further discussion on these non-GAAP measures and a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. 2

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Fiscal Q2 Highlights 3 We achieved record second quarter results Net sales increased 28.7% to a record $833.8 million Net sales base business growth of 8.7% Wallboard sales increased 16.0% (3.7% base) Ceilings sales increased 16.5% (10.0% base) Steel framing sales increased 31.5% (21.9% base) Other product sales increased 58.4% (8.5% base) Net income of $24.9 million, or EPS of $0.58 per diluted share Adjusted EBITDA increased 60.7% to $87.1 million Generated over $88 million of free cash flow during the second quarter, reducing our leverage from 4.2x as of July 31, 2018 to 3.8x as of October 31, 2018 (1) On August 7, 2018, acquired Charles G. Hardy, Inc. in Paramount, California Opened one greenfield location in Williamsburg, VA on October 31, 2018 Board of Directors approved the repurchase of up to $75 million of the Company’s common stock Opened one greenfield location in Ohio on November 30, 2018, for a current total of four this fiscal year Activity across R&R, residential and non-residential end markets remains steady Other Highlights Fiscal Q2 2019 Highlights Free cash flow is a non-GAAP financial measure defined as net cash provided by operations less capital expenditures. Differences may occur due to rounding.

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Fiscal Q2 2019 Performance Adj. Gross Profit ($ mm) Fiscal Q2 2019 Adjusted Gross Profit & Margin (1) Adj. EBITDA ($ mm) Fiscal Q2 2019 Adjusted EBITDA (1) For a reconciliation of Adj. Gross Profit to Gross Profit, Adj. SG&A to SG&A and Adj. EBITDA to Net Income, the most directly comparable GAAP metrics, see Appendix. Fiscal Q2 2019 includes the $5.9 million favorable impact to Adjusted SG&A and Adjusted EBITDA related to the amendment of existing GMS equipment operating leases to capital leases. We have excluded this impact for comparability. Margin ex. Leases(2): 9.7% +60.7% YOY Fiscal Q2 2019 Net Sales & Mix 4 24.5% 21.8% Fiscal Q2 2019 Adjusted SG&A (1) Net Sales ($ mm) Adj. SG&A ($ mm) +28.7% YOY 8.4% 10.5% SG&A% ex. Leases(2): 22.5% -200 bps +140 bps $54.2 $87.1 $0 $10 $20 $30 $40 $50 $60 $70 Fiscal Q2 2018 Fiscal Q2 2019 $158.7 $181.6 $0 $25 $50 $75 $100 $125 $150 $175 Fiscal Q2 2018 Fiscal Q2 2019 $648.0 $833.8 $0 $100 $200 $300 $400 $500 $600 $700 $800 Fiscal Q2 2018 Fiscal Q2 2019 45% 16% 16% 24% 40% 14% 16% 29%

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Attractive Capital Structure Post Titan transaction capital structure as of 10/31/18: Reflects the June 1, 2018 $627 million acquisition of WSB Titan Pro Forma leverage of 3.8x Net Debt / LTM Pro Forma Adj. EBITDA (1) Compares favorably to 6.0x Net Debt / LTM Pro Forma Adj. EBITDA (1) as of 4/30/14 and 4.3x pre-IPO Generated over $88 million of free cash flow during the quarter, lowering our Pro Forma leverage by 0.4x to 3.8x (1) Substantial liquidity, with $52.9 million of cash on hand and an additional $262 million undrawn on our ABL Facilities First Lien Term Loan at L+275 matures 2025 Commentary Leverage Summary Net Debt / PF Adjusted EBITDA (2) Free cash flow is a non-GAAP financial measure defined as net cash provided by operations less capital expenditures. Differences may occur due to rounding. See appendix for a reconciliation of Pro Forma Adjusted EBITDA. 5 ($ mm) 7/31/18 10/31/18 LTM LTM Cash and cash equivalents $37 $53 Asset-Based Revolver $215 $153 First Lien Term Loan 994 992 Second Lien Term Loan - - Capital Lease and Other 95 91 Total Debt $1,304 $1,237 PF Adj. EBITDA (1) $304 $310 Total Debt / PF Adj. EBITDA 4.3x 4.0x Net Debt / PF Adj. EBITDA 4.2x 3.8x 4.2x 3.8x 7/31/18 LTM 10/31/18 LTM

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Leading Specialty Distributor Poised for Continued Growth 6 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 growth in Large, Diverse End Markets Entrepreneurial Culture with Dedicated Employees and Experienced Leadership Driving Superior Execution National Scale Combined With Local Expertise Market Leader with Scale Advantages

