GMS - Earnings call transcript Q2 2019

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Operator

Greetings, and welcome to the GMS Second Quarter 2019 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Leslie Kratcoski, Investor Relations. Thank you.

begin. may You

Leslie Kratcoski

joined and morning Michelle, second everyone joining Goforth, XXXX. for of and Callahan, Thank and CEO; GMS’ good earnings this Doug I'm XX, October for XXXX the by conference us Mike fiscal President you, CFO. ended morning, today call quarter for

website issued In this Investors the call release we at posted this our gms.com. to addition press presentation have in section morning, the slides accompany of to

to management's to Securities may your Slide XXXX. answers X, remarks Turning defined Litigation Private of questions call, forward-looking the prepared as today's Act statements contain and on in Reform

Forward-looking beyond matters are our and those results risks are may statements and from address actual cause subject many to control to which that today. of differ uncertainties, discussed

non-GAAP measures. measures provided presentation and and With fiscal relate XXXX respectively. that, the ended XX, over reconciliations statements company The with of quarter our management's expectations. related detailed reports. October are call any and references periodic to year section in forward-looking and to are these the the XXXX, Callahan. future. XXXX, call slides. update Mike? the to quarter more forward-looking represent assumes in including Today's press non-GAAP includes obligation statements to release statements estimates on Mike I'll that The XX-K also filings in other forward-looking the and XX, fiscal discussions the company's and presentation definitions in Note ended discussion Factors these this encouraged certain SEC, second Listeners a current As Risk of a the now to turn to no review reminder, April contained the

Michael Callahan

you and for today. joining us thank morning, Good

today's of will highlights begin with then detail. results financial our will Doug operating in review more call We cover our and a

your for line the open questions. then will We

We product growth organic and Slide share wallboard growth I testament of X.X% our over the am We second also our company. strength history first to X.X% to highlighted strong feet balance revenue. reported of the our in portfolio, during for generated across the fiscal a pleased Turning offering. shipped the we of quarter, of billion in sales that to X. quarter a by wallboard organic X time

strength saw during increased as sales to in of which XX% a profitability XX% generated savings leverage, driven as changes. continued $XX.X framing, approximately results, year-over-year. accounting a adjusted million in ceiling organically strong year-over-year the quarter. Titan second also record was quarter improvement well and the contribution XX% From improvement our sales, steel quarter of which we grew increased This standpoint, a We increase quarterly including organic operating continued earlier for fiscal from by benefits the lease a full the favorable this of cost year, pricing undertaken initiatives EBITDA

of touch detail. in on me a more items Let these few

we a $XX our other original than respect with while million our North synergies synergies, continues longer in even slowdown and we a Titan results key to platform. cross-border taken Canada, on been more XXXX is we has and initiatives. With advantage housing the continue through power and American process exceed there be While starts estimate to integration we the suppliers we our and take has that fiscal purchasing for as the very our to purchasing our with of residential work believe for to non-purchasing accretive continue to expected, to of track synergies closely are scale generate to suppliers well in look operating little consolidated progressing and

strong be at the second lease reductions, out the the our of cost leverage on to previously change progress as some roll impact on us savings a to and this excludes allowed quarter, X.Xx during improved leverage accounting. flow realize second through quarter, a XXX cost reduce in we January our in significant announced made full Driven during run to reduction the which also the generated of nearly the from initiatives achieved half $XX the demonstrated XXXX rate operating by basis fiscal cash full fiscal turn of points profitability, have by XXXX. of of initiative free We to of we benefit of X, the million X.Xx. Based expect which

we increasing on and profitability, below efficiently Xx consistently free focused use by to our we flow, generate intend capital fiscal leverage As end are stated growing we’ve bring calls, to our our XXXX. cash our working past on managing top which strong back the of to line,

also to to allocation of we shareholder strength cash flows, committed Given strategies value. other drive capital our are the

in opportunistically shares creation. returns company our stock confidence that this prospects to growth and Board an company's to investment commitment believe and repurchasing the to Directors and We an million the capital. attractive for approved value are important part maximizing of our that Now on of stock. end, returning the is $XX This of shareholders our to today, of capital announced reflects repurchase up we

transactions in I program However, buybacks this program the continue that repurchases open contemplates made growth of to is across the stated This and non-residential end described stock reducing will earlier. positive through markets. balanced with at our which and disciplined to in residential, consistent of be time to R&R, greenfields, we acquisitions leverage the see of with our our strategy markets, indicators the from prevailing the under market. market will time prices targets health on market be negotiated that or Related

stabilize on mentioned our to moving As call, share stable in continue market and last industry wallboard to remain expect we conditions the we forward.

