GMS Inc. (GMS) Q4 2019 Earnings Call Transcript

GMS earnings call for the period ending June 27, 2019.

Motley Fool Transcribers
Motley Fool Transcribers
Jun 27, 2019 at 2:23PM
Other
Logo of jester cap with thought bubble.

Image source: The Motley Fool.

GMS Inc. (NYSE:GMS)
Q4 2019 Earnings Call
Jun 27, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the GMS Inc. Fiscal Fourth Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded.

And it's now my pleasure to introduce your host, Ms. Leslie Kratcoski, Investor Relations. Thank you. You may begin.

Leslie H. Kratcoski -- Vice President of Investor Relations

Thanks, Michelle. Good morning and thanks, everyone for joining us today. I'm joined today by Mike Callahan, CEO; John Turner, President; and Lynn Ross, Chief Accounting Officer and Interim CFO. In addition to the press release issued this morning we have posted presentation slides to accompany this call in the Investor Relations section of our website at gms.com.

On today's call management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties, many of which are beyond our control and may cause actual results to differ from those discussed today.

As a reminder forward-looking statements represent management's current estimates and expectations. The Company assumes no obligation to update any forward-looking statements in the future. Listeners are encouraged to review the more detailed discussions related to these forward-looking statements contained in the Company's SEC filings including risk factors section of the Company's 10-k and other periodic reports.

Today's presentation also includes the discussion of certain non-GAAP measures. The definitions and reconciliations of these non-GAAP measures are provided in the press release and presentation slide. Please note that references on this call to fourth quarter and fiscal 2019 relate to the quarter and fiscal year ended April 30th, 2019.

With that, I would now like to turn the call over to Mike Callahan. Mike?

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, Leslie. Good morning and thank you for joining us today. I will begin today's call with a review of our operating highlights and some market commentary and then turn it over to John for a few remarks on his early days here at GMS. Lynn will then cover our financial results in more detail. We will then open the line for your questions.

Turning to slide 3, we are very pleased to deliver a strong finish to fiscal 2019, with record net sales and adjusted EBITDA for our fourth fiscal quarter. Organic sales growth of 7% during the fourth quarter reflected higher volumes and pricing across all of our product groups, including over 3 points of volume growth in wallboard as a result of strong activity in the United States.

Our strong growth of organic revenue for the quarter was broad based across each of our product lines with 3.8% growth in wallboard sales, 13.7% growth in ceilings, and 8.3% growth in steel framing. Other product net sales were also up 7.8% organically and they continue to be a key part of our growth story.

On the profitability front, we also generated record results, with a nearly 50% year-over-year increase in adjusted EBITDA to $73.5 million for the fourth fiscal quarter. The increase reflected contributions from the Titan acquisition, growth in our base business, our continued focus on operational improvements and favorable lease accounting. I'd now like to spend a few moments sharing our current view of our end markets in both Canada and the United States.

In our fourth quarter, our business in Canada continued to be impacted by some softness in the Canadian single-family residential market. Coupled with challenging weather conditions earlier in the quarter, the Canadian business experienced a high-single-digit year-over-year sales decline on a constant currency basis. With further impact from about a 4% depreciation in the Canadian dollar year-over-year. And based on the current forecast, we believe it will take some time for this sector of the Canadian market to normalize. Nonetheless, the fundamentals contributing to long-term Canadian housing demand remain sound, including strong household formation and population and economic growth.

Also on a positive note, the commercial activity in Canada remains solid and Titan continues to be accretive to our consolidated operating results. Our long-term strategic rationale for the acquisition of the largest distributor in Canada remains very compelling including increased scale and footprint in North America, geographic expansion into the highly attractive Canadian market and creation of a well-balanced platform for growth. We firmly believe that our investment thesis for this attractive acquisition of strategic importance remains strong. On the organisational front in Canada we are very pleased to announce that Travis Hendren, most recently Vice President of Corporate Development at GMS will be joining the management team in Canada as Executive Vice President reporting to Doug Skrepnek, President of WSB Titan.

Travis was an integral part and leader in our acquisition of WSB Titan in June of '18 and his appointment to this new role reflects the strategic importance of our Canadian operation and as part of our ongoing succession planning. As part of the succession plans for Titan, Travis will work closely with Doug over the balance of '19, as Doug transitions to a consulting role remaining engaged in the business. And after Doug moves into the consulting role, Travis will assume the position of President of WSB Titan.

In the United States, we continue to be quite encouraged by activity levels and other leading market indicators. The organic daily sales volume improvements we have seen in each month in the fourth quarter and continuing into the first quarter of '20 further validates that view. As it pertains to residential construction, while single-family starts so far in calendar '19 have remained perhaps softer than anticipated. We have seen mortgage rates and home price appreciation moderate and indicators of seasonal demand are generally positive.

Employment and income growth remain at very healthy levels in many of the major markets in the US continue to have limited housing supply as building remains below historical averages, all of which bodes well for the long-term outlook. And on the commercial front which represents the majority of our business, most indicators and estimates point to continued growth against the backdrop of a healthy economy.