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Appendix

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Summary Quarterly Financials 8 FY19 Business Days 1Q29 64 days 2Q29 65 days 3Q29 62 days 4Q29 63 days FY19 254 days Note: Fiscal year end April 30. Includes greenfields, which we consider extensions of “base business.” FY18 acquired branches have been updated to reflect the number of acquired branches that are included within the sales from acquisitions (In millions, except per share data) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 (Unaudited) Wallboard Volume (MSF) 914 929 826 878 3,548 985 1,025 Wallboard Price ($ / '000 Sq. Ft.) 311 $ 311 $ 312 $ 319 $ 313 $ 323 $ 326 $ Wallboard 285 $ 288 $ 256 $ 280 $ 1,110 $ 318 $ 335 $ Ceilings 100 102 90 96 387 116 118 Steel framing 105 103 97 107 412 129 136 Other products 153 155 142 153 603 215 245 Net sales 642 648 586 636 2,511 778 834 Cost of sales 437 436 390 430 1,693 533 566 Gross profit 205 212 195 206 819 245 268 Gross margin 31.9% 32.8% 33.4% 32.4% 32.6% 31.5% 32.2% Operating expenses: Selling, general and administrative expenses 156 160 156 162 634 185 185 Depreciation and amortization 16 17 16 16 66 26 31 Total operating expenses 172 177 173 178 699 212 216 Operating income 33 36 23 28 119 33 52 Other (expense) income: Interest expense (8) (8) (8) (8) (31) (16) (19) Change in fair value of financial instruments (0) (0) (0) (5) (6) (6) (0) Write-off of discount and deferred financing costs (0) - - - (0) - - Other income, net 0 1 1 1 2 1 0 Total other expense, net (7) (8) (7) (13) (35) (22) (19) Income from continuing operations, before tax 25 28 15 15 84 11 33 Income tax expense (benefit) 10 10 (4) 5 21 3 8 Net income 15 $ 18 $ 20 $ 10 $ 63 $ 9 $ 25 $ Business Days 64 65 62 63 254 64 65 Net Sales by Business Day 10.0 $ 10.0 $ 9.4 $ 10.1 $ 9.9 $ 12.2 $ 12.8 $ Base Business Branches (1) (2) 206 206 207 207 207 209 209 Acquired Branches (2) - 4 5 7 7 37 38 Total Branches 206 210 212 214 214 246 247

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Quarterly Cash Flows 9 Free cash flow is a non-GAAP financial measure defined as net cash provided by operations less capital expenditures. Differences may occur due to rounding. ($ in millions) (Unaudited) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 Net income $ 15.3 $ 18.0 $ 19.7 $ 9.9 $ 63.0 $ 8.7 $ 24.9 Non-cash changes & other changes (0.2) 13.3 14.9 35.3 63.4 7.1 45.3 Changes in primary working capital components: Trade accounts and notes receivable (12.9) (8.9) 36.4 (26.3) (11.8) (41.0) (4.4) Inventories (3.3) (4.0) (16.3) (11.2) (34.8) (20.9) 16.4 Accounts payable 9.5 5.1 (20.3) 17.1 11.4 (1.7) 11.2 Cash provided by (used in) operating activities 8.5 23.5 34.4 24.9 91.2 (47.8) 93.5 Purchases of property and equipment (5.5) (2.9) (5.0) (10.3) (23.7) (3.8) (5.4) Proceeds from sale of assets 1.4 0.5 0.4 0.5 2.9 0.3 0.4 Acquisitions of businesses, net of cash acquired (3.1) (15.3) (5.2) (4.8) (28.3) (575.5) (3.4) Cash (used in) investing activities (7.2) (17.7) (9.7) (14.6) (49.2) (579.0) (8.4) Cash provided by (used in) financing activities 3.9 (5.8) (15.5) (2.8) (20.2) 627.3 (68.7) Increase in cash and cash equivalents 5.2 0.0 9.2 7.5 21.8 0.4 16.0 Balance, beginning of period 14.6 19.7 19.8 28.9 14.6 36.3 36.8 Balance, end of period $ 19.7 $ 19.8 $ 28.9 $ 36.4 $ 36.3 $ 36.8 $ 52.9 Supplemental cash flow disclosures: Cash paid for income taxes $ 1.8 $ 26.7 $ 6.6 $ 3.9 $ 39.0 $ 1.0 $ 9.5 Cash paid for interest $ 6.8 $ 7.3 $ 7.1 $ 7.4 $ 28.6 $ 11.0 $ 20.0 Cash provided by (used in) operating activities $ 8.5 $ 23.5 $ 34.4 $ 24.9 $ 91.2 $ (47.8) $ 93.5 Purchases of property and equipment (5.5) (2.9) (5.0) (10.3) (23.7) (3.8) (5.4) Free cash flow (1) 3.0 20.6 29.5 14.6 67.4 (51.6) 88.1 Historical

