GMS(US:GMS)2024-06-20 20:46PART I Business Overview GMS Inc. is a leading North American distributor of wallboard, ceilings, steel framing, and complementary construction products, operating over 300 distribution centers and 100 tool sales, rental, and service centers across 47 U.S. states and six Canadian provinces - GMS Inc. operates a network of over 300 distribution centers and more than 100 tool sales, rental, and service centers across 47 U.S. states and six Canadian provinces, offering wallboard, ceilings, steel framing, and complementary construction products20258 - In fiscal 2024, the company completed three acquisitions (Jawl Lumber Corporation, AMW Construction Supply, LLC, and Kamco Supply Corporation) and opened five new distribution centers and three new Ames tool sales, rental, and service centers222324 - Key business strategies include expanding market share in core products (wallboard, ceilings, steel framing), growing complementary product lines (tools, fasteners, insulation, EIFS, stucco), expanding the platform through greenfield openings and strategic acquisitions, and driving improved productivity and profitability28 - The company's sales volume is generally higher in the first and second fiscal quarters due to favorable weather and longer daylight conditions, with seasonal variations impacted by inclement weather47 Risk Factors GMS Inc. faces risks from economic cycles, competition, price volatility, acquisition integration, supply chain, high debt, and cybersecurity threats - Business is highly dependent on cyclical commercial and residential construction and R&R markets, which are sensitive to economic conditions like interest rates, inflation, and employment levels606162 - Significant fluctuations in product prices (e.g., wallboard, steel) and the inability to pass on cost increases or manage inventories effectively can adversely affect operating results and cash flows6970 - The company's growth strategy relies on successful acquisitions and new branch openings, which carry risks such as integration difficulties, loss of key personnel, and unforeseen liabilities7273 - High levels of indebtedness and variable interest rates expose the company to increased debt servicing costs and limit financial flexibility, potentially affecting its ability to fund operations, acquisitions, or pay dividends99103 - Cybersecurity breaches, disruptions to IT systems, and the inability to attract and retain key employees are significant general risks that could harm business operations and financial performance107109110 Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported114 Cybersecurity GMS Inc. maintains a comprehensive cybersecurity program led by its CISO and CIO, aligned with ISO 27001, NIST SP 800-52, and CIS Top 20 Critical Security Controls - The company's cybersecurity program is led by its CISO and CIO, aligned with ISO 27001, NIST SP 800-52, and CIS Top 20 Critical Security Controls115 - Cybersecurity measures include ongoing system testing (penetration testing, internal/external audits, annual Cyber Risk Assessment), regular employee training, and engagement of a third-party managed detection and response company115116117 - The Board of Directors, via the Audit Committee, oversees cybersecurity risk management, receiving quarterly updates on cyber risks, threats, and security initiatives119 - The company does not believe any cybersecurity threats or incidents have materially affected it to date, but acknowledges the increasing sophistication of cyber threats120 Properties GMS Inc. operates its business through a network of over 300 distribution centers and more than 100 tool sales, rental, and service centers across the U.S. and Canada - As of April 30, 2024, GMS Inc. operated over 300 distribution centers and more than 100 tool sales, rental, and service centers121 Property Type | Property Type | Leased Facilities | Owned Facilities | Total | | :---------------------------- | :---------------- | :--------------- | :---- | | Corporate headquarters | 1 | — | 1 | | Distribution centers | 231 | 85 | 316 | | Tool sales, rental and service centers | 102 | — | 102 | | Tool assembly facility | 1 | — | 1 | | Total | 335 | 85 | 420 | Legal Proceedings GMS Inc. is involved in various lawsuits and administrative actions in the normal course of business, including product liability claims related to alleged asbestos exposure prior to 1979 - The company is a defendant in various lawsuits and administrative actions, including product liability claims related to alleged asbestos exposure from products distributed prior to 1979123124 - Management does not expect the ultimate outcome of any current legal proceedings to have a material adverse effect on its financial condition or operating results124 Mine Safety Disclosures GMS Inc. has no disclosures to report regarding mine safety - No mine safety disclosures are applicable125 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities GMS Inc.'s common stock is traded on the NYSE under the symbol 'GMS', and the company has not paid dividends in the last three fiscal years, intending to retain future earnings for operations, growth, debt repayment, and share repurchases - GMS Inc. common stock is traded on the New York Stock Exchange (NYSE) under the symbol 'GMS'127 - No dividends were paid to stockholders during the years ended April 30, 2024, 2023, or 2022. The company intends to retain future earnings to finance operations, support growth, repay indebtedness, and repurchase shares128 - On October 18, 2023, the Board of Directors approved an expanded share repurchase program authorizing up to $250.0 million of common stock repurchases, replacing a previous $200.0 million authorization134193 Issuer Purchases of Equity Securities (Three Months Ended April 30, 2024) | | Total Number of Shares Repurchased | Average Price Paid per Share($) | Total Number of Shares Repurchased as Part of Publicly Announced Program | Approximate Dollar Value that May Yet be Purchased Under the Program (in thousands) | | :--- | :--- | :--- | :--- | :--- | | February 1 through February 29 | 51,875 | 86.78 | 51,875 | 211,999 | | March 1 through March 31 | 25,029 | 91.64 | 25,029 | 209,706 | | April 1 through April 30 | 97,651 | 94.61 | 97,651 | 200,466 | | Total | 174,555 | | | | Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations GMS Inc. reported increased net sales in fiscal 2024, but net income and Adjusted EBITDA declined due to market dynamics and higher costs Fiscal 2024 Financial Highlights (in millions) | Metric | Fiscal Year Ended April 30, 2024 | Change from Prior Year | | :-------------------------------- | :------------------------------- | :--------------------- | | Net Sales | $5,501.9 | +3.2% | | Net Income | $276.1 | -17.1% | | Net Income as % of Sales | 5.0% | -1.2 percentage points | | Adjusted EBITDA | $615.5 | -7.5% | | Adjusted EBITDA Margin | 11.2% | -1.3 percentage points | - Net sales increase was primarily due to contributions from recent acquisitions, strong multi-family residential and commercial construction activity, and resilient pricing in wallboard, ceilings, and complementary products, offsetting declines in single-family construction and steel framing price deflation137161 - Net income decrease was mainly due