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Monday December 11th, 2017 6:20AM

GMS Reports Record Sales and Adjusted EBITDA for Second Quarter 2018

By The Associated Press

TUCKER, Ga.--(BUSINESS WIRE)--Dec 7, 2017--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 2018 ended October 31, 2017.

Second Quarter 2018 Highlights Compared to Second Quarter 2017

Mike Callahan, President and CEO of GMS, stated, “We are pleased to report a solid quarter highlighted by record Adjusted EBITDA of $54.2 million and net sales of $648.0 million, despite the negative impact of hurricanes Harvey and Irma. Our results reflect broad-based growth across all of our product categories, driven by strong commercial activity highlighted by 19.0% increase in our ceilings business, as well as 10.2% increase in our other product sales. As expected, gross margin rebounded from the first quarter to 32.8%, and we remain confident in our previously issued outlook of full-year gross margin of 32.5% for fiscal 2018.”

Mr. Callahan continued, “Our third quarter is off to a good start as underlying demand remains solid, pricing is up across all of our product categories and we continue to execute well against our growth strategy, all of which should drive above market net sales growth in the second half of the fiscal year. This coupled with improving gross margins and modest SG&A leverage expected in the second half of the fiscal year will help us deliver another record year of Adjusted EBITDA.”

Second Quarter 2018 Results

Net sales for the second quarter of fiscal 2018 ended October 31, 2017 were $648.0 million, compared to $591.8 million for the second quarter of fiscal 2017 ended October 31, 2016.

Gross profit of $212.3 million grew 9.9%, compared to $193.2 million in the second quarter of fiscal 2017, mainly attributable to higher pricing and increased sales. Gross margin was 32.8%, compared to 32.6% in the second quarter of fiscal 2017 largely due to pricing discipline and purchasing initiatives. On a sequential basis, gross margin improved 90 basis points from 31.9% from the first quarter of fiscal 2018.

Net income of $18.0 million, or $0.43 per diluted share, increased by 4.6% or $0.8 million, compared to $17.2 million, or $0.42 per diluted share, in the second quarter of fiscal 2017. Adjusted net income of $21.6 million, or $0.51 per diluted share, grew $1.5 million, compared to $20.1 million, or $0.49 per diluted share, in the second quarter of fiscal 2017.

Adjusted EBITDA of $54.2 million rose 9.5%, compared to $49.5 million in the second quarter of fiscal 2017. Adjusted EBITDA margin was 8.4% as a percentage of net sales, compared to 8.4% in the second quarter of fiscal 2017, with slight improvement in gross margin offset by an increase in SG&A related expenses.

Capital Resources

At October 31, 2017, GMS had cash of $19.8 million and total debt of $610.5 million, as compared to cash of $19.7 million and total debt of $602.9 million at July 31, 2017.

Acquisition Activity

During the second quarter of fiscal 2018, the Company acquired ASI Building Products, LLC, or ASI, a leading provider of ceilings and quality building products serving residential and commercial projects in Eastern Michigan, and Washington Builders Supply, Inc., or WBS, a leading provider of drywall, steel, insulation along with a full range of commercial and residential services in the Western Pennsylvania market.

Subsequent to October 31, 2017, the Company acquired Southwest Building Materials, Ltd. (“SWBM”). SWBM distributes wallboard, ceilings and other interior building products serving residential and commercial projects of all sizes throughout Northwest Texas. GMS now has 16 locations in Texas.

Conference Call and Webcast

GMS will host a conference call and webcast to discuss its results for the second quarter ended October 31, 2017 at 10:00 a.m. Eastern Time on December 7, 2017. Investors who wish to participate in the call should dial 800-259-2693 (domestic) or 323-794-2551 (international) at least 5 minutes prior to the start of the call. The live webcast will be available on the Investors section of the Company’s website at www.gms.com. There will be a slide presentation of the results available on that page of the website as well. Replays of the call will be available through January 7, 2018 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 5463988.

About GMS Inc.

Founded in 1971, GMS operates a network of more than 210 distribution centers across the United States. GMS’s extensive product offering of wallboard, suspended ceilings systems, or ceilings, and complementary interior construction products is designed to provide a comprehensive one-stop-shop for our core customer, the interior contractor who installs these products in commercial and residential buildings.

Use of Non-GAAP Financial Measures

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

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

Forward-Looking Statements and Information:

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by the Company’s use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” or “should,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about the markets in which GMS operates, including the potential for growth in the commercial, residential and repair and remodeling, or R&R, markets, statements about its expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance, statements related to net sales, gross profit, gross margins and capital expenditures, as well as non-GAAP financial measures such as Adjusted EBITDA, Adjusted net income and base business growth and statements regarding potential acquisitions and future greenfield locations, demand trends and future SG&A savings contained in this press release are forward-looking statements. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of the Company’s control, that may cause its business, strategy or actual results to differ materially from the forward-looking statements. These risks and uncertainties may include, among other things: changes in the prices, supply, and/or demand for products which GMS distributes; general economic and business conditions in the United States; the activities of competitors; changes in significant operating expenses; changes in the availability of capital and interest rates; adverse weather patterns or conditions; acts of cyber intrusion; variations in the performance of the financial markets, including the credit markets; and other factors described in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2017, and in its other periodic reports filed with the SEC. In addition, the statements in this release are made as of December 7, 2017. 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 7, 2017.

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