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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. FY18 quarterly sales from acquisitions have been updated in accordance with our presentation of base business for the FY19 vs. FY18 comparative period. 10 ($ in millions) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 (Unaudited) Base Business (1) (2) 642 $ 642 $ 579 $ 627 $ 2,490 $ 681 $ 698 $ Acquisitions (2) (3) - 6 7 8 21 97 136 Total Net Sales 642 $ 648 $ 586 $ 636 $ 2,512 $ 778 $ 834 $ Total Net Sales Growth Wallboard 13.3% 6.9% 0.6% (0.8%) 4.8% 11.6% 16.0% Ceilings 15.5% 19.0% 10.5% 9.3% 13.6% 16.2% 16.5% Steel Framing 24.1% 7.4% 3.5% 6.8% 10.0% 23.4% 31.5% Other Products 19.8% 10.2% 7.4% 5.6% 10.5% 40.7% 58.4% Total Net Sales 16.8% 9.5% 4.1% 3.4% 8.3% 21.2% 28.7% Base Business Sales Growth Wallboard 4.9% 3.0% (1.0%) (1.4%) 1.5% 2.5% 3.7% Ceilings 10.6% 12.9% 7.4% 5.1% 9.0% 8.1% 10.0% Steel Framing 10.0% 2.3% 3.6% 5.5% 5.4% 16.1% 21.9% Other Products 10.0% 6.1% 7.2% 4.6% 7.0% 4.6% 8.5% Total Base Business Net Sales 7.8% 5.1% 2.9% 2.0% 4.5% 6.1% 8.7%

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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 the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value Represents 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 11 ( $ in 000s) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 (Unaudited) Net Income 15,343 $ 18,023 $ 19,686 $ 9,919 $ 62,971 $ 8,650 $ 24,912 $ Add: Interest Expense 7,500 7,917 7,871 8,107 31,395 16,188 19,182 Add: Write off of debt discount and deferred financing fees 74 - - - 74 - - Less: Interest Income (23) (26) (44) (84) (177) (236) 203 Add: Income Tax Expense (Benefit) 10,060 9,983 (4,488) 5,328 20,883 2,836 8,059 Add: Depreciation Expense 5,990 6,023 6,009 6,054 24,075 10,610 11,538 Add: Amortization Expense 10,355 10,690 10,481 9,928 41,455 15,712 19,249 EBITDA 49,299 $ 52,610 $ 39,515 $ 39,252 $ 180,676 $ 53,760 $ 83,143 $ Adjustments Stock appreciation rights expense (A) 590 642 631 455 2,318 334 649 Redeemable noncontrolling interests (B) 866 164 340 498 1,868 531 282 Equity-based compensation (C) 473 375 429 418 1,695 404 1,094 Severance and other permitted costs (D) 205 113 7 256 581 4,836 882 Transaction costs (acquisition and other) (E) 159 88 75 3,049 3,370 4,753 841 (Gain) loss on disposal of assets (390) (207) (51) 139 (509) (121) (173) Effects of fair value adjustments to inventory (F) - 187 89 48 324 4,129 - Change in fair value of financial instruments (G) 196 238 276 5,415 6,125 6,019 376 Secondary public offerings (H) 631 - 894 - 1,525 - - Debt transaction costs (I) 723 35 - 527 1,285 627 51 Total Add-Backs 3,453 $ 1,635 $ 2,690 $ 10,805 $ 18,582 $ 21,512 $ 4,002 $ Adjusted EBITDA (as reported) 52,752 $ 54,245 $ 42,205 $ 50,057 $ 199,258 $ 75,272 $ 87,145 $