We were seeing this in our own business with strong backlogs and quote activity. In recent visits to many of our locations in multiple geographies, I have continued to hear from our own people and key commercial customers that pipelines are very robust through calendar 2019 and quotes are going in the calendar '20 and beyond. GMS generated strong free cash flow in the quarter of $83 million, which enabled us to continue to execute on our balanced approach to capital allocation, including reducing our net leverage in the quarter to 3.6 times pro forma adjusted EBITDA, while at the same time expanding our business through acquisitions and greenfield investments and repurchasing $5 million of our common stock.

During the quarter, we closed on the acquisition of Commercial Builders Group in southern Louisiana and opened four greenfield locations in Carrollton, Texas; Fredericksburg, Virginia, Harrisburg, Pennsylvania; and Portland, Maine. Subsequent to the end of the fiscal fourth quarter and as announced earlier this month, we acquired Hart Acoustical and Drywall Supply in South Texas. As evidenced by all of these actions, we are executing on our capital allocation strategies of debt reduction, disciplined growth through acquisitions in greenfields and opportunistic share repurchases.

Now turning to slide number 4, I'd like to provide a recap of the highlights for the whole fiscal year 2019 which was a very important year for GMS both operationally and strategically. We made significant progress on several fronts.

First, we surpassed $3 billion in net sales through both organic growth and acquisitions. We completed the acquisition of WSB Titan in Canada, which extended our leadership position in North America with materially expanded scale and footprint. We significantly improved overall profitability, expanding adjusted EBITDA margins by 160 basis points year-over-year to 9.5%.

We generated the $175 million in free cash flow. And as I just noted, we deployed a balanced capital allocation strategy, including reducing our net leverage by 0.6 times since closing of the Titan transaction a year ago, investing the two additional acquisitions and a greenfield expansions and repurchasing $16.5 million of our common stock. As we previously announced, I will be retiring in August after a 26 year career at GMS. Since this is my last earnings call, I wanted to take a few moments to reflect on the growth of GMS that I have seen, not only throughout my career here, but also since the Company's IPO in 2016.

Since my joining GMS in 1993, we have grown from about 50 branches to over 250 locations. And expanded from 17 states to 43 states in Canada. Our annual sales at the time I joined were $236 million. And in just the last three fiscal years since the IPO, we have increased our sales by almost 70% more than doubled our adjusted EBITDA, completed 17 acquisitions with 59 branches and opened 13 greenfield yards. It has definitely been a very fast paced and rewarding time here. Now having the opportunity to work alongside the talented and dedicated GMS team, has been my greatest privilege and the highlight of my entire business career.

I'm extremely proud that together, we have built the number one North American speciality distributor of interior building products and developed a unique corporate culture over the years that continues to be very, very special. I've also appreciated working with many of you on the call today and I thank all of our shareholders for their continued support. Going forward, I know that GMS has the right team in place to build upon the Company's strong track record. John who joined us as President in May and will assume the CEO role upon my retirement, brings to GMS nearly 30 years of distribution and manufacturing industry experience and a broad range of expertise in operations, sales, customer service, distribution and logistics as well as strategic planning and M&A.

Having got to know John through our extensive travel and meetings over the last few months, I'm absolutely confident that with his leadership GMS is well positioned to achieve its next phase of growth and success in the years ahead. I look forward to continuing to work closely with John until my retirement and also look forward to seeing what he and the team accomplished to raise GMS to even greater heights in the future.

I'll now turn it over to John.

John C. Turner -- President

Thanks, Mike for that kind introduction and for your service to GMS over the past 26 years.

It's great to be here today to speak with our analysts and investors. I've enjoyed speaking with some of you since joining GMS and look forward to engaging with more of you in the near future. Let me start by saying how excited I am to be part of the GMS family. I was first attracted to GMS by its leading market position, specifically the strength of its North American network combined with local expertise and commitment to service excellence. In the short time I've been here, I've already been impressed by the talent and enthusiasm of the team. I've been welcomed by great people, who are clearly dedicated to the Company, its customers and each other. Together we are working hard to execute on our plans and build on our existing momentum.

Looking ahead the opportunities for growth are significant. I look forward to leading the Company and capitalizing on those opportunities as well as further strengthening our customer relationships, supplier partnerships, product offerings and overall value proposition as we position GMS for its next phase of growth and success. Since joining, I've been spending time in our facilities as well as with our customers and suppliers. I'm here to build on an already strong foundation and I'll be working with the team to identify ways we can enhance every aspect of our business. And we will be sure to keep you updated on our progress. I look forward to transitioning into the role of CEO later this summer and working with you all in the future.

With that, I'll now turn it over to Lynn to provide more details on our financial results for Q4.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Thanks, John. And I would also like to thank you all for joining us today. We were pleased to deliver a solid fourth quarter highlighted by record net sales and adjusted EBITDA performance and strong free cash flow generation. Turning to slide 5, we grew net sales 22.7% to $780.1 million. We are especially pleased with a 7% increase in our organic sales compared to the fourth quarter of last fiscal year. Our sales of wallboard were up by 15% to $322.3 million in the fourth quarter compared to the same period last year. This increase was driven by acquisitions, higher organic volumes and pricing.

