Business Wire | Dec 3, 2020 06:00AM EST

GMS Reports Second Quarter Fiscal 2021 Results

Dec. 03, 2020

TUCKER, Ga.--(BUSINESS WIRE)--Dec. 03, 2020--GMS Inc. (NYSE: GMS), a leading North American specialty distributor of interior building products, today reported financial results for the second quarter of fiscal 2021 ended October 31, 2020.

Second Quarter Fiscal 2021 Highlights(Comparisons are to the second quarter of fiscal 2020, except where noted.)

* Net sales of $812.9 million decreased 5.7%; organic net sales decreased 6.4%. On a per day basis, net sales and organic net sales declined 4.2% and 5.0%, respectively. * Net income of $28.5 million, or $0.66 per diluted share; adjusted net income of $40.2 million, or $0.93 per diluted share. * SG&A and Adjusted SG&A as a percentage of sales were 23.2% and 22.5%, representing 10 and 20 basis points of improvement, respectively. * Adjusted EBITDA of $82.5 million, or 10.2% of sales, compared to $89.9 million, or 10.4% of sales. * The Company opened one new greenfield location during the second quarter of fiscal 2021. * Net debt leverage was 3.0 times as of the end of the second quarter of fiscal 2021. * Cash provided by operating activities and free cash flow totaled $39.8 million and $32.7 million, respectively. * As of October 31, 2020, the Company had cash on hand of $118.2 million, and $415.4 million of available liquidity under its revolving credit facilities.

"Outstanding execution by our entire team enabled us to generate solid second quarter results, with net sales levels exceeding our earlier expectations," said John C. Turner, Jr., President and Chief Executive Officer. "The overall operating environment remained challenged throughout the period, particularly with respect to commercial construction, although we realized benefits from the strong residential market. A disciplined alignment of our cost structure to current demand enabled us to improve SG&A and Adjusted SG&A as a percentage of sales while maintaining a relentless focus on serving our customers. Additionally, we continued to advance our strategic growth initiatives in the second quarter, as evidenced by the opening of a new greenfield location and generating yet another quarter of positive sales growth in our complementary Other products category, despite the difficult market conditions."

Turner continued, "Looking ahead, the safety of our employees, customers and communities remains our top priority. I am confident in our team's ability to continue to leverage opportunities, address challenges and ensure that GMS remains well-positioned to generate value for our shareholders."

Second Quarter Fiscal 2021 Results

Net sales for the second quarter of fiscal 2021 were $812.9 million, down 5.7%, compared to $861.9 million for the second quarter of the prior fiscal year, as a result of continued COVID-19 related market declines. Organic net sales declined 6.4%.

* Wallboard sales of $330.5 million decreased 5.7% (down 6.0% on an organic basis) compared to the second quarter of fiscal 2020, principally due to a decline in mix, volume and, to a lesser extent, price. * Ceilings sales of $111.3 million decreased 9.4% (down 9.5% on an organic basis) year over year driven by lower volume partially offset by higher price/mix. * Steel framing sales of $111.3 million decreased 18.3% (down 18.6% on an organic basis) year over year due to a decline in both volumes and price/mix. * Other product sales of $259.8 million increased 2.9% (up 1.2% on an organic basis) year over year due to positive contributions from acquisitions and execution of strategic growth initiatives.

There was one less selling day in the second quarter of fiscal 2021 than the same period a year ago. Net sales and organic net sales on a per day basis declined 4.2% and 5.0%, respectively.

Year over year sales declines were more pronounced in ceilings and steel framing, as these product categories are tied primarily to commercial construction which remained challenged during the quarter.

Gross profit of $265.1 million decreased 6.8% compared to the second quarter of fiscal 2020 primarily due to lower sales. Gross margin of 32.6% declined 40 basis points year over year principally due to challenging mix dynamics, particularly in the commercial segment.

Selling, general and administrative ("SG&A") expense as a percentage of net sales was 23.2% for the quarter compared to 23.3% in the second quarter of fiscal 2020. Adjusted SG&A expense as a percentage of net sales was 22.5% compared to 22.7% in the prior year quarter. This 20 basis point improvement resulted from ongoing actions to align the Company's cost structure with the current demand environment resulting from the COVID-19 pandemic. This SG&A leverage was realized despite deflationary price and unfavorable mix impacts with certain of the Company's products.

