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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 January 31, 2025

☐ 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 38,389,078 shares of the registrant’s common stock, par value $0.01 per share, outstanding as of February 28, 2025.

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 (Loss) (Unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	9
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4	Controls and Procedures	43

PART II	Other Information	44
Item 1	Legal Proceedings	44
Item 1A	Risk Factors	44
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3	Defaults Upon Senior Securities	45
Item 4	Mine Safety Disclosures	45
Item 5	Other Information	45
Item 6	Exhibits	46
Signatures		47

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, changes in interest rates, 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, including risks relating to new or increased tariffs;

•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 volatility in the political, legal and regulatory environments in which we operate, including as a result of the recent U.S. presidential election, and the legislative, regulatory, trade and policies associated with a new administration;

•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 new tariffs and other trade barriers, or increases in existing tariffs, including in connection with the new U.S. presidential administration, 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)


	January 31, 2025		April 30, 2024
Assets
Current assets:
Cash and cash equivalents	$	59,029	$	166,148
Trade accounts and notes receivable, net of allowances of $15,046 and $16,930, respectively	783,116		849,993
Inventories, net	599,284		580,830
Prepaid expenses and other current assets	50,104		42,352
Total current assets	1,491,533		1,639,323
Property and equipment, net of accumulated depreciation of $348,669 and $309,850, respectively	515,452		472,257
Operating lease right-of-use assets	318,240		251,207
Goodwill	870,027		853,767
Intangible assets, net	548,443		502,688
Deferred income taxes	27,621		21,890
Other assets	21,720		18,708
Total assets	$	3,793,036	$	3,759,840
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	330,125	$	420,237
Accrued compensation and employee benefits	96,430		125,610
Other accrued expenses and current liabilities	109,580		111,204
Current portion of long-term debt	57,104		50,849
Current portion of operating lease liabilities	54,968		49,150
Total current liabilities	648,207		757,050
Non-current liabilities:
Long-term debt	1,352,873		1,229,726
Long-term operating lease liabilities	270,732		204,865
Deferred income taxes, net	76,961		62,698
Other liabilities	50,655		44,980
Total liabilities	2,399,428		2,299,319
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.01 per share, 500,000 shares authorized; 38,487 and 39,754 shares issued and outstanding as of January 31, 2025 and April 30, 2024, respectively	385		397
Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of January 31, 2025 and April 30, 2024	—		—
Additional paid-in capital	211,814		334,596
Retained earnings	1,246,422		1,157,047
Accumulated other comprehensive loss	(65,013)		(31,519)
Total stockholders’ equity	1,393,608		1,460,521
Total liabilities and stockholders’ equity	$	3,793,036	$	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 (Loss) (Unaudited)

(in thousands, except per share data)


	Three Months Ended January 31,				Nine Months Ended January 31,
	2025		2024		2025		2024
Net sales	$	1,260,710	$	1,258,348	$	4,179,942	$	4,088,878
Cost of sales (exclusive of depreciation and amortization shown separately below)	867,620		843,628		2,874,162		2,764,975
Gross profit	393,090		414,720		1,305,780		1,323,903
Operating expenses (income):
Selling, general and administrative	310,815		295,691		950,192		883,381
Depreciation and amortization	42,430		32,804		122,540		97,759
Impairment of goodwill	42,454		—		42,454		—
Gain on sale of business	(7,393)		—		(7,393)		—
Total operating expenses	388,306		328,495		1,107,793		981,140
Operating income	4,784		86,225		197,987		342,763
Other (expense) income:
Interest expense	(23,069)		(18,784)		(68,979)		(56,440)
Write-off of debt discount and deferred financing fees	—		—		—		(1,401)
Other income, net	1,053		1,932		4,380		6,177
Total other expense, net	(22,016)		(16,852)		(64,599)		(51,664)
Income (loss) before taxes	(17,232)		69,373		133,388		291,099
Provision for income taxes	4,177		17,468		44,013		71,407
Net income (loss)	$	(21,409)	$	51,905	$	89,375	$	219,692
Weighted average common shares outstanding:
Basic	38,708		39,864		39,125		40,360
Diluted	38,708		40,512		39,727		41,026
Net income (loss) per common share:
Basic	$	(0.55)	$	1.30	$	2.28	$	5.44
Diluted	$	(0.55)	$	1.28	$	2.25	$	5.35
Comprehensive income (loss)
Net income (loss)	$	(21,409)	$	51,905	$	89,375	$	219,692
Foreign currency translation adjustments	(22,109)		14,404		(28,848)		4,638
Changes in other comprehensive income (loss), net of tax	707		(7,044)		(4,646)		2,559
Comprehensive income (loss)	$	(42,811)	$	59,265	$	55,881	$	226,889

