Business Wire | Nov 2, 2020 04:31PM EST

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

Nov. 02, 2020

SANTA ANA, Calif.--(BUSINESS WIRE)--Nov. 02, 2020--Foundation Building Materials, Inc. (NYSE: FBM), one of the largest specialty building products distributors of wallboard, suspended ceiling systems, metal framing and complementary and other products in North America, today reported third quarter 2020 financial results, provided a COVID-19 (the "COVID-19 Pandemic") business update and issued full year 2020 guidance.

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

2020 Third Quarter Results

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

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

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

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

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

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

2020 Year-to-Date Results

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

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

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

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

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

2020 Full Year Guidance(a)

Net Sales (in billions) $2.01 to $2.03

Adjusted EBITDA^(b)(in millions) $150.0 to $165.0

Adjusted EPS^(b) $0.90 to $1.00

Net debt leverage ratio^(b) 2.60x to 2.75x

^(a)Guidance for 2020 includes anticipated contributions from greenfieldbranches and excludes acquisitions.

^(b)Adjusted EBITDA, adjusted EPS and net debt leverage ratio are non-GAAPfinancial measures.

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

COVID-19 Pandemic Business Update

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

Third Quarter Earnings Release and Conference Call

In conjunction with this release, Foundation Building Materials, Inc. will host a conference call tomorrow, Tuesday, November 3, 2020 at 8:30 AM Eastern Time. Ruben Mendoza, President and Chief Executive Officer, John Gorey, Chief Financial Officer, Pete Welly, Chief Operating Officer, Kirby Thompson, Senior Vice President of Sales and Marketing and John Moten, Vice President Investor Relations, will host the call.

The call can be accessed in three ways:

* Through the Company's website: www.fbmsales.com under the "Events and Presentations" tab in the "Investors" section of the website; * By telephone: For both listen-only participants and those who wish to take part in the question and answer portion of the call, the dial-in telephone number in the U.S. is (877) 407-9039. For participation outside the U.S., the dial-in number is (201) 689-8470; and * Using audio replay: A replay of the call will be available beginning at 11:30 AM Eastern Time on Tuesday, November 3, 2020 and ending at 11:59 PM Eastern Time on Tuesday, November 10, 2020. The dial-in number for U.S.-based participants to listen to the audio replay is (844) 512-2921. Participants outside the U.S. should use the replay dial-in number of (412) 317-6671. All callers will be required to provide a Conference ID of 13711602.

About Foundation Building Materials

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

Forward-Looking Statements

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as "believe," "anticipate," "expect," "estimate," "intend," "project," "plan," or words or phrases with similar meaning. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements contained in this press release relate to, among other things, the impact of the COVID-19 Pandemic on the Company's business and financial performance, the Company's anticipated financial performance, operating results and net debt leverage ratio for the fiscal year ending December 31, 2020, the effect of certain strategic actions and cost-saving initiatives taken by the Company, and the Company's ability to create long-term value. The impacts and disruptions caused by the COVID-19 Pandemic are highly uncertain, cannot be accurately predicted, and will depend upon future developments outside the control of the Company, including the scope and duration of the pandemic, as well as the scope and impact of any government orders and restrictions designed to limit the further spread of COVID-19. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental, public health and technological factors outside of our control that may cause our business, strategy or actual results to differ materially from the forward-looking statements. We do not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Investors are referred to our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.

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

- Financial Tables Follow -

FOUNDATION BUILDING MATERIALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except share and per share data)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Net sales $ 521,261 $ 564,906 $ 1,531,609 $ 1,639,689

Cost of goods sold 366,846 393,111 1,069,381 1,143,397

Gross profit 154,415 171,795 462,228 496,292

Operating expenses:

Selling, generaland administrative 115,125 123,907 344,479 363,872 expenses

Depreciation and 19,413 20,218 57,920 60,911 amortization

Total operating 134,538 144,125 402,399 424,783 expenses

Income from 19,877 27,670 59,829 71,509 operations

Interest expense (6,463) (9,118) (21,349) (26,015)

