GMS Inc.

Hello, and welcome to the GMS Inc. First Quarter 2024 Earnings Conference Call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may ask a question at any time by typing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Carrie Phelps, Vice President, Investor Relations. Please go ahead, Carrie.

Thanks, Kevin. Good morning, and thank you for joining us for the GMS Earnings Conference Call for the first quarter of fiscal 2024. 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 Investors section of our website at www.gms.com. Starting with 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 statement 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 factors section in 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 the presentation slides. Please note that references on this call to the first quarter of fiscal 2024 relate to the quarter ended July 31st, 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 begin on slide three. JP?

Thank you, Carrie, and thank you all for joining us today. We are pleased to report another quarter of solid performance for GMS, with $1.4 billion in net sales, up 3.7% compared to a year ago. Net income was $86.8 million, and adjusted EBITDA was $173.3 million. Net income margin was 6.2%, and adjusted EBITDA margin remained strong at 12.3% for the quarter. Cash flow was improved year over year, and we improved our net debt leverage to 1.5 times from 1.8 times in the first quarter of last year. Continued strength in multifamily construction and resilient growth in commercial activity, combined with moderate inflationary pricing in most product categories, offset softness in the new single family market, as well as deflationary pricing in steel framing. Continued growth in our complementary business lines, as well as expansion and maturation of our greenfields and recent acquisitions, were also positive contributors. Our scale and mix of customers, now roughly equally weighted between commercial and residential, along with the expertise and dedication of our team, have allowed us to pivot as needed to best serve each of our end markets. Despite mortgage rates being at 20-plus year highs, we are encouraged by sequentially improving single-family starts and permits and the associated positive builder sentiment, indicating that the worst of the pullback in single-family construction activity appears to be behind us. While year-over-year volume declines in this business are expected through the end of the calendar year as compared to the relative strength of the prior year period, We expect that the magnitude of these declines will lessen as we progress through the coming months. Looking forward, the medium to long-term outlook for new single-family housing remains very compelling, with a current fundamental shortage of housing availability and interest rate-driven constraints on existing home inventory available for sale. Meanwhile, With numerous apartment, condo, mixed-use, and dormitory projects underway or breaking ground this fall, we expect multifamily to remain a solid contributor to our results for at least the next several quarters, with some progressive tempering sequentially as the market works to complete the current backlog. And while tenant improvement work in the office space is still slow, particularly in large urban centers, We are very pleased with the activity we have continued to see in other sectors of the commercial construction market. Notably, we've seen particular strength in the medical sector and recently secured work on at least 10 hospital expansions or new builds. We also have commitments to deliver product for hospitality projects, such as the new Gaylord Resort in San Diego and a convention center and hotel in Fort Lauderdale. We've secured numerous manufacturing and data center developments and various education projects. We are even engaged on some office activity, including a commitment to supply the pier in Boston, ongoing deliveries for a large-scale project to renovate government office towers in Quebec, and a new office tower in Bellevue, Washington. This is just a sampling of the types of projects we are either actively delivering or expect to start fulfilling in the next several months as our teams work hard to grow our business and execute against our strategic priorities, which I will go through now, beginning on slide four. First, our team's relentless commitment to provide outstanding service regardless of the end market has helped us expand our share in each of our core product categories. Unlike some distributors, as a part of our value-added fulfillment model, we don't merely drop our products off at the curb. Instead, we deliver to the point of use, whether that's in a single-family home or high-volume, off-hours deliveries to the 20th floor of an office building or a multifamily complex. This capability is increasingly in demand as the availability of skilled tradespeople is constrained. Our customers know that they can count on GMS to provide best-in-class service, and they depend on us to secure the products they need when and where they need them. Moving to our second pillar, which is to grow the sales of our complementary products. Our teams are committed to enhancing the value we can provide to our customers by leveraging the sales of our core products and customer relationships to satisfy a broader array of our customers' needs. In some cases, this means we are introducing new brands and types of materials, redesigning our stores to better highlight all of our offerings, or in other cases, we are reallocating or investing in personnel and heightened capability to drive more focused sales. For example, our subsidiary, Tool Source Warehouse, or TSW, continues to expand its operation and product mix. After recently adding a third distribution center in Lenexa, Kansas, TSW is in the process of tripling its Reno, Nevada operation, allowing it to serve a much larger customer base with a more complete product offering. As market conditions and our customer needs evolve, our commitment to service only grows stronger, and this expanded service offering is just one example of this commitment and the dedication of our team to enhance the value we provide to our customers. Our third pillar, to expand our platform through accretive acquisitions and greenfield opportunities, serves to grow both the sales of our core products and those that are complementary to our core. In addition to realizing the benefits of the steady maturation of our investments in Greenfield locations, including our recent ceilings-focused location in New York City, we expanded our presence on Vancouver Island in Canada during the quarter through the acquisition of Jal Lumber Corporation. Jal operates under the Home Lumber and Building Supplies brand name and is a leading supplier of lumber, engineered wood, doors, framing packages, and siding, as well as other key complementary building materials that are offered by our Canadian operations. We are very pleased to bring home lumber into the GMS family of brands, and we intend to continue to focus on expanding our footprint, scale, and product offerings with an active M&A pipeline. 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 while further driving profit improvement. We are continually arming our teams with the tools they need to become better operators, such as providing our forklift drivers with automated tablets to increase the efficiency of our picking and loading activities, launching software solutions to provide better analysis of customer and supplier performance, utilizing centralized dispatch where most beneficial, adding job tracking capabilities, deploying internal scorecards to drive maximum productivity and asset utilization, and broadly, bringing a much more scaled, data-driven approach to our inventory management, purchasing, and pricing efforts. At the corporate level, we are simplifying our subsidiary structure to improve back office efficiencies, standardize our product and customer data, streamline our processes and drive complexity cost out of the business while maintaining our focused, localized presence and customer connection in regional markets. Initiatives like these have been integral to our consistently delivering solid, low double-digit adjusted EBITDA margins in recent years. Our team did a fantastic job this quarter in an environment that is notably more challenging than a year ago. We delivered solid results and we are confident that we are well positioned for the quarters ahead. With that, I will turn the call over to Scott.