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
Net income	—	—		—		53,536		—		53,536
Foreign currency translation adjustments	—	—		—		—		(3,789)		(3,789)
Other comprehensive loss, net of tax	—	—		—		—		(6)		(6)
Repurchase and retirement of common stock	(593)	(6)		(52,633)		—		—		(52,639)
Equity-based compensation	—	—		4,925		—		—		4,925
Exercise of stock options	63	1		1,904		—		—		1,905
Vesting of restricted stock units	118	1		(1)		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(4,928)		—		—		(4,928)
Balances as of October 31, 2024	38,870	389		244,698		1,267,831		(43,611)		1,469,307
Net loss	—	—		—		(21,409)		—		(21,409)
Foreign currency translation adjustments	—	—		—		—		(22,109)		(22,109)
Other comprehensive income, net of tax	—	—		—		—		707		707
Repurchase and retirement of common stock	(445)	(4)		(39,650)		—		—		(39,654)
Equity-based compensation	—	—		3,422		—		—		3,422
Exercise of stock options	21	—		658		—		—		658
Vesting of restricted stock units	2	—		—		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(74)		—		—		(74)
Issuance of common stock pursuant to employee stock purchase plan	39	—		2,760		—		—		2,760
Balances as of January 31, 2025	38,487	$	385	$	211,814	$	1,246,422	$	(65,013)	$	1,393,608

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, 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
Net income	—	—		—		80,957		—		80,957
Foreign currency translation adjustments	—	—		—		—		(21,164)		(21,164)
Other comprehensive income, net of tax	—	—		—		—		4,214		4,214
Repurchase and retirement of common stock	(689)	(6)		(44,566)		—		—		(44,572)
Equity-based compensation	—	—		5,111		—		—		5,111
Exercise of stock options	19	—		508		—		—		508
Vesting of restricted stock units	119	1		(1)		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(3,975)		—		—		(3,975)
Balances as of October 31, 2023	40,055	401		362,021		1,048,755		(35,292)		1,375,885
Net income	—	—		—		51,905		—		51,905
Foreign currency translation adjustments	—	—		—		—		14,404		14,404
Other comprehensive loss, net of tax	—	—		—		—		(7,044)		(7,044)
Repurchase and retirement of common stock	(370)	(4)		(24,932)		—		—		(24,936)
Equity-based compensation	—	—		3,559		—		—		3,559
Exercise of stock options	163	1		3,296		—		—		3,297
Vesting of restricted stock units	2	—		—		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(48)		—		—		(48)
Issuance of common stock pursuant to employee stock purchase plan	31	—		1,922		—		—		1,922
Balances as of January 31, 2024	39,881	$	398	$	345,818	$	1,100,660	$	(27,932)	$	1,418,944

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

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Nine Months Ended January 31,
	2025		2024
Cash flows from operating activities:
Net income	$	89,375	$	219,692
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	122,540		97,759
Impairment of goodwill	42,454		—
Write-off and amortization of debt discount and debt issuance costs	1,342		3,374
Equity-based compensation	14,505		16,507
Gain on sale of business and disposal of assets, net	(4,826)		(663)
Deferred income taxes	(6,862)		(6,410)
Other items, net	6,013		3,876
Changes in assets and liabilities net of effects of acquisitions:
Trade accounts and notes receivable	100,815		2,691
Inventories	(13,623)		7
Prepaid expenses and other assets	(16,024)		(19,184)
Accounts payable	(101,678)		(56,803)
Accrued compensation and employee benefits	(28,874)		(21,505)
Other accrued expenses and liabilities	(18,351)		(10,315)
Cash provided by operating activities	186,806		229,026
Cash flows from investing activities:
Purchases of property and equipment	(34,093)		(39,728)
Proceeds from sale of business and sale of assets	15,888		1,948
Acquisition of businesses, net of cash acquired	(204,333)		(55,402)
Other investing activities	(5,200)		—
Cash used in investing activities	(227,738)		(93,182)
Cash flows from financing activities:
Repayments on revolving credit facility	(1,265,165)		(525,009)
Borrowings from revolving credit facility	1,371,909		443,973
Payments of principal on long-term debt	(3,741)		(1,250)
Borrowings from term loan amendment	—		288,266
Repayments from term loan amendment	—		(287,769)
Payments of principal on finance lease obligations	(34,114)		(30,381)
Repurchases of common stock	(138,902)		(100,292)
Payment for debt issuance costs	—		(5,825)
Proceeds from exercises of stock options	3,118		5,053
Payments for taxes related to net share settlement of equity awards	(5,002)		(4,023)
Proceeds from issuance of stock pursuant to employee stock purchase plan	5,967		4,586
Cash used in financing activities	(65,930)		(212,671)
Effect of exchange rates on cash and cash equivalents	(257)		423
Decrease in cash and cash equivalents	(107,119)		(76,404)
Cash and cash equivalents, beginning of period	166,148		164,745
Cash and cash equivalents, end of period	$	59,029	$	88,341
Supplemental cash flow disclosures:
Cash paid for income taxes	$	58,295	$	93,661
Cash paid for interest	72,490		57,300