Net income of $28.5 million, or $0.66 per diluted share, compared to $29.1 million, or $0.68 per diluted share, in the second quarter of the prior fiscal year. Adjusted net income of $40.2 million, or $0.93 per diluted share, compared to $42.7 million, or $1.00 per diluted share, in the second quarter of the prior fiscal year. Adjusted EBITDA of $82.5 million compared to $89.9 million in the second quarter of the prior fiscal year. Adjusted EBITDA margin of 10.2% compared to 10.4% a year ago.

Platform Expansion Activity

During the second quarter of fiscal 2021, the Company opened a new greenfield location in Hillsboro, Oregon.

Balance Sheet and Liquidity

As of October 31, 2020, the Company had cash on hand of $118.2 million, total debt of $996.0 million and $415.4 million of available liquidity under its revolving credit facilities. Net debt leverage was 3.0 times as of the end of the quarter, equal to that at the end of the first quarter of fiscal 2021, and down from the 3.5 times as of the end of the second quarter of fiscal 2020. The Company generated cash provided by operating activities and free cash flow of $39.8 million and $32.7 million, respectively, in the second quarter.

Conference Call and Webcast

GMS will host a conference call and webcast to discuss its results for the second quarter of fiscal 2021 ended October 31, 2020 and other information related to its business at 8:30 a.m. Eastern Time on Thursday, December 3, 2020. 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 3, 2021 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13713234.

About GMS Inc.

Founded in 1971, GMS operates a network of more than 260 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.

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, Adjusted SG&A margin, Adjusted EBITDA, and Adjusted EBITDA margin 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.

When calculating organic net sales growth, the Company excludes from the calculation (i) net sales of acquired businesses until the first anniversary of the acquisition date, and (ii) the impact of foreign currency translation.

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 and the economy generally, actions taken to optimize our operations and align our business consistent with demand, our ability to continue successfully navigating the evolving operating environment, strategic initiatives and growth potential across the Company's business, our efforts in response to COVID-19, and the ability to deliver growth, value creation and long-term success contained in this press release may be considered forward-looking statements. The Company has based 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, including current public health issues that may affect the Company's business. Forward-looking statements involve risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section in the Company's most recent Annual Report on Form 10-K, and in its other periodic reports filed with the SEC. In addition, the statements in this release are made as of December 3, 2020. 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 3, 2020.

GMS Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)



Three Months Ended Six Months Ended

October 31, October 31,

2020 2019 2020 2019

Net sales $ 812,856 $ 861,929 $ 1,615,429 $ 1,709,105

Cost of sales (exclusiveof depreciation andamortization shown 547,785 577,436 1,089,900 1,150,958

separately below)

Gross profit 265,071 284,493 525,529 558,147

Operating expenses:

Selling, general and 188,352 200,457 371,464 395,088administrative

Depreciation and 27,245 29,518 54,342 58,793amortization

Total operating expenses 215,597 229,975 425,806 453,881

Operating income 49,474 54,518 99,723 104,266

Other (expense) income:

Interest expense (13,525) (17,559) (27,606) (35,836)

Write-off of debtdiscount and deferred - (707) - (707)financing fees

Other income, net 797 813 1,452 1,752

Total other expense, net (12,728) (17,453) (26,154) (34,791)

Income before taxes 36,746 37,065 73,569 69,475

Provision for income 8,277 7,927 17,881 15,517taxes

Net income $ 28,469 $ 29,138 $ 55,688 $ 53,958

Weighted average common shares outstanding:

Basic 42,723 41,761 42,674 41,382

Diluted 43,174 42,635 43,096 42,126

Net income per common share(1):

Basic $ 0.67 $ 0.70 $ 1.30 $ 1.30

Diluted $ 0.66 $ 0.68 $ 1.29 $ 1.27

(1) The following table sets forth the computation of basic and diluted earnings per share of common stock for periods presented:



Three Months Ended Six Months Ended

October 31, October 31,

2020 2019 2020 2019

(in thousands, except per share data)

Net income $ 28,469 $ 29,138 $ 55,688 $ 53,958

Less: Net income allocated to - - - 342participating securities

Net income attributable to common $ 28,469 $ 29,138 $ 55,688 $ 53,616stockholders

Basic earnings per common share:

Basic weighted average common 42,723 41,761 42,674 41,382shares outstanding

Basic earnings per common share $ 0.67 $ 0.70 $ 1.30 $ 1.30

Diluted earnings per common share:

Basic weighted average common 42,723 41,761 42,674 41,382shares outstanding

Add: Common Stock Equivalents 451 874 422 744

Diluted weighted average common 43,174 42,635 43,096 42,126shares outstanding

Diluted earnings per common share $ 0.66 $ 0.68 $ 1.29 $ 1.27

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)

October 31,

April 30,

2020

2020

Assets

Current assets:

Cash and cash equivalents

$

118,168

$

210,909

Trade accounts and notes receivable, net of allowances of $5,273 and $5,141, respectively

434,836

405,254

Inventories, net

302,357

299,815

Prepaid expenses and other current assets

19,042

14,972

Total current assets

874,403

930,950

Property and equipment, net of accumulated depreciation of $174,832 and $158,554, respectively

300,144

305,467

Operating lease right-of-use assets

114,198

115,257

Goodwill

557,486

553,073

Intangible assets, net

339,918

361,884

Deferred income taxes

12,651

8,904

Other assets

12,074

13,247

Total assets

$

2,210,874

$

2,288,782

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

163,927

$

213,230

Accrued compensation and employee benefits

43,843

67,590

Other accrued expenses and current liabilities

88,170

63,812

Current portion of long-term debt

49,302

50,201

Current portion of operating lease liabilities

31,694

33,040

Total current liabilities

376,936

427,873

Non-current liabilities:

Long-term debt, less current portion

946,721

1,047,279

Long-term operating lease liabilities

88,122

89,605

Deferred income taxes, net

7,837

12,018

Other liabilities

73,361

78,026

Total liabilities

1,492,977

1,654,801

Commitments and contingencies

Stockholders' equity:

Common stock, par value $0.01 per share, 500,000 shares authorized; 42,690 and 42,554 shares

issued and outstanding as of October 31, 2020 and April 30, 2020, respectively

427

426

Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and

outstanding as of October 31, 2020 and April 30, 2020

-

-

Additional paid-in capital

534,646

529,662

Retained earnings

224,663

168,975

Accumulated other comprehensive loss

(41,839)

(65,082)

Total stockholders' equity

717,897

633,981

Total liabilities and stockholders' equity

$

2,210,874

$

2,288,782

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)



October 31, April 30,

2020 2020

Assets

Current assets:

Cash and cash equivalents $ 118,168 $ 210,909

Trade accounts and notes receivable, net of 434,836 405,254allowances of $5,273 and $5,141, respectively

Inventories, net 302,357 299,815

Prepaid expenses and other current assets 19,042 14,972

Total current assets 874,403 930,950

Property and equipment, net of accumulated 300,144 305,467depreciation of $174,832 and $158,554, respectively

Operating lease right-of-use assets 114,198 115,257

Goodwill 557,486 553,073

Intangible assets, net 339,918 361,884

Deferred income taxes 12,651 8,904

Other assets 12,074 13,247

Total assets $ 2,210,874 $ 2,288,782

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 163,927 $ 213,230

Accrued compensation and employee benefits 43,843 67,590

Other accrued expenses and current liabilities 88,170 63,812

Current portion of long-term debt 49,302 50,201

Current portion of operating lease liabilities 31,694 33,040

Total current liabilities 376,936 427,873

Non-current liabilities:

Long-term debt, less current portion 946,721 1,047,279

Long-term operating lease liabilities 88,122 89,605

Deferred income taxes, net 7,837 12,018

Other liabilities 73,361 78,026

Total liabilities 1,492,977 1,654,801

Commitments and contingencies

Stockholders' equity:

Common stock, par value $0.01 per share, 500,000shares authorized; 42,690 and 42,554 shares 427 426issued and outstanding as of October 31, 2020 andApril 30, 2020, respectively

Preferred stock, par value $0.01 per share, 50,000shares authorized; 0 shares issued and - -outstanding as of October 31, 2020 and April 30,2020

Additional paid-in capital 534,646 529,662

Retained earnings 224,663 168,975

Accumulated other comprehensive loss (41,839) (65,082)

Total stockholders' equity 717,897 633,981

Total liabilities and stockholders' equity $ 2,210,874 $ 2,288,782

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Six Months Ended

October 31,

2020

2019

Cash flows from operating activities:

Net income

$

55,688

$

53,958

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

Depreciation and amortization

54,342

58,793

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

1,505

2,368

Equity-based compensation

6,370

5,591

Loss (gain) on disposal and impairment of assets

875

(742)

Deferred income taxes

(9,296)

(2,380)

Other items, net

(1,057)

1,101

Changes in assets and liabilities net of effects of acquisitions:

Trade accounts and notes receivable

(26,137)

(29,932)

Inventories

(950)

1,800

Prepaid expenses and other assets

(4,776)

1,573

Accounts payable

(50,867)

(5,486)

Accrued compensation and employee benefits

(23,889)

(12,974)

Other accrued expenses and liabilities

22,240

(3,743)

Cash provided by operating activities

24,048

69,927

Cash flows from investing activities:

Purchases of property and equipment

(11,845)

(14,637)

Proceeds from sale of assets

720

1,056

Acquisition of businesses, net of cash acquired

(51)

(10,633)

Cash used in investing activities

(11,176)

(24,214)

Cash flows from financing activities:

Repayments on revolving credit facilities

(102,189)

(558,906)

Borrowings from revolving credit facilities

14,750

562,698

Payments of principal on long-term debt

(4,984)

(54,984)

Payments of principal on finance lease obligations

(14,629)

(12,310)

Repurchases of common stock

(1,222)

-

Debt issuance costs

-

(1,286)

Proceeds from exercises of stock options

863

6,761

Payments for taxes related to net share settlement of equity awards

(754)

-

Other financing activities

1,270

1,022

Cash used in financing activities

(106,895)

(57,005)

Effect of exchange rates on cash and cash equivalents

1,282

223

Decrease in cash and cash equivalents

(92,741)

(11,069)

Cash and cash equivalents, beginning of period

210,909

47,338

Cash and cash equivalents, end of period

$

118,168

$

36,269

Supplemental cash flow disclosures:

Cash paid for income taxes

$

20,224

$

25,642

Cash paid for interest

25,726

33,654

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Six Months Ended

October 31,

2020 2019

Cash flows from operating activities:

Net income $ 55,688 $ 53,958

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

Depreciation and amortization 54,342 58,793

Write-off and amortization of debt discount and 1,505 2,368debt issuance costs

Equity-based compensation 6,370 5,591

Loss (gain) on disposal and impairment of assets 875 (742)

Deferred income taxes (9,296) (2,380)

Other items, net (1,057) 1,101

Changes in assets and liabilities net of effects of acquisitions:

Trade accounts and notes receivable (26,137) (29,932)

Inventories (950) 1,800

Prepaid expenses and other assets (4,776) 1,573

Accounts payable (50,867) (5,486)

Accrued compensation and employee benefits (23,889) (12,974)

Other accrued expenses and liabilities 22,240 (3,743)

Cash provided by operating activities 24,048 69,927

Cash flows from investing activities:

Purchases of property and equipment (11,845) (14,637)

Proceeds from sale of assets 720 1,056

Acquisition of businesses, net of cash acquired (51) (10,633)

Cash used in investing activities (11,176) (24,214)

Cash flows from financing activities:

Repayments on revolving credit facilities (102,189) (558,906)

Borrowings from revolving credit facilities 14,750 562,698

Payments of principal on long-term debt (4,984) (54,984)

Payments of principal on finance lease obligations (14,629) (12,310)

