gms-20240731

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

COMMISSION FILE NUMBER: 001-37784

______________________________________________________________

GMS INC.

(Exact name of registrant as specified in its charter)

______________________________________________________________


Delaware		46-2931287
(State or other jurisdiction of incorporation		(IRS Employer Identification No.)
or organization)

100 Crescent Centre Parkway, Suite 800
Tucker,	Georgia	30084
(Address of principal executive offices)		(ZIP Code)

(800) 392-4619

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

GMS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 39,285,251 shares of the registrant’s common stock, par value $0.01 per share, outstanding as of August 26, 2024.

FORM 10-Q

TABLE OF CONTENTS



		Page
Cautionary Note Regarding Forward-Looking Statements		3

PART I	Financial Information	5
Item 1	Financial Statements	5
	Condensed Consolidated Balance Sheets (Unaudited)	5
	Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4	Controls and Procedures	36

PART II	Other Information	37
Item 1	Legal Proceedings	37
Item 1A	Risk Factors	37
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3	Defaults Upon Senior Securities	38
Item 4	Mine Safety Disclosures	38
Item 5	Other Information	38
Item 6	Exhibits	39
Signatures		40

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” or “should,” or the negative thereof or other variations thereon or comparable terminology. Statements about our future financial performance, growth or future developments relating to economic conditions, our markets or the commercial and residential construction industries and statements about our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events contained in this Quarterly Report on Form 10-Q are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed under the heading “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2024, filed with the U.S. Securities and Exchange Commission (the “SEC”), may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:

•general business, financial market and economic conditions, including inflation and deflation, rising interest rates, supply chain disruptions, labor shortages and increased labor costs, geopolitical conflicts, an economic downturn or recession and capital market volatility;

•our dependency upon the cyclical commercial and residential construction markets, both new and repair and remodeling (“R&R”) including any impact from a decline or delay in residential or commercial construction activity, including from disruptions caused by the inability of commercial borrowers to repay their debt obligations, and from the availability or cost of financing;

•competition in our industry and the markets in which we operate;

•consolidation in our industry;

•the fluctuations in prices and mix of the products we distribute and our ability to pass on price increases to our customers and effectively manage inventories and margins in both inflationary and deflationary pricing environments;

•our ability to successfully implement our growth strategy, including identifying, successfully consummating and integrating acquisitions, opening new branches and expanding our product offerings;

•our ability to successfully expand into new geographic markets;

•product shortages, other disruptions in our supply chain or distribution network and potential loss of relationships with key suppliers, including increased shipping costs and delays and heightened risks relating to sourcing products from international suppliers;

•our ability to manage operating costs and achieve the anticipated benefits from our cost reduction and productivity initiatives;

•the potential loss of any significant customers or reduction in volume of purchases by our significant customers;

•our ability to renew leases for our facilities on acceptable terms or secure new facilities on acceptable terms;

•our ability to effectively manage our inventory as our sales volume or the prices of the products we distribute fluctuate;

•significant fluctuations in fuel costs or shortages in the supply of fuel;

•natural or man-made disruptions to our facilities or equipment;

•the risk related to our Canadian operations, including currency rate fluctuations;

•our ability to continue to anticipate and address evolving consumer demands;

•exposure to product liability and various other claims and litigation, and the adequacy and costs of insurance related thereto;

•operating hazards that may cause personal injury or property damage;

•the impact of federal, state, provincial and local regulations and the regulatory environment in which we operate;

•our inability to engage in activities that may be in our best long-term interests because of restrictions in our debt agreements;

•our current level of indebtedness and our ability to incur additional indebtedness, including to fund acquisitions;

•our ability to obtain additional financing on acceptable terms, if at all;

•the effects of widespread public health crises on our business, industry and results of operations;

•our ability to attract and retain key employees while controlling costs, including the impact of labor and trucking shortages;

•a cybersecurity breach, including misappropriation of our customers’, employees’ or suppliers’ confidential information, and the potential costs related thereto;

•a disruption in our IT systems and costs necessary to maintain and update our IT systems; and

•the imposition of tariffs and other trade barriers, and the effect of any retaliatory trade measures.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance, and actual results and events may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise. You should review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of the filing of this Quarterly Report on Form 10-Q.

PART I – Financial Information

Item 1. Financial Statements

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)


	July 31, 2024		April 30, 2024
Assets
Current assets:
Cash and cash equivalents	$	53,172	$	166,148
Trade accounts and notes receivable, net of allowances of $16,924 and $16,930, respectively	929,508		849,993
Inventories, net	607,403		580,830
Prepaid expenses and other current assets	43,183		42,352
Total current assets	1,633,266		1,639,323
Property and equipment, net of accumulated depreciation of $320,106 and $309,850, respectively	490,713		472,257
Operating lease right-of-use assets	288,335		251,207
Goodwill	890,699		853,767
Intangible assets, net	553,341		502,688
Deferred income taxes	22,591		21,890
Other assets	14,357		18,708
Total assets	$	3,893,302	$	3,759,840
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	420,288	$	420,237
Accrued compensation and employee benefits	59,451		125,610
Other accrued expenses and current liabilities	122,346		111,204
Current portion of long-term debt	53,743		50,849
Current portion of operating lease liabilities	52,372		49,150
Total current liabilities	708,200		757,050
Non-current liabilities:
Long-term debt	1,326,695		1,229,726
Long-term operating lease liabilities	241,041		204,865
Deferred income taxes, net	80,403		62,698
Other liabilities	66,660		44,980
Total liabilities	2,422,999		2,299,319
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.01 per share, 500,000 shares authorized; 39,282 and 39,754 shares issued and outstanding as of July 31, 2024 and April 30, 2024, respectively	393		397
Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of July 31, 2024 and April 30, 2024	—		—
Additional paid-in capital	295,431		334,596
Retained earnings	1,214,295		1,157,047
Accumulated other comprehensive loss	(39,816)		(31,519)
Total stockholders’ equity	1,470,303		1,460,521
Total liabilities and stockholders’ equity	$	3,893,302	$	3,759,840