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

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

Founded in 1971, GMS Inc. (together with its consolidated subsidiaries, “we,” “our,” “us,” or the “Company”), through its operating subsidiaries, operates a network of more than 300 distribution centers with extensive product offerings of wallboard, ceilings, steel framing and complementary construction products. The Company also operates nearly 100 tool sales, rental and service centers. Through these operations, the Company provides a comprehensive selection of building products and solutions for its residential and commercial contractor customer base across the United States and Canada. The Company’s operating model combines the benefits of a national platform and strategy with a local go-to-market focus, enabling the Company to generate significant economies of scale while maintaining high levels of customer service.

Basis of Presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) that permit reduced disclosure for interim periods. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary for a fair presentation of the results of operations, financial position and cash flows. All adjustments are of a normal recurring nature unless otherwise disclosed. The results of operations for interim periods are not necessarily indicative of results for any other interim period or the entire fiscal year. The unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2024.

Investments

The Company accounts for investments in equity securities where it does not have significant influence over the investee using the cost method. The carrying amount of investments in equity securities was $5.2 million as of January 31, 2025 and is included in other assets in the Condensed Consolidated Balance Sheet.

Insurance Liabilities

The following table presents the Company’s aggregate liabilities for medical self-insurance, general liability, automobile and workers’ compensation and any expected recoveries. Liabilities for medical self-insurance are included in other accrued expenses and current liabilities. Reserves for general liability, automobile and workers’ compensation are included in other accrued expenses and current liabilities and other liabilities in the Condensed Consolidated Balance Sheets. Expected recoveries for insurance liabilities are included in prepaid expenses and other current assets and other assets in the Condensed Consolidated Balance Sheets.


	January 31, 2025		April 30, 2024
	(in thousands)
Medical self‑insurance	$	5,413	$	6,067
General liability, automobile and workers’ compensation	29,338		22,731
Expected recoveries for insurance liabilities	(4,991)		(3,746)

Restructuring

During the second quarter of fiscal 2025, the Company implemented a reduction in work force as part of a strategic cost reduction plan to improve operational efficiency. The Company recorded $6.2 million of restructuring costs in connection with the reduction in workforce and certain other restructuring activities, consisting primarily of severance and other employee costs. As of January 31, 2025, all such costs related to the reduction in workforce were paid. Restructuring costs are classified within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Sale of Business

On January 31, 2025, the Company sold its Michigan-based installed insulation contracting business, which was a part of the Company’s geographic divisions segment. The Company received $12.5 million of cash and recognized a $7.4 million pre-tax gain on the sale. The Company may receive up to an additional $1.5 million of cash that was held back by the buyer to secure certain of the Company’s indemnification obligations subject to and in accordance with the terms of the purchase agreement, which amount, if any, will be payable 15 months after the transaction date. The gain is included within operating income in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Revenue Recognition

Revenue is recognized upon transfer of control of contracted goods to customers at an amount that reflects the consideration the Company expects to receive in exchange for those goods. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company includes shipping and handling costs billed to customers in net sales. These costs are recognized as a component of selling, general and administrative expenses.

See Note 13, “Segments,” for information regarding disaggregation of revenue, including revenue by product and by geographic area.

Recently Issued Accounting Pronouncements

Segment Reporting. In November 2023, the Financial Accounting Standards Board (“FASB”) issued new guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker (“CODM”). The new guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The new guidance will apply retrospectively to all periods presented. Since this new guidance addresses only disclosures, the Company does not expect the adoption to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating the new disclosures that may be required upon adoption.