steel in reflecting confidence well-balanced portfolio in had categories, growth. a we strength to that We our that for organic also built is product growth expect ceilings, see other revenue framing, and our continued

the turn the that, Doug? over we Doug delever Now grow remain to capital and of on more opportunistically cash to long-term it will to looking emphasis financial work intend for of balance committed put And XXXX beyond, and to common We balance to results. repurchase and I growth business the an stock. generation. flow fiscal with a to to our sheet, drive free value, shareholder profitability detailed review our with this

Howard Goforth

deliver pleased flow strong and highlighted and us strong to Thanks, record appreciate We very free performance today. quarter generation. sales cash a Mike. We EBITDA adjusted net everyone second were joining by

X, quarter base year. net the sales sales to by at to X.X% including net year, Looking sales basis, X.X% compared to increased XX% growth Wallboard by gains. period last strong $XXX the we quarter organic during Slide second business of second an and million pricing last grew on driven to the XX.X% $XXX.X same the compared increased million in quarter

a business, expands during positive in recent $XXX our quarter an acquisitions. sales on addition product business, increase the drivers XX.X% to high highlighting by to in gains. the to to success to business. ceiling other category. and year-over-year increased by XX.X% second of impact sales increased million impact million. of $XXX this a last continue The the This sales the growth main The driven further from in our net price, higher increase driven the over from continued activity, acquisitions offering framing X.X% million, XX% including efforts $XXX year-over-year Steel XX.X% ceiling base Our year, and including $XXX includes base benefit in volumes, by XX% Gross of growth margin sales our quarter by increase our from of improvement were second positive increased profit the a the stronger compared base quarter of grow of in by breadth pricing Titan. as of commercial to products, million product XX.X% represents the Titan increase which share

organic basis. to fiscal job is prices in terms well to can reduced price of increases, as challenging of in XX.X% But increase. product margins Titan we basis done year by good points in by feel These gross strong by primarily our reduction mostly was demonstrate, through a specifically the declined selling by well including price And have XXX% pressures, of basis primary for margin as sales points SG&A net we Rising EBITDA favorable lease our as class improvements year-over-year from and offset product two we The XX our organic managing grid the We various that cost contribution and percentage multiple through other well remainder due improved it which on higher ceiling quarter. each by and mix. year-over-year as inflation a XX about sequential increases, pricing, partially logistics. by a XX.X% top of changes aided primarily on to margins, and of to offset capture during changes product our leverage, made wallboard, XX steel driven moving year XXX continuing higher taken initiatives While expand the our basis were the points contributions as as both operating cost freight able to year-over-year forward. was was were to of basis, focus driven by had still the and as adjusted from accounting, a our costs, you leverage, product to costs, good a basis see, Titan. and pass as this decline our our surcharges controlling ability as volume reduction in a were product points of and variety acquisitions. wallboard disciplined

X. we've rate made plan significant and run cost to full initiatives be on our reduction As progress the discussed, we've January at by

by operating leases and $XX the first the sales. approximately the percentage margin second quarter, to amended SG&A million second EBITDA it the year-over-year leases. quarter. provided This fiscal quarter, favorably the EBITDA adjusted As during XXXX our discussed an million on We $X.X in in capital of basis we Adjusted million $XX.X previous adjusted year impact a expect of to delivered up of we as prior in $XX.X XX.X% our was benefit majority calls, points or XX change EBITDA XX% million. quarter in from

Turning X. to Slide

pro to pro XX, reduce As stood up debt to generation. nearly our from through to and We pre-transaction. leverage X/X EBITDA acquisition, pleased turn July continue X.Xx at were forma cash of after free October We our XXXX. adjusted net as a X.Xx flow of strong forma by X.Xx Titan intend XX delever ratio from the LTM to

it leverage a Xx, ratio when to well our IPO, as favorably prior when As leverage compares ratio May current X.Xx. was as our was post-Titan reminder, XXXX, XXXX our just

$XX.X remains with on balance of on facility. million available ABL our million and healthy cash $XXX Our sheet hand

to we for up Mike back turn the before Now over open me questions. line the call let

