GMS Inc. Reports 2.8% Net Sales Growth, 34.1% Net Income Decline in Q2 2024

GMS Inc. reported its financial results for the three months ended July 31, 2024, showing a net sales increase of 2.8% to $1,448.5 million compared to $1,409.6 million in the same period of 2023. This growth was attributed to contributions from recent acquisitions, resilient pricing in wallboard and ceilings, and a rebound in single-family construction volume. However, net income decreased significantly by 34.1% to $57.2 million, down from $86.8 million in the prior year, reflecting a net income margin of 4.0%, compared to 6.2% in 2023.

The company’s operating income also declined to $98.4 million from $131.7 million year-over-year, while adjusted EBITDA fell 15.8% to $145.9 million, with an adjusted EBITDA margin of 10.1%, down from 12.2% in the previous year. The decrease in profitability was influenced by increased selling, general, and administrative expenses, which rose by approximately $16.2 million, and a decline in gross margin due to steel price deflation and a shift in product delivery focus.

GMS Inc. made strategic acquisitions during the quarter, including Howard & Sons Building Materials, Inc. on May 1, 2024, and Yvon Building Supply, Inc. on July 2, 2024. The acquisition of Yvon was funded through cash on hand and borrowings from the asset-based revolving credit facility, with contingent consideration arrangements potentially totaling up to CAD 46 million based on purchase volumes over five years. Additionally, GMS acquired R.S. Elliott Specialty Supply on August 26, 2024, further expanding its market presence.

Cash flow from operations showed a negative trend, with cash used in operating activities amounting to $(22.9) million, compared to a positive $6.6 million in the same period last year. Cash used in investing activities increased significantly to $(126.2) million, primarily due to a $79.5 million rise in cash used for acquisitions. In financing activities, GMS reported cash provided of $35.3 million, driven by net borrowings of $90.2 million under the ABL Facility.

As of July 31, 2024, GMS Inc. had total assets of $3.89 billion, with total liabilities increasing to $2.42 billion. The company’s stockholders' equity rose to $1.47 billion, reflecting retained earnings of $1.21 billion. The company remains compliant with all covenants related to its debt facilities and continues to evaluate opportunities to optimize its capital structure.