The increase included a 3.8% growth on an organic basis, which included an increase in volume of just over 3% and about a 1% increase in pricing. Our fourth quarter ceiling sales increased by 17.4% year-over-year to $112.2 million. Higher organic volumes resulting from increased commercial business along with benefit from acquisitions and pricing improvement drove this increase. The 13.7% organic increase was comprised of price increases of approximately 9% as well as higher volumes of approximately 5%. Our sales of steel frame increased during the quarter by 16.3% year-over-year to $124.5 million driven by the positive impact of acquisitions, higher organic volumes from greater commercial business and pricing. The 8.3% organic increase included gains of approximately 4% for pricing and volume. Sales of our other products, which consists of installation, joint compound, tools, stucco, EIFS and various other complementary products continues to grow rapidly totalling $221.1 million and up 44.4% compared to the fourth quarter of last year.

The addition of Titan has broadened our product offerings. And at the same time, our nearly 8% increase in base business sales of other product further reinforces the continuing success of our efforts to grow this highly profitable product category. Gross profit in the fourth quarter increased almost 25% to $257 million. This was the result of both higher organic sales and the positive impact of acquisitions as well as pricing improvement. Gross margin of 32.9% improved 50 basis points from 32.4% a year ago. Due to contributions from the Titan acquisition, including purchasing synergies and favorable price cost dynamics index. And on a sequential basis gross margin also improved 50 basis points from the third quarter and exceeded the 32.2% guide, we indicated in our last call. While we benefited from some favorable price cost dynamics and mix in the fourth quarter. We do maintain our gross margin guide of 32.2% moving into fiscal '20.

Turning to slide 6, we improved our leverage of fixed cost, reducing our adjusted SG&A as a percentage of net sales by 100 basis points year-over-year to 23.6%. This year-over-year reduction was less than we had previously estimated on our Q3 earnings call. Let's walk through the details, while we did recognise the full benefit of our strategic cost reduction and lease accounting changes. These benefits were partially offset by some headwinds including unanticipated insurance cost, increases in certain corporate expenses related to timing differences as well as lower sales and operating leverage from Titan.

Finally, we have continued to be impacted by significant inflationary wage pressures as we discussed on previous calls. This is a reminder, we've now lapped the year-over-year benefits from our change in lease accounting and we'll do so with respect to our strategic cost reductions after the first quarter of '20.

Moving along to adjusted EBITDA, we delivered $73.5 million of adjusted EBITDA in Q4, up 46.9% year-over-year. Our adjusted EBITDA margin was 9.4% as a percent of sales or 8.7% excluding the impact of leases which was up 80 basis points from 7.9% a year ago.

Turning to slide 7, during the fourth fiscal quarter we generated $83 million of free cash flow, a significant increase from $15 million a year ago, the increase is due to a $40 million reduction in net working capital, $24 million of higher net income after adjustments for non-cash item and $5 million of lower capital expenditures.

We use this free cash flow to reduce our net debt by $66 million as well as repurchase $5 million of our common stock and complete the acquisition in greenfield transactions that Mike talked about. At the end of the quarter, our net debt to LTM pro forma adjusted EBITDA was 3.6 times which was down from 4.2 times at the end of the first quarter of fiscal '19 and down from 3.8 times at the end of the third quarter.

We intend to continue to de-lever through strong free cash flow generation. Our balance sheet remains quite healthy with $47.3 million cash on hand and $314 million under our ABL facility resulting in substantial liquidity. Additionally of our total long term debt, approximately 80% is not due until 2025.

Before turning the call back over to Mike, I'd like to touch on a few more outlook items for fiscal '20. For fiscal '20, we expect CapEx to be in range of $20 million to $25 million and interest expense to be in the range of $70 million to $75 million.

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

G. Michael Callahan -- President, Chief Executive Officer and Director

Thank you, Lynn. Just a few additional comments before we open the line for questions. Again we are extremely pleased with our strong finish to the year and our confidence in the team's ability to continue to take advantage of our multiple levers to drive success. Organic growth, greenfields, M&A and operating leverage. We continue to leverage our market leading position in the distribution of interior building products, our balanced product portfolio and our diversified exposure across commercial and residential new and R&R construction markets. And most importantly, our great network of dedicated GMS colleagues, in both the US and Canada continue to embrace our strong entrepreneurial culture to drive outstanding performance and service for our customers and our suppliers.

Operator, we are now ready to open the line for questions.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Our first question comes from the line of Matthew Bouley with Barclays. Please proceed with your question.

Matthew Bouley -- Barclays -- Analyst

Good morning. Thanks for taking my questions and congrats to Mike, and welcome to John. I wanted to -- I guess first ask about the free cash flow, obviously impressive in the quarter. I think you ended up with about $175 million for the full year of '19. Is there anything that, you call out that anything that particularly drove the strength in the quarter there? And how should we think about what free cash flow could look like in fiscal '20?

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah, sure Matt. In terms of what drove the free cash flow in the quarter. Some of that was driven by about a $35 million increase in accounts payable that we do not expect to experience going forward. That kind of brings our expectations down to somewhere between 40% to 45% of adjusted EBITDA going forward. And that the $35 million of the increase in accounts payable was simply driven by changes in the timing of purchases.

