GMS Inc.

Greetings. Welcome to GMS Incorporated fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Carrie Phelps, Vice President, Investor Relations. Thank you. You may begin.

Thanks, Sherry. Good morning, and thank you for joining us for the GMS earnings conference call for the fourth quarter and full year fiscal 2023. I am joined today by John Turner, President and Chief Executive Officer, and Scott Deacon, Senior Vice President and Chief Financial Officer. In addition to the press release issued this morning, we have posted PowerPoint slides to accompany this call in the investor section of our website at www.gms.com. Starting on slide two, 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 filings with the SEC, including the risk factor section of the company's 10-K and other periodic reports. Today's presentation also includes a discussion of certain non-GAAP measures. The definitions and reconciliations of these non-GAAP measures are provided in the press release and presentation slides. Please note that references on this call to the fourth quarter of fiscal 2023 relate to the quarter ended April 30, 2023. Finally, once we begin the question and answer session of the call, in the interest of time, we kindly request that you limit yourself to one question and one follow-up. With that, I'll turn the call over to John Turner, whose discussion will be starting on slide three. JT?

Thank you, Carrie, and thank you all for joining us today. 2023 was a year of strong growth and profitability, with record levels of full-year net sales, net income, adjusted EBITDA, and cash flow generation. For fiscal 2023, we achieved full-year net sales of $5.3 billion, an increase of 15% compared to the prior year. Net income increased 22% to $333 million. Adjusted EBITDA grew 17% to $665.7 million. And adjusted EBITDA margin improved 30 basis points to 12.5%. Cash generation was also significantly improved year over year, reaching a full year record high with cash from operations of $442 million and free cash flow of $389 million, each more than double their levels from a year ago. For the quarter, even after seeing a pullback in single-family demand and without the benefit of the steel inflation that we experienced during fiscal 2022 and early 2023, our team performed exceptionally well to close out the year. For our fiscal fourth quarter, we grew net sales to 1.3 billion, up 2.8% on a same-day basis. Net income declined slightly to 75.6 million, but despite having one less selling day, adjusted EBITDA grew to $154.3 million, marking our ninth consecutive quarter of year-over-year adjusted EBITDA growth. Adjusted EBITDA margin was 11.8% for the quarter, compared with 12% in the prior year period. Strong multifamily demand and continued growth in commercial construction combined with a favorable pricing environment in wallboard, ceilings, and complementary products helped offset lower steel prices and the continued softness in single-family activity that we began to see at the start of this calendar year in most regional markets. That said, on strength in Florida, the Southeast has been an outlier with modest year-over-year single-family growth. Looking at our balance sheet, during fiscal 2023 and just after the end of our fourth quarter, we refinanced our ABL and extended and amended our term loan facility. The foundational strength of our well-positioned capital structure and liquidity position helps enable us to continue driving growth and improve profitability through the execution of our strategic priorities which I will review now. Looking at slide four, the first of our four strategic priorities is to expand share in our core products. Our team has worked tirelessly to be the supplier of choice for our customers, providing exceptional service, expertise, and product availability. For Wallboard, despite being impacted the most by the slowdown in new single-family housing, our teams have successfully strengthened existing relationships and entered into new agreements with key customers across our end markets. In steel framing and ceilings, we are also strengthening relationships and successfully winning business in most of the sectors we serve, even in large office new and remodel, which does remain muted. As such, utilizing a combination of data sources, including the Gypsum Association, the Steel Framing Industry Association, and our supplier's disclosures, We believe that we continue to maintain or grow share in each of our core product categories, and we'll continue to focus on this objective going forward. Next, we are growing our complementary products. Broadening and realizing incremental scale in our offerings helps enhance the value we bring to our customers, while also allowing us to accelerate our growth and strengthen our margins. A complementary products group comprised of our field business leaders and our central purchasing team is progressively sharing best practices, identifying areas of opportunity, leveraging scale, and consolidating vendors where sensible. This focus allows us to leverage sales of our core products, such as wallboard and steel, to pull through complementary items, such as tools, fasteners, or insulation. And we are also expanding our eaves and stucco lines to new locations and onboarding additional specialized sales expertise to boost growth in this category. Also, during fiscal 2023, we furthered the growth of our complementary products with the continued expansion of the AIMS footprint. In addition, we entered the New York City market through the acquisition of Tanner Bolt & Nutt, a leading distributor of tools, fasteners, and other related construction products in that area, added additional EAVS-focused locations with the acquisition of Englermeyer & Justice, and purchased Blair Building Materials, a highly respected provider of complementary products in Ontario, Canada. As we've discussed on previous calls, within our complementary product offerings, we are focused primarily on expanding several high-opportunity growth subcategories, including tools and fasteners, stucco and heaps, and insulation. Collectively, these product lines grew nearly 15% during the fourth quarter and 25% for the full year. We intend to continue this push to profitably expand and scale these product offerings across our geographies. Third, we continued to take steps to expand our platform through accretive acquisitions and greenfield opportunities. As I just mentioned, during the fourth quarter, we completed our acquisitions of EMJ in Chicago and Blair Building Materials in Ontario, Canada. With EMJ, we significantly expanded our Chicago operations and, in the process, strengthened our relationship with Armstrong World Industries in this important market. Meanwhile, The Blair acquisition will allow us to further scale our complimentary product offerings in the greater Toronto area. In addition, we are pleased with our continued growth of new greenfield opportunities with the opening of a new yard in Ottawa, Canada during the quarter, as well as two new AIMS store locations. For the year, we completed four acquisitions and opened six new greenfield yards and 11 AIMS stores. Expanding our footprint, scale, and product offerings remains a key priority for GMS. We have a healthy list of opportunities in our pipeline of core GSD businesses as well as numerous complementary-focused businesses. Our fourth strategic priority relates to our efforts to drive improved productivity and profitability by leveraging our scale and employing technology and best practices to deliver a best-in-class customer experience and further drive profit improvements. Notably, the steps we are taking to build our yard of the future are yielding improvements in efficiencies, productivity, and profitability, all while making it easier for our customers to do business with us. To highlight some of our initiatives, we now have about 60% of our non-cash U.S. customers set up with online accounts. We are at the midpoint in our initiative to bring digital capabilities into our larger warehouses, equipping our teams with automated tablets to increase the speed and accuracy of the picking and shipping process and better facilitate customer pickups. And we are bringing a much more robust and data-driven approach to our purchasing efforts. Using our automated forecasting and replenishment platform, we are seeing improved turns and reduced stock-outs. While in the early stages of implementation now, we hope to eventually push approximately 60% to 70% of our purchase orders through this system. Finally, as we mentioned last quarter, some of our ongoing initiatives are focused on the consolidation of certain back-of-house functions as we continually look to improve efficiencies, streamline our processes, and drive complexity costs out of the business. These are just a few of the many efforts we have underway to improve our productivity and profitability. Such steps, along with growth in complementary products and expansion of scale, have contributed to our taking adjusted EBITDA margins from the upper single digits pre-COVID to now consistently reporting these returns at double-digit levels. As a result of our productivity initiatives and heightened systematic focus on organizational and people development, we have become better operators and look forward to making further improvements as we execute on all of our strategic priorities. With that, I'll now turn the call over to Scott. Scott?