Michael Callahan

a Doug. Thanks lot,

we Just the a few comments line before questions. for open additional

of very in our pleased to EBITDA our with and second our performance are confident year adjusted fiscal We deliver XXXX. third quarter remain and consecutive record sales ability in

our are the markets very confident see product We growth health well. opportunities is overall Titan portfolio going across and also our performing end forward. of in continued

time over the outstanding that And questions. to growth continue we our Our will operator, ready to great for Canada are will with shareholders. and the now network of open our customers deliver GMS we that, up to the employees U.S. deliver believe in both to service profitable line

Operator

Instructions]. [Operator

from first comes of from Keith Our question SunTrust. Hughes the line

Keith Hughes

So, year-over-year run rate we tremendous I last that had guess gains just the two looking that kind is the year? the decline, something see SG&A, with this you've of in the we in of at? would Is quarters what are given

Howard Goforth

though part, bit run away from that saw it SG&A you still for by -- savings be but quarter in be second -- -- the X, comparable. the were pretty the numbers the in January you most final on The little going what to rate that'll specifically should all place the a

As our are relatively we've of discussed fixed. before, costs about half

pretty that at a be way, of late So, starting out are and projected bit a using if whatever second third close and sales you quarter be as with benchmark it quarter. little improvement to the of in kind it should look model

Keith Hughes

to At decline correct? Is going to year-over-year that year-over-year And that? you're be just decline, first what close to something is ... that used referring the

Howard Goforth

haven't Keith. back the Well that. at have have at year-over-year to specific I percentage really really I change think, -- will for I actual I numbers, don't go looked and look

Keith Hughes

And on decline. for you've the about margin, then talked gross Okay. the reasons

suppliers this On the from product offset with there in number? were still increases fully drag to cost, price were able inflation you some your or

Michael Callahan

when issues so between a bit but it, you little there there We here. increase is worked and can always Yes. was There bit fully realize you the of of a timing know, aggressively, definitely little was drag. drag as

Keith Hughes

had And that of see will increase, for we realized our on the pretty some year earnings a that we manufacturers big continue in rest the the of as to releases? and well,

Michael Callahan

for think know, we're wallboard is now, now, you as right announced but fairly February, right generally relatively the say I are now. an stable think speaking, been stable. that And though things increase for there would I in I

Keith Hughes

as get look And a if about little need you Okay. guess some final lead you for at you how remarks? How I in commercial a residential, in can ahead strong time customers. or can from and a in see the on, commercial far slowdown here said talked see in I question bit -- to business with -- continuing outlook here you ahead backlog of your prepared far the the you

Michael Callahan

you kind real the that's tell me, into to positive calendar I'd 'XX. of Keith, going

in down As activity committed as months, it's both as well already the the undertaken road based committed look mean looking at ahead, terms on I as well we of nine months have volumes backlog activity six quote as you with easily right now. that

So view we've might on spot 'XX for bit good of be bit while little to that's on or is little my around there that say a softness of be noise bright that. commercial and single-family visibility a res, going got the

Operator

of the comes question from RBC next line Markets. Mike Capital with Dahl Our

Michael Dahl

just just question of, and percentage res a we last you're from or lot expecting give can could markets. Mike, and kind just on Obviously, standpoint. was what you of a volume builders there around what's see, the end of a turning wise, mentioned the you negative from builders on single-family end markets? to the going hoping some your all new of -- us I sense pick up different are

more an from what's just standpoint for organic outlook So markets? your little end some of detail a around these

Michael Callahan

would that's there homebuilders, already some I so is. I know the good worst and a Well, a front, house we've that on good national pretty say And would the of counts what indicator. think I we're numbers single-family say, are pretty forward-looking bit kind outlook and on looking our front are we with generally, up mean at I single-family the slap little established the

little conversations front, commercial just gives backlog optimistic, momentum that as has There's we've a Canada, towards and very there slippage look is into cross-border based remain team on and On into in high-rise I mentioned, bit as if And there, country traction single-family that been but our the us on the on backlog calendar I the regard. a commercial good be solid very of multifamily single-family front, clearly got yes, bit and very, really we quite year a and market. where to good going going the 'XX, I going look at throughout up high-rise the the little with the promising. it's slippage of side, solid really

think and the noise pieces segments very So there, but other the there are be it's in yes, some single-family, both is positive. R&R segments I going to