Matthew Bouley -- Barclays -- Analyst

Okay. That's perfect. Thanks for that. And then secondly, the gross margin I think you said price cost was favorable which drove the strength in the quarter and if I heard you correctly I think you said 32.2% was the expectation for fiscal '20, still. So just -- I guess what are you expecting with price cost and mix that is driving the margin to subside a bit? Thank you.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah. So we believe that the 32.2% is a prudent guide going forward given the uncertainty around the pricing environment. Obviously, you should construe that 32.2% is a floor. We hope to do better.

Matthew Bouley -- Barclays -- Analyst

All right. I'll leave it there. Thanks very much.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, Matt.

Operator

Thank you. Our next question comes from the line of Trey Grooms with Stephens. Please proceed with your question.

Trey Grooms -- Stephens -- Analyst

Good morning. And I want to echo the last comment, congrats, Mike on your retirement. It's been great working with you. And John we look forward to working with you going forward.

John C. Turner -- President

Thank you, Trey.

G. Michael Callahan -- President, Chief Executive Officer and Director

Yes. Thank you, Trey. I've enjoyed it.

Trey Grooms -- Stephens -- Analyst

Well. So I want to touch on a couple of things. One so your wallboard pricing slid just a little bit sequentially, the manufacturers' February wallboard increase failed, and it seems to have continued to slide a little bit at the manufacturing level at least according to the PPI. Can you guys talk about what you're seeing there, more real time and have you seen any stabilization in the pricing? Or how should we be thinking about that especially, US specifically?

G. Michael Callahan -- President, Chief Executive Officer and Director

Well, I mean I think you touched on it. I mean I think the price increase in February definitely was lethargic coming out of the gate and we really did not -- we just didn't really get much realization to say the least. I think right now just the supply demand conditions are such that, until that kind of alters a bit I think the price outlook going forward is going to be kind of -- remains to be seen at this point. So, but I would say that in general, I think the pricing environment is stable right now. If I had to kind of give a characteristic to it today. But clearly the -- the increase did not hold.

Trey Grooms -- Stephens -- Analyst

Yeah. Okay. But seeing some stabilization currently I guess is the key takeaway.

G. Michael Callahan -- President, Chief Executive Officer and Director

Yes. Yeah. That'll be my take.

Trey Grooms -- Stephens -- Analyst

Okay. And then my follow up is around Canada. So just -- I just want to make sure that I understood your comment. So volume down high-single-digits and was that just on the single-family side or is that overall including some of the positive impact from commercial? Just some clarity around that comment.

G. Michael Callahan -- President, Chief Executive Officer and Director

That would be on a consolidated basis, that would be in total. I -- and really on the single family front that for the most part is confined to single family low rise. I mean if you look at the high rise activity. the high rise condo and apartment as well as commercial, the fundamentals of those segments are still very sound. The real area is focused on that single-family low rise and frankly a lot of that is just has to do with a lot of the regulatory pressures have been brought to bear in that segment of the market up there. So long term we continue to be optimistic about where it's going to develop, but right now there's definitely some noise in that segment of the market.

Trey Grooms -- Stephens -- Analyst

And just -- if I can just to get a little bit more kind of back on the pricing within the Canadian market. I know it's been tight there, just wallboard has been tight there over the last few years, now with that kind of -- I guess loosening up a little bit. What's the thought around pricing in that market? Kind of going forward, does that usually -- I know it's a totally different market than US. So forgive me if this is elementary question. But historically, what is that generally done in times of when things start softening up a little bit, understanding it's still a -- quite a bit of imports coming into that market.

G. Michael Callahan -- President, Chief Executive Officer and Director

Up there, I would say and again my historical reference is somewhat limited to having just bought the Company a year ago. But I would tell you that based on the limited numbers of suppliers up there, I mean it's not as if it's like in the stage where you've got seven manufacturers you can pull from, there's really only two or three depending on which part of the country you're talking about to pull from. So I don't see any big alterations necessarily in terms of the pricing environment. And frankly I think the production would be adjusted based on the demand levels anyway kind of like what you here. So I don't see any big price adjustments necessarily taking place up there.

Trey Grooms -- Stephens -- Analyst

Okay. Thanks for taking my questions. I'll turn it over. Good luck.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thank you, Trey. Thanks.

Operator

Thank you. Our next question comes from the line of Keith Hughes with SunTrust. Please proceed with your question.

Keith Hughes -- SunTrust -- Analyst

Thank you. My congratulations to you Mike and good luck. I'm sure the golfing industry will see its rounds go up, once you head into retirement.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, Keith.

Keith Hughes -- SunTrust -- Analyst

Just building on a couple of questions that have come in. Specifically turning to the ceilings industry, you've had some very strong numbers here. That is similar to what we saw or better volume what we saw out of Armstrong. I guess my question is, as the speciality business ramps up in ceilings, they USG and others have been doing that. Can you tell us how that benefits GMS? Is there any of that business you missed because it's all direct? Or how does that work out for you?