Income Taxes. In December 2023, the FASB issued new guidance to enhance income tax disclosures, primarily through changes in the rate reconciliation and income taxes paid disclosures. The new guidance is effective for fiscal years beginning after December 15, 2024. The new guidance will apply on a prospective basis to annual financial statements for periods beginning after the effective date. However, retrospective application in all prior periods presented is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Disaggregation of Income Statement Expenses. In November 2024, the FASB issued new guidance requiring additional disclosures of specified information about certain costs and expenses. The new guidance is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, and is to be applied prospectively with the option to adopt retrospectively. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

2. Business Combinations

The Company accounts for business combinations by recognizing the assets acquired and liabilities assumed at the acquisition date fair value. In valuing certain acquired assets and liabilities, fair value estimates use Level 3 inputs, including future expected cash flows and discount rates. Goodwill is measured as the excess of consideration transferred over the fair values of the assets acquired and liabilities assumed. While the Company uses its best estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date, the Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments arising from new facts and circumstances are recorded to the Consolidated Statements of Operations and Comprehensive Income (Loss). The results of operations of acquisitions are reflected in the Company’s Consolidated Financial Statements from the date of acquisition.

On May 1, 2024, the Company acquired Howard & Sons Building Materials, Inc., a distributor of wallboard, steel framing and complementary products from a single location in Pomona, California.

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

On July 2, 2024, the Company acquired Yvon Building Supply, Inc., Yvon Insulation Corporation, Yvon Insulation Windsor, Laminated Glass Technologies, Inc. and Right Fit Foam Insulation Ltd. (collectively, “Yvon”). Yvon provides drywall, insulation, steel, ceilings and other complementary products and related services, including installed insulation. Yvon operates through seven locations across Greater Toronto and Ontario, Canada. The Company funded this transaction with cash on hand and borrowings under its asset based revolving credit facility (the “ABL Facility”). The Company also entered into contingent consideration arrangements, based on purchase volumes of certain customers, that are payable in cash to the sellers over five years, ranging from zero dollars to a maximum amount of $33.5 million as of the acquisition date ($46.0 million Canadian dollars).

On August 26, 2024, the Company acquired R.S. Elliott Specialty Supply, Inc., a leading regional distributor of stucco, plaster, siding, External Insulation and Finishing Systems (“EIFS”) and related construction supplies, servicing markets across Florida from five locations in Orlando, Wildwood, Tampa, West Palm Beach and Jacksonville. The Company funded this transaction with cash on hand and borrowings under its ABL Facility.

The primary purpose of these transactions was to expand the geographical coverage of the Company and grow the business. The Company’s Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the nine months ended January 31, 2025 included $114.3 million of net sales and $0.1 million of net loss from acquisitions made in fiscal 2025. The Company recorded transaction costs of $3.3 million and $3.4 million during the nine months ended January 31, 2025 and 2024, respectively. Unaudited pro forma financial information is not provided because the impact of these acquisitions was not material to the Company’s Consolidated Financial Statements.

The following table summarizes the preliminary consideration transferred for the Company’s fiscal 2025 acquisitions:


	(in thousands)
Cash	$	212,356
Contingent consideration	26,648
Fair value of consideration transferred	$	239,004

The preliminary estimated fair value of the Yvon contingent consideration payments was determined using a Monte Carlo simulation which accounts for the probabilities of various outcomes. The contingent consideration will be remeasured to fair value each reporting period with changes in fair value recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 11, “Fair Value Measurements,” for more information on the changes in fair value of contingent consideration.

The assets acquired and liabilities assumed were recognized at their acquisition date fair values. The acquisition accounting is subject to change as the Company obtains additional information during the measurement period about the facts and circumstances that existed as of the acquisition date. The primary areas of the preliminary acquisition accounting that are not yet finalized relate to preliminary fair value estimates (including contingent consideration), working capital adjustments and residual goodwill.