Gain on legal - - 8,556 - settlement

Other income 436 (89) (39) (4) (expense), net

Income before 13,850 18,463 46,997 45,490 income taxes

Income tax expense 2,049 5,754 10,963 13,232

Income fromcontinuing 11,801 12,709 36,034 32,258 operations

Loss on sale ofdiscontinued - (11) - (1,401) operations, net oftax

Net income $ 11,801 $ 12,698 $ 36,034 $ 30,857



Earnings per share data:

Earnings fromcontinuing 0.27 0.30 0.83 0.75 operations pershare - basic

Earnings fromcontinuing 0.27 0.30 0.83 0.75 operations pershare - diluted



Loss fromdiscontinued - - - (0.03) operations pershare - basic

Loss fromdiscontinued - - - (0.03) operations pershare - diluted



Earnings per share 0.27 0.30 0.83 0.72 - basic

Earnings per share 0.27 0.30 0.83 0.72 - diluted



Weighted average shares outstanding:

Basic 43,206,505 42,988,829 43,152,229 42,969,797

Diluted 43,565,493 43,508,678 43,478,442 43,174,351

FOUNDATION BUILDING MATERIALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share data)

September 30, December 31, 2020 2019

Current assets:

Cash and cash equivalents $ 18,675 $ 17,766

Accounts receivable-net of allowance for expectedcredit losses of $2,864 265,352 262,757 and $3,169, respectively

Other receivables 38,928 59,104

Inventories 153,650 178,624

Prepaid expenses and other current assets 11,297 7,965

Total current assets 487,902 526,216

Property and equipment, net 150,801 150,188

Right-of-use assets, net 123,821 120,562

Intangible assets, net 80,101 113,861

Goodwill 494,825 495,724

Other assets 4,663 5,206

Total assets $ 1,342,113 $ 1,411,757

Liabilities and stockholders' equity:

Current liabilities:

Accounts payable $ 142,972 $ 145,226

Accrued payroll and employee benefits 28,099 31,410

Accrued taxes 10,269 8,780

Current portion of tax receivable agreement 8,537 27,850

Current portion of term loan 4,500 4,500

Current portion of lease liabilities 32,162 30,307

Other current liabilities 13,694 18,557

Total current liabilities 240,233 266,630

Asset-based revolving credit facility 9,500 89,000

Long-term portion of term loan, net 432,108 434,633

Tax receivable agreement 80,996 89,533

Deferred income taxes, net 22,114 18,972

Long-term portion of lease liabilities 97,290 97,145

Other liabilities 15,446 7,679

Total liabilities 897,687 1,003,592

Commitments and contingencies



Stockholders' equity:

Preferred stock, $0.001 par value, authorized - - 10,000,000 shares; 0 shares issued

Common stock, $0.001 par value, authorized190,000,000 shares; 43,207,120 and 13 13 42,991,016 shares issued, respectively

Additional paid-in capital 340,299 336,362

Retained earnings 110,288 74,254

Accumulated other comprehensive loss (6,174) (2,464)

Total stockholders' equity 444,426 408,165

Total liabilities and stockholders' equity $ 1,342,113 $ 1,411,757

FOUNDATION BUILDING MATERIALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)

Nine Months Ended September 30,

2020 2019

Cash flows from operating activities:

Net income $ 36,034 $ 30,857

Less: loss on sale of discontinued operations - (1,401)

Net income from continuing operations 36,034 32,258

Adjustments to reconcile net income to net cashprovided by operating activities from continuing operations:

Depreciation 22,044 26,173

Amortization of intangible assets 35,876 34,738

Amortization of debt issuance costs and debt discount 1,620 1,617

Inventory fair value purchase accounting adjustment - 234

Provision for expected credit losses 2,102 2,017

Stock-based compensation 4,319 3,056

Loss (gain) on disposal or sale of assets 807 (54)

Right-of-use assets non-cash expense 22,716 20,586

Deferred income taxes 3,737 63

Change in assets and liabilities, net of effects of acquisitions:

Accounts receivable (715) (32,949)

Other receivables 19,744 10,520

Inventories 26,828 5,623

Prepaid expenses and other current assets (3,361) (4,198)

Other assets 8 (187)

Accounts payable (1,720) 2,417

Accrued payroll and employee benefits (3,219) 214

Accrued taxes 1,495 (860)

Operating lease liabilities (22,336) (20,034)

Other liabilities 1,205 6,019

Net cash provided by operating activities from 147,184 87,253 continuing operations