G. Michael Callahan -- President, Chief Executive Officer and Director

The speciality side.

Keith Hughes -- SunTrust -- Analyst

Yeah. Speciality side of the business. Yes.

G. Michael Callahan -- President, Chief Executive Officer and Director

You know, that -- we talked about this a little bit before. I mean if you look at the gross, there's always this conversation around the commodity product, and what's the long term growth prospects of that. But the reality is, is that we've seen very significant growth in the specialty wood metal ceilings, the accoutrements, to open platform ceilings, for example, with the acoustical clouds and things such as that.

And so, I think and I really have to tip my hat to our guys in the field who've dedicated a lot of resources and energy behind those segments of the business. Because it requires technical expertise, it requires a lot of product knowledge. And in many respects, we become kind of consultants for even architects as they're trying to design a lot of these more sophisticated spaces. So we've committed a lot of resources to that segment. And I think we're yielding the results of that. The AS products are a key part of the growth story and the other part of it is to -- just the fundamental R&R side and the fact that you've got that annuity factor built in, because of the replacement of either tiles that are damaged due to a water pipe failure or somebody that's building out three new floors. There's just kind of a -- there's an ongoing activity level, particularly given the relative strength to commercial right now. So it's kind of a combination to factors. But the specialty side, the architectural specialty side is definitely a growth area for us.

Keith Hughes -- SunTrust -- Analyst

Okay. And switching to Titan, do you think the next couple of quarters where you see your Titan business bottom out or were there still be some downside in business as you try to search for a bottom in Canada.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah, sure, Keith. On the bottom in Canada, a couple of things. First of all our exposure there is 22% of the demand is single-family, is new single-family. We certainly hope to see things turn in the next two or three quarters. One thing that's starting to turn already, Canada -- I think you guys know has a higher lumber business than the US businesses do. And we've already started to see some of the lumber prices start to turn around. So don't know where the bottom is, we hope that it's now and fully expect to see things start to turn around however, it will take a little bit of time for the factors that we discussed related to single-family to earn themselves out.

Keith Hughes -- SunTrust -- Analyst

Okay. Final question on SG&A, now that you been on Titan on for a year. Do you think there'll be more as you go into year two of ownership? Will there be more SG&A savings, less leverage, and we would see that tick down for the whole company, synergies are we kind of past that?

G. Michael Callahan -- President, Chief Executive Officer and Director

Well, I mean I think on the synergy front, that's an ongoing effort. It's kind of like we had our first bite at the apple, so to speak but as we continue to grow our businesses together we find more opportunities to purchase cross-border from the same manufacturers or even new manufacturers. We're going to find more opportunities to find synergies and I think frankly is the revenue and expense mix improves, as single-family comes back. And I think you're going to see more opportunities for SG&A leverage in the future. But that's a TBD there. But I -- I'm fundamentally optimistic and I would reiterate as I said earlier, the acquisition of Titan was and is a very, very sound and strategically significant investment for us. So while there is some short term hiccups in the business, long term it's accretive now and it will continue to grow, would be accretive in the future.

Keith Hughes -- SunTrust -- Analyst

Okay. Thank you very much and good luck again.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, Keith. Appreciate it.

Operator

Thank you. Our next question comes from the line of Michael Wood with Nomura Instinet. Please proceed with your question.

Michael Wood -- Nomura Instinet -- Analyst

Thanks. Mike, it's been a pleasure working with you and congratulations on a well deserved retirement.

G. Michael Callahan -- President, Chief Executive Officer and Director

Yeah. Thanks, Mike. Appreciate it.

Michael Wood -- Nomura Instinet -- Analyst

First I wanted to get some just more SG&A details if you wouldn't mind, the wage inflation maybe where exactly that's coming from. That's an industry phenomenon or GMS-specific and maybe some of the timing of the corporate expenses in terms of details on what's driving that, when that might come down.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah, sure. On the first question that you asked with respect to the wage inflation, this -- it's a real thing across the industry. It's driven by labor shortages that are pretty significant in construction. It's not just the GMS thing, most of the economies in which we operate are a full employment economy. So we're seeing that primarily in logistics, but also in other costs. Related to your question on the timing, really nothing ominous just simply year-over-year timing of certain expenses, as well as some unanticipated and unexpected insurance claims that took place, the last quarter of the year -- the last -- actually in April.

Michael Wood -- Nomura Instinet -- Analyst

Thanks. And on the favorable price cost that you called out, can you just give us some details on that perhaps quantify your cost inflation where that was running just in terms of the gross margin impact.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

No we're not -- we can't really quantify the impact of the favorability of price cost. We did have some -- some nice tailwinds from the purchasing synergies as a result of the Titan acquisition. So really I think the remainder of the increase was due to price cost and the mix.

Michael Wood -- Nomura Instinet -- Analyst

Okay. But just to understand the sustainability of the low double digit EBITDA conversion margins that you achieve which is in line with your long-term expectation. Is that something that you think is sustainable going forward -- trying to just understand the price cost was sort of like a one time benefit -- that benefit might win.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah. So moving forward we fully expect to be in the 10% to 15% range for incremental adjusted EBITDA. And we think that's very achievable. So, we do believe that is sustainable.