Repurchases of common stock (1,222) -

Debt issuance costs - (1,286)

Proceeds from exercises of stock options 863 6,761

Payments for taxes related to net share settlement (754) -of equity awards

Other financing activities 1,270 1,022

Cash used in financing activities (106,895) (57,005)

Effect of exchange rates on cash and cash 1,282 223equivalents

Decrease in cash and cash equivalents (92,741) (11,069)

Cash and cash equivalents, beginning of period 210,909 47,338

Cash and cash equivalents, end of period $ 118,168 $ 36,269

Supplemental cash flow disclosures:

Cash paid for income taxes $ 20,224 $ 25,642

Cash paid for interest 25,726 33,654

GMS Inc.

Net Sales by Product Group (Unaudited)

(dollars in thousands)

Three Months Ended

Six Months Ended

October 31,

% of

October 31,

% of

October 31,

% of

October 31,

% of

2020

Total

2019

Total

2020

Total

2019

Total

Wallboard

$

330,515

40.6

%

$

350,618

40.7

%

$

658,512

40.8

%

$

692,213

40.5

%

Ceilings

111,293

13.7

%

122,807

14.2

%

224,995

13.9

%

251,917

14.7

%

Steel framing

111,293

13.7

%

136,159

15.8

%

221,780

13.7

%

267,988

15.7

%

Other products

259,755

32.0

%

252,345

29.3

%

510,142

31.6

%

496,987

29.1

%

Total net sales

$

812,856

$

861,929

$

1,615,429

$

1,709,105

GMS Inc.

Net Sales by Product Group (Unaudited)

(dollars in thousands)



Three Months Ended Six Months Ended

October % of October % of October 31, % of October 31, % of 31, 31,

2020 Total 2019 Total 2020 Total 2019 Total



Wallboard $ 330,515 40.6 % $ 350,618 40.7 % $ 658,512 40.8 % $ 692,213 40.5 %

Ceilings 111,293 13.7 % 122,807 14.2 % 224,995 13.9 % 251,917 14.7 %

Steel 111,293 13.7 % 136,159 15.8 % 221,780 13.7 % 267,988 15.7 %framing

Other 259,755 32.0 % 252,345 29.3 % 510,142 31.6 % 496,987 29.1 %products

Total net $ 812,856 $ 861,929 $ 1,615,429 $ 1,709,105 sales

GMS Inc.

Reconciliation of Net Income to Adjusted EBITDA (Unaudited)

(in thousands)

Three Months Ended

Six Months Ended

October 31,

October 31,

2020

2019

2020

2019

Net income

$

28,469

$

29,138

$

55,688

$

53,958

Interest expense

13,525

17,559

27,606

35,836

Write-off of debt discount and deferred financing fees

-

707

-

707

Interest income

(14)

(6)

(51)

(18)

Provision for income taxes

8,277

7,927

17,881

15,517

Depreciation expense

12,710

12,592

25,537

25,014

Amortization expense

14,535

16,926

28,805

33,779

EBITDA

$

77,502

$

84,843

$

155,466

$

164,793

Stock appreciation expense(a)

314

1,267

1,106

1,327

Redeemable noncontrolling interests(b)

186

(18)

438

644

Equity-based compensation(c)

3,252

2,315

4,857

3,710

Severance and other permitted costs(d)

762

1,394

2,709

1,948

Transaction costs (acquisitions and other)(e)

25

327

125

1,299

Loss (gain) on disposal and impairment of assets(f)

481

(586)

875

(742)

Effects of fair value adjustments to inventory(g)

-

-

-

151

Secondary public offering costs(h)

-

363

-

363

EBITDA add-backs

5,020

5,062

10,110

8,700

Adjusted EBITDA

$

82,522

$

89,905

$

165,576

$

173,493

Net sales

$

812,856

$

861,929

$

1,615,429

$

1,709,105

Adjusted EBITDA margin

10.2

%

10.4

%

10.2

%

10.2

%

(a) Represents non?cash expense related to stock appreciation rights agreements.

(b) Represents non?cash compensation expense related to changes in the 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 Term Loan Facility, including certain unusual, nonrecurring costs due to the COVID-19 pandemic.