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The following table summarizes the preliminary acquisition accounting for the Company’s fiscal 2025 acquisitions based on currently available information:


	Preliminary Acquisition Accounting		Adjustments		Preliminary Acquisition Accounting
	(in thousands)
Cash	$	8,414	$	—	$	8,414
Trade accounts and notes receivable	51,721		611		52,332
Inventories	10,731		(185)		10,546
Property and equipment	22,392		—		22,392
Other assets	15,826		161		15,987
Intangible assets	102,563		14,000		116,563
Goodwill	83,217		(16,190)		67,027
Accounts payable and other liabilities	(31,483)		(181)		(31,664)
Deferred income taxes	(21,230)		(1,363)		(22,593)
Fair value of consideration transferred	$	242,151	$	(3,147)	$	239,004

Goodwill recognized for acquisitions is attributable to synergies achieved through the streamlining of acquired company operations combined with improved margins attainable through increased market presence. The goodwill is assigned to the Company’s geographic divisions reportable segment. Goodwill of $35.7 million is not expected to be deductible for income tax purposes and goodwill of $31.3 million is expected to be deductible for income tax purposes.

The following table summarizes the preliminary components of intangible assets acquired in connection with the Company’s fiscal 2025 acquisitions (dollars in thousands):


	Fair Value		Weighted Average Amortization Period (Years)
Customer relationships	$	101,440	11.6
Trade names	13,276		15.0
Other	1,847		5.0
Total intangible assets	$	116,563	11.9

Trade accounts and notes receivable had an estimated fair value of $52.3 million and a gross contractual value of $52.5 million. The difference represents the Company’s best estimate of the contractual cash flows that will not be collected.

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

3. Accounts Receivable

The Company’s trade accounts and notes receivable consisted of the following:


	January 31, 2025		April 30, 2024
	(in thousands)
Trade receivables	$	654,257	$	745,956
Other receivables	143,905		120,967
Allowance for expected credit losses	(9,252)		(10,228)
Other allowances	(5,794)		(6,702)
Trade accounts and notes receivable	$	783,116	$	849,993

The following table presents the change in the allowance for expected credit losses during the nine months ended January 31, 2025:


	(in thousands)
Balance as of April 30, 2024	$	10,228
Provision	1,548
Write-offs and other	(2,524)
Balance as of January 31, 2025	$	9,252

Receivables from contracts with customers, net of allowances, were $639.2 million and $729.0 million as of January 31, 2025 and April 30, 2024, respectively. The Company did not have material amounts of contract assets or liabilities as of January 31, 2025 or April 30, 2024.

4. Goodwill and Intangible Assets

Goodwill

The following table presents changes in the carrying amount of goodwill:


	Gross		Accumulated		Net
	Carrying Amount		Impairment Loss		Carrying Amount
	(in thousands)
Balance as of April 30, 2024	$	917,689	$	(63,922)	$	853,767
Goodwill recognized from acquisitions	67,027		—		67,027
Impairment of goodwill	—		(42,454)		(42,454)
Goodwill written off related to sale of business	(1,744)		—		(1,744)
Acquisition accounting adjustments from prior period	2,486		—		2,486
Translation adjustment	(11,523)		2,468		(9,055)
Balance as of January 31, 2025	$	973,935	$	(103,908)	$	870,027

As of January 31, 2025, $804.7 million of goodwill was assigned to the Company’s geographic divisions reportable segment and $65.3 million was assigned to the Company’s other segment. During the nine months ended January 31, 2025, the Company recorded measurement period adjustments related to its acquisition of Kamco Supply Corporation and affiliates.

During the three months ended January 31, 2025, the Company recognized a $42.5 million non-cash impairment charge to write off a portion of the goodwill assigned to its Ames reporting unit in conjunction with an interim goodwill impairment test. This charge is included in impairment of goodwill in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three and nine months ended January 31, 2025. After analysis of a number of factors, including budgeted-to-actual performance, a downward revision to forecasted future cash flows and the prior year excess of fair value over carrying value, the Company determined it was appropriate to perform an interim goodwill impairment test as of January 31, 2025. The primary factor contributing to the impairment was a decrease in the reporting unit’s forecasted future cash flows, primarily due to softness in the markets the reporting unit operates in stemming from high interest rates and other

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

economic factors as well as delay in the projected timing of a recovery. Also contributing was an increase in the discount rate and a decrease in market multiples. The impairment charge was equal to the excess of the reporting unit’s carrying value over its fair value. As of January 31, 2025, the Company had $65.3 million of remaining goodwill assigned to its Ames reporting unit.