Michael Wood -- Nomura Instinet -- Analyst

Okay. Thank you.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah. Just to qualify that with -- of course that depends on the pricing environment and on Titan's performance as well.

Operator

Thank you. Our next question comes from the line of Mike Dahl with RBC Capital Markets. Please proceed with your question.

Mike Dahl -- RBC Capital Markets -- Analyst

Good morning. Thanks for taking my questions. And Mike and John, congrats to you both.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, Michael.

John C. Turner -- President

Thank you, Mike.

Mike Dahl -- RBC Capital Markets -- Analyst

So I wanted to pick up on the Titan conversation with the first question. I think the business was run rating something around $460 million and 15% EBITDA margins on an LTM basis when you bought it. Clearly some moving pieces since then. Can you just help us size up what the current run rate on sales and profitability is for the business?

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah. Sure, sales is 15% of the total. And in terms of level of detail as we've discussed on previous calls, we're not prepared to provide that level of detail.

Mike Dahl -- RBC Capital Markets -- Analyst

Got it, OK. I was shifting gears, wallboard pricing, Mike, you mentioned that you're seeing stability in the market today, I guess and just looking for a little clarity on that, if you could, provide a little more detail on the pricing intra-quarter and is there anything we should be thinking about in terms of exit rate on pricing that's different from the $324 million (ph) for the quarterly average.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Can you reframe the question?

Mike Dahl -- RBC Capital Markets -- Analyst

Yeah, sure. So, I think the comment suggested that there's been sequential stabilisation in pricing, I guess that the PPI data has kind of continued to move lower sequentially for the manufacturers. So, your quarterly price was $324 million (ph). I'm just wondering if the exit price, if we should be thinking that the price was kind of falling through the quarter. So that even if we're stabilising today, we could see another down-tick in the quarterly price next quarter. I just want to make sure we're on the right page there.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah. It's a possibility again. There's a lot of uncertainty with respect to what we talked about with respect to the pricing environment.

G. Michael Callahan -- President, Chief Executive Officer and Director

And it also depends on the mix, because that's based on -- that's exactly number two, so, I would say that there is no big moves that we're seeing at the parent right now, and I think based on the supply demand predictability right now that we're, the pricing is generally stable, but trying to handicap that going forward is pretty difficult to do at this juncture.

Mike Dahl -- RBC Capital Markets -- Analyst

Okay. Got it. If I could get one last question and just on SG&A. I think you highlighted both the comments in the presentation is the unanticipated costs and timing of certain other costs. Can you quantify how much of it impact that was in the quarter and kind of how to think about and you're lapping some of the benefits as you mentioned in early fiscal '20. But just how to think about what to expect for SG&A moving forward.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah, in terms of the mix of the -- so we got 100 basis points of leverage, we would have reforecast to get 200 basis points of leverage year-over-year. The 100 basis points of like, let's call it NAV (ph) was half and half due to Titan. A, not being as big of a portion of the business and B, not having the ability to leverage its own fixed costs to the extent that we had forecast and the other half being the insurance costs and the timing of a corporate expenses that we talked about. Going forward, we certainly hope to get some leverage. How much under our current run rate it is, it's really dependent on wage inflation as well as on Titan performance.

Mike Dahl -- RBC Capital Markets -- Analyst

Okay. Makes sense. Thank you, all.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, Mike.

Operator

Thank you. Our next question comes from the line of David Manthey with Baird. Please proceed with your question.

David Manthey -- Robert W. Baird -- Analyst

Thank you. Hi, and Mike, congratulations and good luck.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, David.

David Manthey -- Robert W. Baird -- Analyst

Question on -- to get at these one timers another way here. Maybe could you just give us the magnitude of the insurance and the timing of other costs sort of year-over-year what the magnitude of that impact was and then I assume what you're signaling here is that we should get relief on both of those as we move into the first quarter, they were sort of periodic to the fourth quarter is that correct?

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yes, that is correct.

G. Michael Callahan -- President, Chief Executive Officer and Director

Yeah.

David Manthey -- Robert W. Baird -- Analyst

And in terms of magnitude, basis points or dollars any -- can you give us an idea of what they were.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah, sure, 50 basis points was the insurance costs and the timing of certain corporate expenses and 50 basis points was the Titan impact.

David Manthey -- Robert W. Baird -- Analyst

Okay. All right. Got it.

G. Michael Callahan -- President, Chief Executive Officer and Director

Give or take. Yeah.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Give or take.

David Manthey -- Robert W. Baird -- Analyst

Okay. That sounds good. And then second on pricing, it sounds like you're sort of signaling maybe flattish wallboard pricing in fiscal 2020. But could you talk about the ceiling prices. Will we see another strong quarter coming up here and I'm just trying to get an idea of the timing when you lap the prior price increases. And I assume at some point you will revert back to sort of the 3% to 5% norm there. And then I know it's a long question, but just mainly ceiling pricing and timing and then second is steel prices, is it possible, you could actually see a drag from steel prices this year?