(e) Represents costs related to acquisitions paid to third parties.

(f) Includes impairment of assets resulting from restructuring plans to close certain facilities and gains from the sale of assets.

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

(h) Represents costs paid to third-party advisors related to secondary offerings of our common stock.

GMS Inc.

Reconciliation of Net Income to Adjusted EBITDA (Unaudited)

(in thousands)



Three Months Ended Six Months Ended

October 31, October 31,

2020 2019 2020 2019



Net income $ 28,469 $ 29,138 $ 55,688 $ 53,958

Interest expense 13,525 17,559 27,606 35,836

Write-off of debtdiscount and deferred - 707 - 707 financing fees

Interest income (14) (6) (51) (18)

Provision for income 8,277 7,927 17,881 15,517 taxes

Depreciation expense 12,710 12,592 25,537 25,014

Amortization expense 14,535 16,926 28,805 33,779

EBITDA $ 77,502 $ 84,843 $ 155,466 $ 164,793

Stock appreciation 314 1,267 1,106 1,327 expense(a)

Redeemable noncontrolling 186 (18) 438 644 interests(b)

Equity-based compensation 3,252 2,315 4,857 3,710 (c)

Severance and other 762 1,394 2,709 1,948 permitted costs(d)

Transaction costs(acquisitions and other) 25 327 125 1,299 (e)

Loss (gain) on disposaland impairment of assets 481 (586) 875 (742) (f)

Effects of fair valueadjustments to inventory - - - 151 (g)

Secondary public offering - 363 - 363 costs(h)

EBITDA add-backs 5,020 5,062 10,110 8,700

Adjusted EBITDA $ 82,522 $ 89,905 $ 165,576 $ 173,493



Net sales $ 812,856 $ 861,929 $ 1,615,429 $ 1,709,105

Adjusted EBITDA margin 10.2 % 10.4 % 10.2 % 10.2 %

(a) Represents non?cash expense related to stock appreciation rightsagreements.

(b) Represents non?cash compensation expense related to changes in the valuesof noncontrolling interests.

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

(d) Represents severance expenses and other costs permitted in calculationsunder the ABL Facility and the Term Loan Facility, including certain unusual,nonrecurring costs due to the COVID-19 pandemic.

(e) Represents costs related to acquisitions paid to third parties.

(f) Includes impairment of assets resulting from restructuring plans to closecertain facilities and gains from the sale of assets.

(g) Represents the non?cash cost of sales impact of acquisition accountingadjustments to increase inventory to its estimated fair value.

(h) Represents costs paid to third-party advisors related to secondaryofferings of our common stock.

GMS Inc.

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

(in thousands)



Three Months Ended Six Months Ended

October 31, October 31,

2020 2019 2020 2019



Cash provided by operating $ 39,759 $ 82,367 $ 24,048 $ 69,927activities

Purchases of property and (7,100) (8,746) (11,845) (14,637)equipment

Free cash flow(a) $ 32,659 $ 73,621 $ 12,203 $ 55,290

(a) Free cash flow is a non-GAAP financial measure that we define as net cashprovided by operations less capital expenditures.

GMS Inc.

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

(in thousands)

Three Months Ended

Six Months Ended

October 31,

October 31,

2020

2019

2020

2019

Selling, general and administrative expense

$

188,352

$

200,457

$

371,464

$

395,088

Adjustments

Stock appreciation expense(a)

(314)

(1,267)

(1,106)

(1,327)

Redeemable noncontrolling interests(b)

(186)

18

(438)

(644)

Equity-based compensation(c)

(3,252)

(2,315)

(4,857)

(3,710)

Severance and other permitted costs(d)

(812)

(1,394)

(2,693)

(1,948)

Transaction costs (acquisitions and other)(e)

(25)

(327)

(125)

(1,299)

(Loss) gain on disposal and impairment of assets(f)

(481)

586

(875)

742

Secondary public offering costs(g)

-

(363)

-

(363)

Adjusted SG&A

$

183,282

$

195,395

$

361,370

$

386,539

Net sales

$

812,856

$

861,929

$

1,615,429

$

1,709,105

Adjusted SG&A margin

22.5

%

22.7

%

22.4

%

22.6

%

(a) Represents non?cash expense related to stock appreciation rights agreements.