Cash flows from investing activities from continuing operations:

Purchases of property and equipment (22,015) (29,369)

Proceeds from termination of net investment hedge - 3,313

Net (payments of) proceeds from net working capitaladjustments related to (44) 461 acquisitions

Proceeds from disposal or sale of assets 1,194 2,719

Acquisitions, net of cash acquired (12,163) (21,882)

Net cash used in investing activities from continuing (33,028) (44,758) operations

Cash flows from financing activities from continuing operations:

Proceeds from asset-based revolving credit facility 403,000 403,454

Repayments of asset-based revolving credit facility (482,500) (415,178)

Principal payments for term loan (3,375) (3,375)

Payment related to tax receivable agreement (27,850) (16,667)

Tax withholding payment related to net settlement of (382) (155) equity awards

Principal repayment of finance lease liabilities (2,066) (2,002)

Net cash used in financing activities from continuing (113,173) (33,923) operations

Net cash used in investing activities from - (1,401) discontinued operations

Net cash used in discontinued operations - (1,401)

Effect of exchange rate changes on cash (74) 198

Net increase in cash 909 7,369

Cash and cash equivalents at beginning of period 17,766 15,299

Cash and cash equivalents at end of period $ 18,675 $ 22,668

Supplemental disclosures of cash flow information:

Cash paid for income taxes $ 8,109 $ 10,401

Cash paid for interest $ 19,736 $ 24,150

Supplemental disclosures of non-cash investing and financing activities:

Decrease in fair value of derivatives, net of tax $ 1,532 $ 5,663

Net goodwill increase for purchase price allocation $ 33 $ 57

FOUNDATION BUILDING MATERIALS, INC. NET SALES BY MAJOR PRODUCT LINE, GROSS PROFIT AND GROSS MARGIN FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) (dollars in thousands)

Three Months Ended September 30, Change

2020 2019 $ %

Wallboard $ 199,448 38.3 % $ 207,326 36.7 % $ (7,878) (3.8) %

Suspendedceiling 97,323 18.7 % 118,873 21.0 % (21,550) (18.1) %systems

Metal framing 90,333 17.3 % 98,817 17.5 % (8,484) (8.6) %

Complementaryand other 134,157 25.7 % 139,890 24.8 % (5,733) (4.1) %products

Total net $ 521,261 100.0 % $ 564,906 100.0 % $ (43,645) (7.7) %sales

Total gross $ 154,415 $ 171,795 $ (17,380) (10.1) %profit

Total gross 29.6 % 30.4 % (0.8) % margin



Nine Months Ended September 30,

Change

2020

2019

$

%

Wallboard

$

590,304

38.5

%

$

624,299

38.1

%

$

(33,995)

(5.4)

%

Suspended ceiling systems

287,337

18.8

%

314,045

19.2

%

(26,708)

(8.5)

%

Metal framing

265,855

17.4

%

300,493

18.3

%

(34,638)

(11.5)

%

Complementary and other products

388,113

25.3

%

400,852

24.4

%

(12,739)

(3.2)

%

Total net sales

$

1,531,609

100.0

%

$

1,639,689

100.0

%

$

(108,080)

(6.6)

%

Total gross profit

$

462,228

$

496,292

$

(34,064)

(6.9)

%

Total gross margin

30.2

%

30.3

%

(0.1)

%

FOUNDATION BUILDING MATERIALS, INC. BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) (dollars in thousands)

Nine Months Ended September 30, Change

2020 2019 $ %

Wallboard $ 590,304 38.5 % $ 624,299 38.1 % $ (33,995) (5.4) %

Suspendedceiling 287,337 18.8 % 314,045 19.2 % (26,708) (8.5) %systems

Metal framing 265,855 17.4 % 300,493 18.3 % (34,638) (11.5) %

Complementaryand other 388,113 25.3 % 400,852 24.4 % (12,739) (3.2) %products

Total net $ 1,531,609 100.0 % $ 1,639,689 100.0 % $ (108,080) (6.6) %sales

Total gross $ 462,228 $ 496,292 $ (34,064) (6.9) %profit

Total gross 30.2 % 30.3 % (0.1) % margin



FOUNDATION BUILDING MATERIALS, INC. BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) (dollars in thousands)

Three Months Ended Change September 30,

2020 2019 $ %

Base business ^(1) $ 487,167 $ 538,936 $ (51,769) (9.6) %

Acquired and combined^ (2) 34,094 25,970 8,124 31.3 %

Net sales $ 521,261 $ 564,906 $ (43,645) (7.7) %

^(1) Represents net sales from branches that were owned by us since January 1,2019, and branches that were opened by us during such period.