G. Michael Callahan -- President, Chief Executive Officer and Director

Well, as it relates to wallboard, I mean -- I'm not smart enough to project out that the entire year '20 will like to see wallboard increases. So I mean I -- I don't want to go -- record, I think say that, again a lot of that has to do with demand supply conditions and just overall activity level. So -- that certainly could have an influence as to longer term wallboard pricing. On the ceilings front, everything that we're seeing in terms of quote activity and backlog and in the general attitude of our folks out in the field is that we're going to continue to see growth in ceilings going forward just based on the current volumes.

And as we've discussed on previous calls, I mean there is pretty much kind of a built in price increase relative to ceilings year in and year out. I mean you get two increases a year and it's fairly predictable. So, I mean -- I think our outlook on the ceilings front and our growth and frankly our investments in people and resources to grow that business. You can see the fruits of those efforts already and I would see that continuing into the future.

David Manthey -- Robert W. Baird -- Analyst

And then on steal, Mike?

G. Michael Callahan -- President, Chief Executive Officer and Director

Yeah. Steel, I tell you Dave, steel is -- it's really slept down. We've seen some slippage downward. It's obviously -- prices have fallen. And I think when you look at the current market relative to scrap and the availability of ship scrap, offshore is limited. I would say that our view is that steel prices. And I'm talking specifically now about the steel, the structural side. I think we're probably going to see that continue to probably drop in terms of price as we go forward.

David Manthey -- Robert W. Baird -- Analyst

Okay, thank you.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks.

Operator

Thank you. Our next question comes from the line of Kevin Hocevar with Northcoast Research. Please proceed with your question.

Kevin Hocevar -- Northcoast Research -- Analyst

Hey, good morning, everybody and congratulations as well to Mike and John.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, Kevin.

Kevin Hocevar -- Northcoast Research -- Analyst

Wondering if you could comment on cash usage expectations here in 2020? It seems like debt paydown is the priority, but obviously still doing acquisitions and a little bit of share repurchases as well. So you can kind of frame up for us as your expectations there. And where do you think you can get that net leverage? Looks like you took off 0.6 -- from what 4.2 to 3.6 I think this year? How much further down do you think you can draw that in fiscal '20?

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah. We'll continue to operate using our balance capital allocation approach, debt paydown remains a priority. We've talked about our target of a 3.0. The exact timing of that 3.0 obviously depends on the generation of adjusted EBITDA. If you look from where we were right after the Titan deal, 4.2, really we're halfway there now. So we'll continue to do that in terms of the -- in terms of the share repurchases, we will continue to be opportunistic about share repurchases. And we'll continue to be selective about strategic acquisition. We think that's an important part of our growth story.

G. Michael Callahan -- President, Chief Executive Officer and Director

Yeah, I would add to that, Kevin, if you look at this quarter, to me, I think it's kind of a perfect example of this balance strategy that we're approaching. I mean -- it's not an all or nothing proposition we've got to have the right balance between delevering which we clearly understand is a priority. But at the same time as opportunities present themselves whether it's commercial builders -- whether it's hard or whether it's greenfields, we have to continue to run the business long term strategically. And as things present themselves from a stock price standpoint, we capitalize on that as well. I think just a really good picture of how we can do that, and at the same time continue to drive down that debt level. So that's going to be the strategy going forward.

Kevin Hocevar -- Northcoast Research -- Analyst

Yeah. Okay, great. And then Mike you mentioned the strength you saw here in the fiscal fourth quarter carrying forward into May and June, just kind of curious if you can comment on that, specifically, are you seeing pretty similar growth rates -- are you seeing any accelerations or decelerations, just wondering if you can elaborate that -- on that a little bit.

G. Michael Callahan -- President, Chief Executive Officer and Director

Well, I mean I think just as a general statement, there is a solid level of momentum certainly going into May, June just kind of early to tell, because we haven't wrapped up all the numbers obviously and that kind of thing. But just in talking with the field and meeting with the customers and looking at frankly a lot of the larger commercial folks who were completely booked out for '19 and going into '20, our view is the overall activity level is solid there and even with some of the softness if you want to call it that in single-family, we're still stocking at an enormous number of units of housing right now in multi-family. So pretty much broad based. I just say that the activity level and the outlook is just very positive. Is it -- it's not like a hockey stick or some massive growth, but it's just a real solid environment right now. And I think the outlook is very positive.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah. I just add sequentially during the quarter and continuing into May, we saw sequential increases in our sales per day. So we're pretty positive about that, little bit too early to tell in June, since, we're still in the month.

G. Michael Callahan -- President, Chief Executive Officer and Director

Right. Right.

Kevin Hocevar -- Northcoast Research -- Analyst

Got you. Okay. Thank you very much.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, Kevin.

Operator

Thank you. Our next question comes from the line of Matt McCall with Seaport Global Securities. Please proceed with your question.

Reuben Garner -- Seaport Global Securities -- Analyst

Thanks. Good morning, everybody. And it's actually Reuben on for Matt. Congrats, Mike and John to you both.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks, Reuben.