(b) Represents non?cash compensation expense related to changes in the 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 Term Loan Facility, including certain unusual, nonrecurring costs due to the COVID-19 pandemic.

(e) Represents costs related to acquisitions paid to third parties.

(f) Includes impairment of assets resulting from restructuring plans to close certain facilities and gains from the sale of assets.

(g) Represents costs paid to third-party advisors related to secondary offerings of our common stock.

GMS Inc.

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

(in thousands)



Three Months Ended Six Months Ended

October 31, October 31,

2020 2019 2020 2019



Selling, general and $ 188,352 $ 200,457 $ 371,464 $ 395,088 administrative expense



Adjustments

Stock appreciation (314) (1,267) (1,106) (1,327) expense(a)

Redeemable noncontrolling (186) 18 (438) (644) interests(b)

Equity-based compensation (3,252) (2,315) (4,857) (3,710) (c)

Severance and other (812) (1,394) (2,693) (1,948) permitted costs(d)

Transaction costs(acquisitions and other) (25) (327) (125) (1,299) (e)

(Loss) gain on disposaland impairment of assets (481) 586 (875) 742 (f)

Secondary public offering - (363) - (363) costs(g)

Adjusted SG&A $ 183,282 $ 195,395 $ 361,370 $ 386,539



Net sales $ 812,856 $ 861,929 $ 1,615,429 $ 1,709,105

Adjusted SG&A margin 22.5 % 22.7 % 22.4 % 22.6 %

(a) Represents non?cash expense related to stock appreciation rightsagreements.

(b) Represents non?cash compensation expense related to changes in the valuesof noncontrolling interests.

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

(d) Represents severance expenses and other costs permitted in calculationsunder the ABL Facility and the Term Loan Facility, including certain unusual,nonrecurring costs due to the COVID-19 pandemic.

(e) Represents costs related to acquisitions paid to third parties.

(f) Includes impairment of assets resulting from restructuring plans to closecertain facilities and gains from the sale of assets.

(g) Represents costs paid to third-party advisors related to secondaryofferings of our common stock.

GMS Inc.

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

(in thousands, except per share data)



Three Months Ended Six Months Ended

October 31, October 31,

2020 2019 2020 2019

Income before taxes $ 36,746 $ 37,065 $ 73,569 $ 69,475

EBITDA add-backs 5,020 5,062 10,110 8,700

Write-off of discount and - 707 - 707 deferred financing fees

Purchase accountingdepreciation and 10,121 12,276 20,256 24,661 amortization (1)

Adjusted pre-tax income 51,887 55,110 103,935 103,543

Adjusted income tax expense 11,674 12,400 23,385 23,297

Adjusted net income $ 40,213 $ 42,710 $ 80,550 $ 80,246

Effective tax rate (2) 22.5 % 22.5 % 22.5 % 22.5 %



Weighted average shares outstanding:

Basic 42,723 41,761 42,674 41,382

Diluted (3) 43,174 42,635 43,096 42,391

Adjusted net income per share:

Basic $ 0.94 $ 1.02 $ 1.89 $ 1.94

Diluted $ 0.93 $ 1.00 $ 1.87 $ 1.89

^(1) Depreciation and amortization from the increase in value of certainlong-term assets associated with the April 1, 2014 acquisition of thepredecessor company and the acquisition of Titan.

^(2) Normalized cash tax rate determined based on our estimated taxes excludingthe impact of purchase accounting and certain other deferred tax amounts.

^(3) Diluted shares outstanding for periods prior to June 13, 2019 have beenadjusted to include the effect of 1.1 million shares of equity issued inconnection with the acquisition of Titan that were exchangeable for theCompany's common stock. On June 13, 2019, the holders exchanged all of theexchangeable shares for 1.1 million shares of the Company's common stock.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201203005146/en/

CONTACT: Investors: Leslie H. Kratcoski ir@gms.com 770-723-3306