^(2) Represents branches acquired and combined after January 1, 2019, primarilyas a result of our strategic combination of branches.

Nine Months EndedSeptember 30,

Change

2020

2019

$

%

Base business (1)

$

1,438,355

$

1,569,039

$

(130,684)

(8.3)

%

Acquired and combined (2)

93,254

70,650

22,604

32.0

%

Net sales

$

1,531,609

$

1,639,689

$

(108,080)

(6.6)

%

(1) Represents net sales from branches that were owned by us since January 1, 2019, and branches that were opened by us during such period.

(2) Represents branches acquired and combined after January 1, 2019, primarily as a result of our strategic combination of branches.

FOUNDATION BUILDING MATERIALS, INC. BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY MAJOR PRODUCT LINE FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) (dollars in thousands)

Nine Months Ended Change September 30,

2020 2019 $ %

Base business ^(1) $ 1,438,355 $ 1,569,039 $ (130,684) (8.3) %

Acquired and combined^ (2) 93,254 70,650 22,604 32.0 %

Net sales $ 1,531,609 $ 1,639,689 $ (108,080) (6.6) %

^(1) Represents net sales from branches that were owned by us since January 1,2019, and branches that were opened by us during such period.

^(2) Represents branches acquired and combined after January 1, 2019, primarilyas a result of our strategic combination of branches.

FOUNDATION BUILDING MATERIALS, INC. BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY MAJOR PRODUCT LINE FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) (dollars in thousands)

Base Acquired Three Acquired Three Total Business and Months Base and Months Net Net Combined Ended Business Net Combined Ended Sales % Sales % Net September Sales Change Net Sales September Change Change^ Sales % 30, 2019 Change 30, 2020 (1) Change^ (2)

Wallboard $ 207,326 $ (12,156) $ 4,278 $ 199,448 (3.8) % (6.1) % 55.7 %

Suspendedceiling 118,873 (22,239) 689 97,323 (18.1) % (19.9) % 9.9 %systems

Metal framing 98,817 (8,709) 225 90,333 (8.6) % (9.2) % 5.2 %

Complementaryand 139,890 (8,665) 2,932 134,157 (4.1) % (6.5) % 41.8 %otherproducts

Net sales $ 564,906 $ (51,769) $ 8,124 $ 521,261 (7.7) % (9.6) % 31.3 %

Average dailynet $ 8,967 $ (943) $ 121 $ 8,145 (9.2) % (11.0) % 29.2 %sales^(3)

^(1) Represents base business net sales change as a percentage of base businessnet sales for the three months ended September 30, 2019.

^(2) Represents acquired and combined net sales change as a percentage ofacquired and combined net sales for the three months ended September 30, 2019.

^(3) The numbers of business days for the three months ended September 30, 2020and 2019 were 64 and 63, respectively.

Nine Months Ended September 30, 2019

Base Business Net Sales Change

Acquired and Combined Net Sales Change

Nine Months Ended September 30, 2020

Total Net Sales % Change

Base Business Net Sales % Change(1)

Acquired and Combined Net Sales % Change(2)

Wallboard

$

624,299

$

(42,540)

$

8,545

$

590,304

(5.4)

%

(7.1)

%

36.1

%

Suspended ceiling systems

314,045

(33,233)

6,525

287,337

(8.5)

%

(11.1)

%

43.6

%

Metal framing

300,493

(35,597)

959

265,855

(11.5)

%

(12.3)

%

7.9

%

Complementary and other products

400,852

(19,314)

6,575

388,113

(3.2)

%

(5.1)

%

33.0

%

Net sales

$

1,639,689

$

(130,684)

$

22,604

$

1,531,609

(6.6)

%

(8.3)

%

32.0

%

Average daily net sales(3)

$

8,630

$

(767)

$

114

$

7,977

(7.6)

%

(9.3)

%

30.6

%

(1) Represents base business net sales change as a percentage of base business net sales for the nine months ended September 30, 2019.