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LTM Net Income to Pro Forma Adjusted EBITDA Pro Forma Adjusted EBITDA Reconciliation Commentary 12 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 Represents the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value Represents 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, including synergies Represents the favorable impact to Adjusted EBITDA related to the amendment of existing GMS equipment operating leases to capital leases ( $ in 000s) 2Q19 LTM 2018 2017 2016 (Unaudited) Net Income 63,167 $ 62,971 $ 48,886 $ $ 12,564 Add: Interest Expense 51,348 31,395 29,360 37,418 Add: Write off of debt discount and deferred financing fees - 74 7,103 - Less: Interest Income (161) (177) (152) (928) Add: Income Tax Expense 11,735 20,883 22,654 12,584 Add: Depreciation Expense 34,211 24,075 25,565 26,667 Add: Amortization Expense 55,370 41,455 43,675 37,548 EBITDA 215,670 $ 180,676 $ 177,091 $ $ 125,853 Adjustments Stock appreciation rights expense (A) 2,069 2,318 148 1,988 Redeemable noncontrolling interests (B) 1,651 1,868 3,536 880 Equity-based compensation (C) 2,345 1,695 2,534 2,699 AEA transaction related costs (D) - - - - Severance and other permitted costs (E) 5,981 581 (157) 379 Transaction costs (acquisition and other) (F) 8,718 3,370 1,988 3,751 (Gain) loss on disposal of assets (206) (509) (338) (645) AEA management fee (G) - - 188 2,250 Effects of fair value adjustments to inventory (H) 4,266 324 946 1,009 Change in fair value of financial instruments (I) 12,086 6,125 382 - Secondary public offerings (J) 894 1,525 1,385 19 Debt transaction costs (K) 1,205 1,285 526 - Total Add-Backs 39,009 $ 18,582 $ 11,138 $ 12,330 $ Adjusted EBITDA (as reported) 254,679 $ 199,258 $ 188,229 $ 138,183 $ Contributions from acquisitions (L) 42,827 1,280 9,500 12,093 Pro Forma Adjusted EBITDA with Acquisitions 297,506 $ 200,538 $ 197,729 $ 150,276 $ Conversion of GMS Operating Leases (M) 12,039 Pro Forma Adjusted EBITDA 309,545 $

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Reconciliation of Gross Profit to Adjusted Gross Profit GAAP Gross Profit Reconciliation Commentary Represents the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value 13 (Unaudited) 1Q18 2Q18 3Q18 4Q18 FY2018 1Q19 2Q19 ($ in millions) Gross Profit - Reported 205.1 $ 212.3 $ 195.4 $ 205.8 $ 818.6 $ 244.8 $ 268.2 $ Adjustments Effects of fair value adjustments to inventory (A) - 0.2 0.1 0.0 0.3 4.1 - Gross Profit - Adjusted 205.1 $ 212.4 $ 195.5 $ 205.8 $ 818.9 $ 248.9 $ 268.2 $ Gross Margin - Adjusted 31.9% 32.8% 33.4% 32.4% 32.6% 32.0% 32.2%

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Reconciliation of SG&A to Adjusted SG&A & Organic 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. 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 Represents SG&A incurred by 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 14 (Unaudited) 1Q18 2Q18 3Q18 4Q18 FY2018 1Q19 2Q19 ($ in millions) SG&A - Reported 156.1 $ 159.9 $ 156.3 $ 161.6 $ 633.9 $ 185.4 $ 185.3 $ Adjustments Stock appreciation rights expense (benefit) (A) (0.6) (0.6) (0.6) (0.5) (2.3) (0.3) (0.6) Redeemable noncontrolling interests (B) (0.9) (0.2) (0.3) (0.5) (1.9) (0.5) (0.3) Equity-based compensation (C) (0.5) (0.4) (0.4) (0.4) (1.7) (0.4) (1.1) Severance and other permitted costs (D) (0.2) (0.1) (0.0) (0.3) (0.6) (4.8) (0.9) Transaction costs (acquisition and other) (E) (0.2) (0.1) (0.1) (3.0) (3.4) (4.8) (0.8) Loss (gain) on disposal of assets 0.4 0.2 0.1 (0.1) 0.5 0.1 0.2 Secondary Public Offering (F) (0.6) - (0.9) - (1.5) - - Debt Related Costs (G) (0.7) (0.0) - (0.5) (1.3) (0.6) (0.1) SG&A - Adjusted 152.8 $ 158.7 $ 153.9 $ 156.3 $ 621.7 $ 174.1 $ 181.6 $ % of net sales 23.8% 24.5% 26.3% 24.6% 24.8% 22.4% 21.8% SG&A - Acquistions (H) - $ 1.0 $ 1.2 $ 0.5 $ 54.6 $ 17.8 $ 25.6 $ Organic Adjusted SG&A 152.8 $ 157.7 $ 152.7 $ 155.8 $ 567.1 $ 156.3 $ 156.1 $

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