Michael Dahl

color. That's helpful

mentioned The I stable. past better from environment -- kind that your this competitively settling a What stable driving, is had, the or second maintained you question you what you speaking, down of, share you think you think quarter? in I expect and be share environment standpoint? share And do think more the to competitive do

Howard Goforth

Doug. is this Mike,

is in lot end share I or calendar a of noise that in once saw Association quarter we where we hit numbers. little is think strong the September record August pretty through weather particularly volumes bit we but not in hurricanes But you a quarter current were that the fiscal only of in the and see in when at tailed-off then all also again, and little our least bit. October, what the September, the our quarter in rainfall Gypsum there up Texas, had a of actually

we're line X continue and with So moving in about over towards going pretty to feel the to the to price. going but forward, be next to trend back also share good we're stock that able X quarters to get seating we particularly market

Michael Dahl

and hurricanes? What's around shipments terms And estimate the as the as is of lost my far revenues due or really dovetails you question, much to best Great. Okay. into the last rains weather. dollar of kind in your how that which

Howard Goforth

Well, like overall it I used definitely results affected but it year, to QX we're weather did and that just wasn't material last to our something our mean results through. it's managing

really have than other don't to we So that. share specifics any

Operator

Our next line Matthew of Bouley question from Barclays. comes the with

Matthew Bouley

buyback to have capital here. the the allocation wanted I ask priorities, you now that about

any in is opportunistic market this this kind driving is in kind be about there any were that balanced how in going thinking M&A You of this Or part? you're the at that there about maybe you've would signal seen to changes that clear point? of be M&A but and

Michael Callahan

No.

keyword I balanced. is the think

myopic I think or thing one to strategy we setting don't really those have do a singularly.

at is right the very when is look think current same no you at of us and the And look the the the been continue are and one, conversations for out with react acquisition it, clear. looking in value some have number the that. active ownership the but In we question key delevering will need then to calls there's down we dialogue are create road. fact a I that past that delever, price opportunities at stock to the right at transfer to that's had we've to investors front, with to there companies priority and about that the to time, we time opportunity, there the on there of

-- you to deliberate -- and to is three those very will delever forward. continue one we're be opportunistic focus very that it's priority going of balance. in move and we going the as and we but We're measured, to is key So to all on areas,

Matthew Bouley

some on residential. I in that. following secondly, these discussion can prospective around potential historically Okay. when you single-family Mike, periods Appreciate maybe is any give And in tends And on up see the I M&A then of you mean on how kind evolve of guess kind slowing? there other competitive choppiness? even you've these as the you've type the side, that seen market dynamic potential environments? how some of then evolve maybe to seen

Michael Callahan

service, then is a continue, Well, and intensity about very a that of competitive little that regardless as delivery, of it already, is a knowledge decline quality of is I or the quality like. still would and of And anticipate the value whether there of it relationship market competitive would with we've carries commercial single-family reality in the still is, of this this it's a lot single-family the customer I but base the level business. talked weight if think as is

provide choppiness the help in even that market So you some I when think continuity does do have to segments.

So and deal XX, playbook years our we've I've standard XX -- a in of had that kind view. as for with

Matthew Bouley

mention just then Did lastly. you And Okay. how...

Michael Callahan

I'm M&A Doug? that about mentioned part. the you sorry too. Missed Matt,

Howard Goforth

the create some more business -- on more some mean up open tighter little It I may M&A a it front opportunities sidelines actually on challenging, opportunities. may sitting the gets actually folks might some be a or and little additional the

So a to it consider that I don't to necessarily M&A. as be negative relates

Matthew Bouley

it. Yes, just Got weather Okay. you and did ask mention issues November in October? following appreciate comment. wanted then I September that And the trends quickly, into

Howard Goforth

No.

We quarter. the talked haven't specifically about current

Matthew Bouley

Okay. give that? quantification any there Is around you can

Howard Goforth

It's a this to the out at little really anything on early, that ended I it's so weekend throw over point. just wouldn't want

Operator

comes line from question Stephens next of Trey Our the with Grooms Inc.

Noah Merkousko

a is you housekeeping Trey quick And for Noah guys on I How This Merkousko CapEx thinking had for the year? item. just about Grooms. are

Howard Goforth

Canada No year. talked change than million we've what previously $XX about, a million about to including $XX

Operator

comes Matt of next line with question Global from McCall Seaport the Our Securities.