(2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the nine months ended September 30, 2019.

(3) The numbers of business days for the nine months ended September 30, 2020 and 2019 were 192 and 190, respectively.

Non-GAAP Financial Measures

In addition to presenting financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), this press release contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and net debt leverage ratio, which are provided as supplemental measures of financial performance. These measures are not required by, or presented in accordance with, GAAP. The Company calculates adjusted EBITDA as net income from continuing operations before interest expense, net, income tax expense, depreciation and amortization, offering and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as (gain) loss on disposal or sale of assets, gain on legal settlement and transaction costs. The Company calculates adjusted EBITDA margin as adjusted EBITDA divided by net sales. The Company calculates adjusted net income as net income from continuing operations before offering and public company readiness expenses, stock-based compensation, tax effects on adjustments, and other non-recurring adjustments such as (gain) loss on disposal or sale of assets, gain on legal settlement and transaction costs. The Company calculates adjusted earnings per share as adjusted net income on a per weighted average share outstanding basis. For a calculation of net debt leverage ratio, see Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Quarterly Report on Form 10-Q for the three months ended September 30, 2020.

These non-GAAP financial measures are presented because they are important metrics used by management as a means by which it assesses financial performance. We believe these measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company's industry. These measures, when used in conjunction with the most directly comparable GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing the Company's financial condition and results of operations.

These non-GAAP financial measures have certain limitations, which are discussed in greater detail in the Company's filings with the Securities and Exchange Commission. These measures should not be considered as alternatives to measures of financial performance prepared in accordance with GAAP. In addition, these measures should not be construed as an inference that the Company's future results will be unaffected by unusual or non-recurring items. Furthermore, these measures are not intended to be considered liquidity measures. Other companies, including other companies in the Company's industry, may not use these measures or may calculate one or more of these measures differently than the Company does, limiting their usefulness as comparative measures.

The following is a reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income from continuing operations (unaudited):

Base Acquired Nine Months Acquired Nine Months Total Business and Ended Base Business and Ended Net Net Combined September 30, Net Sales Combined September 30, Sales % Sales % Net 2019 Change Net Sales 2020 Change Change^ Sales % Change (1) Change^ (2)

Wallboard $ 624,299 $ (42,540) $ 8,545 $ 590,304 (5.4) % (7.1) % 36.1 %

Suspendedceiling 314,045 (33,233) 6,525 287,337 (8.5) % (11.1) % 43.6 %systems

Metal framing 300,493 (35,597) 959 265,855 (11.5) % (12.3) % 7.9 %

Complementaryand 400,852 (19,314) 6,575 388,113 (3.2) % (5.1) % 33.0 %otherproducts

Net sales $ 1,639,689 $ (130,684) $ 22,604 $ 1,531,609 (6.6) % (8.3) % 32.0 %

Average dailynet $ 8,630 $ (767) $ 114 $ 7,977 (7.6) % (9.3) % 30.6 %sales^(3)

^(1) Represents base business net sales change as a percentage of base businessnet sales for the nine months ended September 30, 2019.

^(2) Represents acquired and combined net sales change as a percentage ofacquired and combined net sales for the nine months ended September 30, 2019.

^(3) The numbers of business days for the nine months ended September 30, 2020and 2019 were 192 and 190, respectively.

Non-GAAP Financial Measures

In addition to presenting financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), this press release contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and net debt leverage ratio, which are provided as supplemental measures of financial performance. These measures are not required by, or presented in accordance with, GAAP. The Company calculates adjusted EBITDA as net income from continuing operations before interest expense, net, income tax expense, depreciation and amortization, offering and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as (gain) loss on disposal or sale of assets, gain on legal settlement and transaction costs. The Company calculates adjusted EBITDA margin as adjusted EBITDA divided by net sales. The Company calculates adjusted net income as net income from continuing operations before offering and public company readiness expenses, stock-based compensation, tax effects on adjustments, and other non-recurring adjustments such as (gain) loss on disposal or sale of assets, gain on legal settlement and transaction costs. The Company calculates adjusted earnings per share as adjusted net income on a per weighted average share outstanding basis. For a calculation of net debt leverage ratio, see Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Quarterly Report on Form 10-Q for the three months ended September 30, 2020.