The accompanying notes are an integral part of these condensed consolidated financial statements.

GMS Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(in thousands, except per share data)


	Three Months Ended July 31,
	2024		2023
Net sales	$	1,448,456	$	1,409,600
Cost of sales (exclusive of depreciation and amortization shown separately below)	996,893		959,046
Gross profit	451,563		450,554
Operating expenses:
Selling, general and administrative	315,152		286,796
Depreciation and amortization	38,032		32,018
Total operating expenses	353,184		318,814
Operating income	98,379		131,740
Other (expense) income:
Interest expense	(22,213)		(18,914)
Write-off of debt discount and deferred financing fees	—		(1,401)
Other income, net	2,028		2,139
Total other expense, net	(20,185)		(18,176)
Income before taxes	78,194		113,564
Provision for income taxes	20,946		26,734
Net income	$	57,248	$	86,830
Weighted average common shares outstanding:
Basic	39,542		40,749
Diluted	40,226		41,477
Net income per common share:
Basic	$	1.45	$	2.13
Diluted	$	1.42	$	2.09
Comprehensive income
Net income	$	57,248	$	86,830
Foreign currency translation adjustments	(2,950)		11,398
Changes in other comprehensive income, net of tax	(5,347)		5,389
Comprehensive income	$	48,951	$	103,617

The accompanying notes are an integral part of these condensed consolidated financial statements.

GMS Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balances as of April 30, 2024	39,754	$	397	$	334,596	$	1,157,047	$	(31,519)	$	1,460,521
Net income	—	—		—		57,248		—		57,248
Foreign currency translation adjustments	—	—		—		—		(2,950)		(2,950)
Other comprehensive loss, net of tax	—	—		—		—		(5,347)		(5,347)
Repurchase and retirement of common stock	(538)	(5)		(46,604)		—		—		(46,609)
Equity-based compensation	—	—		3,678		—		—		3,678
Exercise of stock options	22	—		555		—		—		555


Issuance of common stock pursuant to employee stock purchase plan	44	1		3,206		—		—		3,207
Balances as of July 31, 2024	39,282	$	393	$	295,431	$	1,214,295	$	(39,816)	$	1,470,303


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balances as of April 30, 2023	40,971	$	410	$	428,508	$	880,968	$	(35,129)	$	1,274,757
Net income	—	—		—		86,830		—		86,830
Foreign currency translation adjustments	—	—		—		—		11,398		11,398
Other comprehensive income, net of tax	—	—		—		—		5,389		5,389
Repurchase and retirement of common stock	(469)	(5)		(30,779)		—		—		(30,784)
Equity-based compensation	—	—		3,304		—		—		3,304
Exercise of stock options	46	—		1,248		—		—		1,248


Issuance of common stock pursuant to employee stock purchase plan	58	1		2,663		—		—		2,664
Balances as of July 31, 2023	40,606	$	406	$	404,944	$	967,798	$	(18,342)	$	1,354,806

The accompanying notes are an integral part of these condensed consolidated financial statements.

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Three Months Ended July 31,
	2024		2023
Cash flows from operating activities:
Net income	$	57,248	$	86,830
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	38,032		32,018
Write-off and amortization of debt discount and debt issuance costs	448		2,077
Equity-based compensation	4,343		5,002
Loss (gain) on disposal of assets	858		(131)
Deferred income taxes	(1,681)		(2,587)
Other items, net	2,288		820
Changes in assets and liabilities net of effects of acquisitions:
Trade accounts and notes receivable	(36,373)		(38,244)
Inventories	(20,640)		(1,359)
Prepaid expenses and other assets	(3,320)		(19,331)
Accounts payable	(10,644)		(28,280)
Accrued compensation and employee benefits	(66,124)		(64,038)
Other accrued expenses and liabilities	12,626		33,870
Cash (used in) provided by operating activities	(22,939)		6,647
Cash flows from investing activities:
Purchases of property and equipment	(8,976)		(13,538)
Proceeds from sale of assets	1,218		982
Acquisition of businesses, net of cash acquired	(118,461)		(38,976)
Cash used in investing activities	(126,219)		(51,532)
Cash flows from financing activities:
Repayments on revolving credit facility	(378,641)		(187,784)
Borrowings from revolving credit facility	468,864		190,673
Payments of principal on long-term debt	(1,247)		—
Borrowings from term loan amendment	—		288,266
Repayments from term loan amendment	—		(287,768)
Payments of principal on finance lease obligations	(10,839)		(9,793)
Repurchases of common stock	(46,609)		(30,784)

SEC Form 10-Q filed by GMS Inc.