Reuben Garner -- Seaport Global Securities -- Analyst

Most of my questions have been answered. Just one follow up if I could. You mentioned still targeting kind of 10% to 15% of EBITDA contribution margin, going into this year. Is there -- a clarification, does that include kind of any pressures that would result from WSB declining? I assume that's a higher margin business probably has higher contribution margins. Does that include any pressure from there that's maybe offset by some synergies or and or any maybe savings if there were to be continued pressure in the Canadian business?

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah, sure. The 10% to 15% incremental EBITDA contribution does include our forecast which we expect to Titan.

Reuben Garner -- Seaport Global Securities -- Analyst

Okay, great. And that's all I got, everything else was answered. Thank you, guys.

G. Michael Callahan -- President, Chief Executive Officer and Director

Thanks.

Operator

Thank you. Our final question comes from the line of Truman Patterson with Wells Fargo. Please proceed with your question.

Truman Patterson -- Wells Fargo -- Analyst

Hi, good morning, everybody. Thanks for squeezing me in here. Mike, let me add my congratulations. I hope you enjoy retirement. So --

G. Michael Callahan -- President, Chief Executive Officer and Director

Yeah. Thanks, Truman, I appreciate it.

Truman Patterson -- Wells Fargo -- Analyst

Yeah. First off, on the wallboard volumes, you know up in the 3% range, seems like that's a pretty good result given what's going on with Canada's housing starts decline, the US starts are down. So a pretty good result. I guess, how do you guys think about your market share there? You guys have been maintaining it or even picking up a little bit of market share here in the US?

G. Michael Callahan -- President, Chief Executive Officer and Director

I would say as a general statement, we feel like we're kind of holding our -- we're holding our share position. If you look at particularly on a 12 month run rate relative to the GA numbers and kind of where we see our numbers coming in. So the -- the growth rates we're very happy with on the organic side, frankly there was also some deferred work that got pushed out. You've heard and seen all the things about weather and this and that, the reality is, there was deferred work that we've really picked up on as well, going into this quarter. So it's kind of a combination of factors. But we're confident that our share position, we're pretty much holding firm.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah. I just -- I would just echo that and say that kind of I read through, the Gypsum Association data which obviously has a lot of noise in it. We actually think we might have seen some positive movement on share. So we're pretty positive about that.

Truman Patterson -- Wells Fargo -- Analyst

Okay. Great. Thanks for that. And then looking at your greenfields, you guys opened four during the quarter, seems like you guys are picking up that activity a little bit over the past year. Could you just walk us through the economics of opening a new branch and kind of the timeline of revenues and cash flows until break even and performing in line with more established branches.

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Yeah. So in terms of greenfields, we still think that the 6 to 8 guide is a generally good guide. We did have 8 this year. I think it's reasonable to expect that in '20 we'll have that number. In terms of the economics of it, it's a fairly nominal capital investment, there is a period of ramp, let's say 12 to 24 months.

Truman Patterson -- Wells Fargo -- Analyst

Okay. Is there any way we can think about kind of the revenue ramp and how long it takes to get a greenfield branch to -- kind of the average overall branch level.

G. Michael Callahan -- President, Chief Executive Officer and Director

Maybe 24 -- maybe just 24 months, little bit over 24, I mean the reality is that, most of these greenfields as you know we've talked about the four terminal, they're extensions of existing platforms where we might shift x percent of volume from an existing operation with greenfield site. I would say that it's a minimal amount of capital investment. You're probably good -- get doing normalized run rate of a couple of years, maybe 2.5 years get it on a full run rate basis as a standard branch so to speak.

Truman Patterson -- Wells Fargo -- Analyst

Okay.

G. Michael Callahan -- President, Chief Executive Officer and Director

But you also in the near term you're picking up logistical benefits because of, obviously opening up a new location not trans shipping or going to long distances and that kind of thing.

Truman Patterson -- Wells Fargo -- Analyst

Okay. Thank you.

Operator

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

G. Michael Callahan -- President, Chief Executive Officer and Director

Thank you. Well, thank you all for joining us today. Again I really appreciated working with many of you since our IPO in 2016 and I thank all of our shareholders for their continued support of GMS. I wish John and the GMS team all the best in the future and I look forward to seeing them bring GMS to its next phase of growth that gives us. Thanks very much for being with us today.

Operator

Thank you. This concludes today's teleconference, you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Duration: 54 minutes

Call participants:

Leslie H. Kratcoski -- Vice President of Investor Relations

G. Michael Callahan -- President, Chief Executive Officer and Director

John C. Turner -- President

A. Lynn Ross -- Interim Chief Financial Officer, Chief Accounting Officer and Corporate Controller

Matthew Bouley -- Barclays -- Analyst

Trey Grooms -- Stephens -- Analyst

Keith Hughes -- SunTrust -- Analyst

Michael Wood -- Nomura Instinet -- Analyst

Mike Dahl -- RBC Capital Markets -- Analyst

David Manthey -- Robert W. Baird -- Analyst

Kevin Hocevar -- Northcoast Research -- Analyst

Reuben Garner -- Seaport Global Securities -- Analyst

Truman Patterson -- Wells Fargo -- Analyst

More GMS analysis

All earnings call transcripts

AlphaStreet Logo