These non-GAAP financial measures are presented because they are important metrics used by management as a means by which it assesses financial performance. We believe these measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company's industry. These measures, when used in conjunction with the most directly comparable GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing the Company's financial condition and results of operations.

These non-GAAP financial measures have certain limitations, which are discussed in greater detail in the Company's filings with the Securities and Exchange Commission. These measures should not be considered as alternatives to measures of financial performance prepared in accordance with GAAP. In addition, these measures should not be construed as an inference that the Company's future results will be unaffected by unusual or non-recurring items. Furthermore, these measures are not intended to be considered liquidity measures. Other companies, including other companies in the Company's industry, may not use these measures or may calculate one or more of these measures differently than the Company does, limiting their usefulness as comparative measures.

The following is a reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income from continuing operations (unaudited):

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(dollars in thousands)

Net income from continuing $ 11,801 $ 12,709 36,034 32,258 operations

Interest expense, net 6,447 9,012 21,265 25,999

Income tax expense 2,049 5,754 10,963 13,232

Depreciation and amortization 19,413 20,218 57,920 60,911

Offering and public companyreadiness - 378 - 378 expenses^(a)

Stock-based compensation 1,491 1,117 4,319 3,056

(Gain) loss on disposal or (294) 13 414 (54) sale of assets

Gain on legal settlement - - (8,556) -

Transaction costs^(b) 811 819 1,895 2,046

Adjusted EBITDA $ 41,718 $ 50,020 $ 124,254 $ 137,826

Adjusted EBITDA margin^(c) 8.0 % 8.9 % 8.1 % 8.4 %



(a) Represents costs related to our initial public offering, secondaryoffering, and public company readiness expenses.

(b) Represents costs related to our transactions, including fees paid tofinancial advisors, accountants, attorneys, and other professionals, as well ascertain internal corporate development costs. The costs also include non-cashpurchase accounting effects to adjust for the effect of the purchase accountingstep-up in the value of inventory to fair value recognized as a result ofacquisitions.

(c) Adjusted EBITDA margin represents adjusted EBITDA divided by net sales.

The following is a reconciliation of adjusted net income to the most directly comparable GAAP measure, net income from continuing operations (unaudited):

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

(in thousands, exceptshare and per share data)

Net income from $ 11,801 $ 12,709 $ 36,034 $ 32,258 continuing operations

Offering and publiccompany readiness - 378 - 378 expenses^(a)

Stock-based 1,491 1,117 4,319 3,056 compensation

(Gain) loss ondisposal or sale of (294) 13 414 (54) assets

Gain on legal - - (8,556) - settlement

Transaction costs^(b) 811 819 1,895 2,046

Tax effects^(c) (517) (594) 497 (1,386)

Adjusted net income $ 13,292 $ 14,442 $ 34,603 $ 36,298



Earnings per share data as reported:

Basic $ 0.27 $ 0.30 $ 0.83 $ 0.75

Diluted $ 0.27 $ 0.30 $ 0.83 $ 0.75

Earnings per share data as adjusted:

Basic $ 0.31 $ 0.33 $ 0.81 $ 0.84

Diluted $ 0.31 $ 0.33 $ 0.80 $ 0.84



Weighted average shares outstanding:

Basic 43,206,505 42,988,829 43,152,229 42,969,797

Diluted 43,565,493 43,508,678 43,478,442 43,174,351

(a) Represents costs related to our initial public offering, secondaryoffering, and public company readiness expenses.

(b) Represents costs related to our transactions, including fees paid tofinancial advisors, accountants, attorneys, and other professionals, as well ascertain internal corporate development costs. The costs also include non-cashpurchase accounting effects to adjust for the effect of the purchase accountingstep-up in the value of inventory to fair value recognized as a result ofacquisitions.

(c) Represents the impact of corporate income taxes. The tax rate applied tothese adjustments is calculated by using a forecasted blended federal and statestatutory rate, which amounted to 25.76% during both the three and nine monthsended September 30, 2020.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201102006016/en/

CONTACT: Investor Relations: John Moten, IRC Foundation Building Materials, Inc. 657-900-3200 Investors@fbmsales.com

CONTACT: Media Relations: Joele Frank, Wilkinson Brimmer Katcher Jed Repko or Ed Trissel 212-355-4449