GMS(GMS) - 2024 Q3 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - This report contains forward-looking statements based on current expectations, assumptions, and projections that are subject to known and unknown risks and uncertainties[9][10] - Key risk factors include general economic conditions, dependency on construction markets, competition, price fluctuations, and supply chain disruptions[11][14] PART I: Financial Information Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for GMS Inc as of and for the periods ended January 31, 2024 Condensed Consolidated Balance Sheets Total assets slightly increased to $3.27 billion while total liabilities decreased, resulting in higher stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | January 31, 2024 | April 30, 2023 | | :--- | :--- | :--- | | Total current assets | $1,500,914 | $1,549,523 | | Total assets | $3,271,553 | $3,267,008 | | Total current liabilities | $624,362 | $706,281 | | Long-term debt | $982,667 | $1,044,642 | | Total liabilities | $1,852,609 | $1,992,251 | | Total stockholders' equity | $1,418,944 | $1,274,757 | Condensed Consolidated Statements of Operations and Comprehensive Income Net sales increased slightly for the nine-month period, but higher operating expenses led to a decrease in net income Key Operating Results (in thousands, except per share data) | Metric | Q3 FY2024 | Q3 FY2023 | Nine Months FY2024 | Nine Months FY2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,258,348 | $1,234,618 | $4,088,878 | $4,025,150 | | Gross profit | $414,720 | $402,248 | $1,323,903 | $1,301,469 | | Operating income | $86,225 | $103,449 | $342,763 | $391,321 | | Net income | $51,905 | $64,775 | $219,692 | $257,398 | | Diluted EPS | $1.28 | $1.53 | $5.35 | $6.01 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity grew, driven by net income which was partially offset by common stock repurchases - For the nine months ended January 31, 2024, the company repurchased and retired 1,528 thousand shares of common stock for a total cost of approximately $100.3 million[21][76] Condensed Consolidated Statements of Cash Flows Operating cash flow slightly decreased while increased investing and financing activities led to a net decrease in cash Summary of Cash Flows (Nine Months Ended January 31, in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $229,026 | $236,927 | | Cash used in investing activities | ($93,182) | ($52,004) | | Cash used in financing activities | ($212,671) | ($98,929) | | (Decrease) increase in cash | ($76,404) | $84,747 | | Cash and cash equivalents, end of period | $88,341 | $186,663 | Notes to Condensed Consolidated Financial Statements The notes detail key events including acquisitions, debt refinancing, and an expanded share repurchase program - During fiscal 2024, the Company acquired Jawl Lumber Corporation and AMW Construction Supply, LLC, recognizing goodwill of $20.9 million[48][49][51] - On December 18, 2023, the Company agreed to acquire Kamco Supply Corporation for $321.5 million, with closing expected in Q4 fiscal 2024[47] - On May 12, 2023, the Company amended its Term Loan Facility, refinancing $499.5 million in borrowings and extending the maturity to May 12, 2030[61] - On October 18, 2023, the Board approved an expanded share repurchase program, authorizing up to $250.0 million, with $216.5 million remaining as of January 31, 2024[75] - On February 2, 2024, the Company amended its Term Loan Facility to reduce the applicable interest rate on SOFR loans to SOFR + 2.25%[100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting sales growth offset by higher expenses, and a strong liquidity position Market Conditions and Outlook The company observes improving commercial demand, a recovering single-family market, and a robust multi-family project backlog - Commercial: Demand is improving, with seven consecutive quarters of U.S. commercial wallboard volume growth and solid activity in medical, education, and data center projects[104] - Single-Family Residential: After a slowdown, there are encouraging signs of recovery, with improved homebuilder sentiment and continued sequential demand improvements[106] - Multi-Family Residential: Construction activity was robust, and a significant backlog of projects is expected to drive continued growth into early fiscal 