GMS Inc.

Greetings and welcome to GMS Inc. Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Carrie Phelps, Vice President and Investor Relations. Thank you, Ms. Phelps. You may begin.

Thank you. Good morning, and thank you for joining us for the GMS Earnings Conference Call for the third quarter of fiscal 2024. I'm 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've posted PowerPoint slides to accompany this call in the investor section of our website at www.gms.com. As detailed 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 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 presentation slides. Please note that references on this call to the third quarter of fiscal 2024 relate to the quarter ended January 31, 2024. 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. I would also like to thank our team for once again executing against our key initiatives and delivering outstanding service and solid results this quarter. Volume growth was realized across all of our major product categories, as we benefited both from our organic efforts and from the contributions of recent acquisitions. And, except in steel, pricing remained resilient and, in total, accretive to growth as compared with a year ago. Our increase in total net sales versus last year was achieved despite significant steel price deflation, which we expected along with the near-term headwind of adverse weather conditions that we faced in late January. Typical weather forced all but one of our geographic divisions to shut down locations temporarily during the week of January 15th, delaying sales into the early part of our fourth quarter. Still, even with these challenges, we were pleased to deliver third quarter net income of $51.9 million and adjusted EBITDA of $128 million, which were both above our previously communicated expectations. During the quarter, strong multifamily and commercial in-market demand, along with an improving single-family backdrop and gains from acquisitions, helped drive volume growth in wallboard, ceilings, steel framing, and complementary products. And these trends are expected to continue as we anticipate delivering both year-over-year and sequential growth in net sales for our fourth quarter as we close out fiscal 2024 at the end of April. While multifamily permits and starts do indicate a forthcoming slowdown, likely in the back half of this calendar year, for now there remains a significant number of units still under construction. Commercial is also expected to continue its current pace of solid demand as our internal and external channel checks indicate levels of backlog consistent with those we experienced in our third quarter. For single family, we are encouraged by the continuing uptick in new home orders reported by our builder customers and the three-month consecutive rise in builder confidence levels, reflecting expectations for an improving mortgage rate environment and the pronounced foundation of pent-up need for housing in a relatively supply-constrained environment. In addition, we are pleased with the continued resilience of pricing in Wallboard, reinforcing what we continue to believe is a structurally changed industry, with low levels of recent new or planned capacity and rising manufacturing costs, particularly given the declining availability of synthetic gypsum. Pricing in sealings and complementary products has also held up well, while steel framing has performed as expected, with prices down substantially year over year. Although raw steel price indices began escalating roughly four months ago, it appears that these have now reached a near-term peak As such, while we expect our prices to slightly increase sequentially for our fiscal fourth quarter, those prices will likely flatten for at least the near term thereafter. While navigating the near term dynamics in end market demand and pricing, our teams have continued to deliver solid results and have maintained their focus on the successful execution of our four strategic pillars, which are highlighted on slide four. Measuring against data from the Gypsum Association, the Steel Framing Industry Association, and manufacturer disclosures, we believe that we have continued to expand our share in each of our core product categories. Customers across our end markets are seeing the value that our scale, expertise, product breadth, and commitment to delivering outstanding service provide. In recent months, we have successfully secured a range of new projects. including expanding activity with some of the nation's largest residential home builders, while also winning commercial work in those sectors, which remain most active, primarily manufacturing, medical, education, government, and data centers, as well as participation in many of the mega-projects underway across the country. Second, our complementary products category continues to grow as an increasingly important part of our product mix, This category has made up 30% of our sales so far this fiscal year, and as we've said in previous quarters, our aim is to grow this category at twice the rate of our core products. In particular, we are placing emphasis on tools and fasteners, heaps and stucco, and insulation, which collectively grew 11.7% for the quarter, while the total complementary products category grew 7.3%. Over time, we expect to continue to drive accelerated growth in this margin accretive segment as a percentage of our overall net sales. Third, we are seeing success with our many productivity initiatives and our push to drive complexity costs out of the business, while further realizing the benefits of our attractive scale position. Equipping our yard operators with the right tools and technologies continues to improve the efficiency of their operations. Our e-commerce advancements are providing an enhanced customer experience and, among other features, offer an avenue for quick product pricing and order information, together with easy online payments, which customers are increasingly taking advantage of. Additionally, we are consolidating a number of our legacy legal entities and merging back-of-house functionality, thereby reducing organizational and process complexity, along with costs, while also leveraging the standardization of our product, vendor, customer, and other operational data across the business. Collectively, These initiatives help drive additional profitability in the business and make us better operators, further positioning GMS as the provider of choice for our customers. Finally, our fourth strategic pillar is to expand our platform to accretive acquisition and greenfield opportunities. During the third quarter, we opened three new greenfields, and we continue to focus on M&A to drive growth, with attractive opportunities in both our core and complementary businesses. In late December, as highlighted on slide five, We capitalized on one of these opportunities and announced our agreement to purchase Camco Supply Corporation, a leading distributor of building products in the New York City market. We are very excited about the prospects of this transaction, which we expect to close in the coming days. Camco's values and highly regarded execution discipline align very well with our own, and we are pleased to welcome the company's leadership and employees as they join GMS. Bringing CAMCO into the GMS family of brands represents a unique opportunity to advance our strategic priorities, including expanding share in our core products and geographic expansion in the highly attractive New York City market. Additionally, as we continue to drive complementary product sales, this transaction will present cross-selling opportunities with other GMS operations in the area, including further expanding our leadership position in Wallboard. We are very excited about becoming one of the top distributors in this key region, and will look to leverage CAMCO's excellent reputation for customer service and operational execution as a base for further organic and inorganic expansion. Before turning the call over to Scott, who will cover more on this exciting transaction and our business results, I want, once again, to thank our team for maintaining our high level of service and performance during the quarter. We again successfully demonstrated the benefits of our end market balance. and the flexibility and expertise we have in servicing each one. I am confident that we will continue to drive further growth and profitability as we execute on our strategic priorities. With that, I will turn the call over to Scott.