Matthew McCall

of couple follow-ups a So quickly.

in talked drag of your how the the the quarter, for cost of price cost behind? some timing announced does XXXX expectations in put numbers outlook? increases you you price how give -- the far price can then You've about And were kind that, behind change change

Michael Callahan

I well a is fact versus bit mean that a different. February little Yes, increase the it's January

of be sale if interesting February to the pre-buy what January. peak going to to But that to is, the and opposed -- closer be think to it's that the obviously news to as place see going is any good relative season timing increase. I I there's think some takes

or little around momentum maybe conversation increase. Gypsum, it. into synthetic, whether price cost material, us of it's that will labor, a So that the through is inflation you continues, standard bit going The name that inflation give

momentum at -- increases So out. see to And I drive is least compared really to wait have the pretty but think solid This there shakes we'll unique and and of up is, past have and it initiative how to to timing see. price or kind when February. in wait

Matthew McCall

price the was of of much quantification cost How in a the then gap And it? QX. Okay. drag

Howard Goforth

quarters. reason price we the to in I margin were say probably Well earlier of forward increases. for able most think the next right part, at where pass expectation alluded But it least most is Mike couple through moving for a to as gross now for of call, the our on I'd is

calendar Although on that, aggressively into year upon we try that which generally X to we a past, to of in are January improve programs, particularly different the cost start working some doing. lot is programs had as enter our success we've

Matthew McCall

Okay.

notes, and I about you of timing my think of longer, timing find -- going the said then but when recognize kind -- is so as of it And what it for have all, SG&A, And to some trying you recognized? the you much what's you And how you're about this see what I'm do remainder? to [indiscernible] taking of the QX? on the what similarly talked

Howard Goforth

we the realized the in of We -- quarter, earnings. realized probably about second $X.XX million

the So as that of we've savings including QX got, some we savings amount got well. in

which we'll up working I that was million million for full $XX to the fiscal $XX increase provided, 'XX, and fiscal this year, previous and that. probably million then for end the to still of around $XX on low think I the opportunities range end

Operator

Instructions]. [Operator

Our next Michael from Wood Nomura Instinet. with question of line the comes

Michael Wood

I purchasing First made ask you just the synergies about taking about longer. to question, the comment wanted

the finding taking the they to terms amount are expectations? why curious discussions of longer? in And of relative your you're what initial Just in

Michael Callahan

just perching they alluded the to, basis. calendar Well, typically, on run program a Doug

for the going and actually And program we negotiating 'XX some up 'XX. that standpoint programs so wrapping are were the synergistic of into from the

the into growth, So incremental the of, carry synergies, negotiation over kind incremental for XXXX.

our initial achieved $XX good So we're synergies looking fundamentally, very is news some we the that definitely exceed goal we're while kind to going million. are going of confident and exceed. already, to forward We're of we

literally key -- spent up a have in there to some go with session friends today our I a and leaving with some on negotiation day fact, am vendors. In Canada

Michael Wood

prices? we example, fairly Will away forward? surcharges Okay. expect to should that will the margin see they And how lower for going go be modest hear. immediately? the And Good fuel to fuel benefit impact a of

Howard Goforth

try are, prices. where fleet, be our sales immediately -- lower to we raise Where quick for to fuel is which and benefit be least a mean little I prices, were to in through main prices, to our the particularly at is try diesel runs slower able lower SG&A. own we No. prices get

Michael Wood

another capital. the inventory And on forward? a like Is the with pre-buy it before back balance? to heavy that Okay. question know post pre-buy, little seasonal you previously more I down we now cash conversion working going a flow were bit. that you and in seems Should expect worked

Howard Goforth

happy got still we've with were but We our running opportunities XX%, back about the improvement several but at there. we there's to over still -- last returns been wallboard We've our years, XX%.

I there's think room there. So still to improve

Operator

no over like back Mike further the I any for closing are to turn at this remarks. time. Callahan call There would to questions

Michael Callahan

for are about excited success today to coming you updating a day. us quarters. this we today. you the quarter. where And the very we Thank Have all look our We're forward and good progress of joining in on

Operator

teleconference. today's concludes This you. Thank

day. time. you You wonderful at may this Thank your participation, your have lines for disconnect and a

GMS (GMS) 4 Dec 182019 Q2 Earnings call transcript