2025[107] Results of Operations Nine-month net sales and gross profit increased, but higher SG&A expenses led to lower operating and net income Results of Operations Summary (Nine Months Ended Jan 31) | Metric | FY2024 (in thousands) | FY2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $4,088,878 | $4,025,150 | 1.6% | | Gross Profit | $1,323,903 | $1,301,469 | 1.7% | | SG&A Expenses | $883,381 | $814,063 | 8.5% | | Operating Income | $342,763 | $391,321 | (12.4)% | | Net Income | $219,692 | $257,398 | (14.6)% | Net Sales by Product (Nine Months Ended Jan 31, in thousands) | Product | FY2024 | FY2023 | % Change | | :--- | :--- | :--- | :--- | | Wallboard | $1,677,285 | $1,606,821 | 4.4% | | Complementary products | $1,233,084 | $1,157,144 | 6.6% | | Steel framing | $672,231 | $787,499 | (14.6)% | | Ceilings | $506,278 | $473,686 | 6.9% | - The increase in SG&A as a percentage of net sales (21.6% vs 20.2% YoY) was primarily due to steel price deflation and a mix shift to higher-cost commercial and multi-family end markets[136][137] Liquidity and Capital Resources The company maintains strong liquidity through cash from operations and its ABL facility, funding acquisitions and share repurchases - As of January 31, 2024, the company had available borrowing capacity of approximately $813.4 million under its ABL Facility[142] - During the nine months ended January 31, 2024, the company repurchased approximately 1.5 million shares of its common stock for $99.6 million, plus $0.7 million in excise taxes[154] Cash Flow Summary (Nine Months Ended Jan 31, in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Cash from Operations | $229,026 | $236,927 | | Cash used in Investing | ($93,182) | ($52,004) | | Cash used in Financing | ($212,671) | ($98,929) | Non-GAAP Financial Measures Adjusted EBITDA and Adjusted EBITDA margin decreased for the nine-month period compared to the prior year Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 FY2024 | Q3 FY2023 | Nine Months FY2024 | Nine Months FY2023 | | :--- | :--- | :--- | :--- | :--- | | Net income | $51,905 | $64,775 | $219,692 | $257,398 | | Adjusted EBITDA | $128,020 | $140,828 | $468,876 | $511,355 | | Adjusted EBITDA Margin | 10.2% | 11.4% | 11.5% | 12.7% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk exposure since its last annual report - There have been no material changes to the company's market risk exposure since the fiscal year ended April 30, 2023[167] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The Chief Executive Officer and Chief Financial Officer concluded that as of January 31, 2024, the company's disclosure controls and procedures were effective[169] - No material changes occurred in internal control over financial reporting during the quarter[170] PART II: Other Information Item 1. Legal Proceedings The company is involved in routine litigation not expected to have a material adverse effect - The company is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business or financial condition[173] - Regarding asbestos-related claims, 1,011 of 1,065 lawsuits filed since 2002 have been dismissed without payment[174] Item 1A. Risk Factors No material changes to risk factors have occurred since the last Annual Report on Form 10-K - No material changes to risk factors have occurred since the company's last Annual Report on Form 10-K[175] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity under its expanded $250 million program Share Repurchases (Three Months Ended January 31, 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | November 2023 | 237,487 | $62.93 | | December 2023 | 83,681 | $70.52 | | January 2024 | 49,064 | $81.42 | | Total | 370,232 | N/A | - On October 18, 2023, the Board approved an expanded share repurchase program authorizing up to $250.0 million of its common stock[176] Item 3. Defaults Upon Senior Securities None - None[178] Item 4. Mine Safety Disclosures Not Applicable - Not Applicable[179] Item 5. Other Information None - None[180] Item 6. Exhibits This section lists the exhibits filed with the report, including CEO/CFO certifications and XBRL data - Exhibits filed with the report include CEO and CFO certifications and XBRL data files[182] Signatures - The Quarterly Report was duly signed on February 29, 2024, by Scott M Deakin, the Chief Financial Officer[184][186]