The Company estimated the fair value of its Ames reporting unit based on a weighting of the income and market approaches. These models use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Under the income approach, the Company calculated the fair value of the reporting unit based on the present value of estimated cash flows using a discounted cash flow method. The significant assumptions used in the discounted cash flow method include internal forecasts and projections developed by management for planning purposes, available industry/market data, discount rates and the growth rate to calculate the terminal value. Under the market approach, fair value is estimated using the guideline company method. The Company selects guideline companies in the industry in which each reporting unit operates. The Company primarily uses EBITDA multiples based on the multiples of the selected guideline companies.

The Company also performed a quantitative assessment of the Ames reporting unit indefinite-lived intangible asset and performed a recoverability test of the Ames reporting unit definite-lived intangible assets, both of which did not indicate an impairment.

Intangible Assets

The following tables present the components of the Company’s intangible assets:


	Estimated Useful Lives (years)	Weighted Average Amortization Period	January 31, 2025
			Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
	(dollars in thousands)
Customer relationships	5-15	12.6	$	777,649	$	(436,249)	$	341,400
Definite-lived trade names	5-20	15.4	154,104		(39,441)		114,663
Developed technology	5-10	7.0	8,077		(5,811)		2,266
Other	3-10	5.5	8,023		(2,276)		5,747
Definite-lived intangible assets		13.0	$	947,853	$	(483,777)	$	464,076
Indefinite-lived intangible assets							84,367
Total intangible assets, net							$	548,443


	Estimated Useful Lives (years)	Weighted Average Amortization Period	April 30, 2024
			Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
	(dollars in thousands)
Customer relationships	5-15	12.8	$	695,411	$	(395,117)	$	300,294
Definite-lived trade names	5-20	15.4	143,267		(32,613)		110,654
Developed technology	5-10	6.9	8,249		(5,843)		2,406
Other	3-10	5.6	6,142		(1,175)		4,967
Definite-lived intangible assets		13.1	$	853,069	$	(434,748)	$	418,321
Indefinite-lived intangible assets							84,367
Total intangible assets, net							$	502,688

Amortization expense related to definite-lived intangible assets was $21.2 million and $15.5 million for the three months ended January 31, 2025 and 2024, respectively, and $61.5 million and $47.2 million during the nine months ended January 31, 2025 and 2024, respectively.

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The following table summarizes the estimated future amortization expense for definite-lived intangible assets. Actual amortization expense to be reported in future periods could differ materially from these estimates as a result of acquisitions, changes in useful lives, foreign currency exchange rate fluctuations and other relevant factors.


Year Ending April 30,	(in thousands)
2025 (remaining three months)	$	19,590
2026	74,347
2027	66,526
2028	58,011
2029	50,331
Thereafter	195,271
Total	$	464,076

The Company’s indefinite-lived intangible assets as of January 31, 2025 and April 30, 2024 consisted of indefinite-lived trade names.

5. Long-Term Debt

The Company’s long-term debt consisted of the following:


	January 31, 2025		April 30, 2024
	(in thousands)
Term Loan Facility	$	493,763	$	497,503
Unamortized discount and deferred financing costs on Term Loan Facility	(5,582)		(6,406)
Senior Notes	350,000		350,000
Unamortized discount and deferred financing costs on Senior Notes	(2,912)		(3,426)
ABL Facility	372,763		270,000
Finance lease obligations	191,185		168,738
Installment notes at fixed rates up to 5.0%, due in monthly and annual installments through 2029	10,760		4,170
Unamortized discount on installment notes	—		(4)
Carrying value of debt	1,409,977		1,280,575
Less current portion	57,104		50,849
Long-term debt	$	1,352,873	$	1,229,726

Term Loan Facility

The Company has a senior secured first lien term loan facility (the “Term Loan Facility”) with $493.8 million outstanding as of January 31, 2025. The Company is required to make scheduled quarterly payments of $1.3 million, or 0.25% of the aggregate principal amount of the Term Loan Facility, which began January 1, 2024 with the remaining balance due May 12, 2030. As of January 31, 2025, the applicable rate of interest under the Term Loan Facility was 6.61%. Borrowings under the Term Loan Facility bear interest at a floating rate per annum based on the Secured Overnight Financing Rate (“SOFR”) plus 2.25%. The Company has interest rate swap and collar agreements to convert the variable interest rate on a portion of its Term Loan Facility to a fixed rate. For more information, see Note 11, “Fair Value Measurements.”

On May 12, 2023, the Company amended the Term Loan Facility to provide refinancing term loans in the aggregate principal amount of $500.0 million, the net proceeds of which were used, together with cash on hand, to refinance the then outstanding borrowings under the Term Loan Facility in the principal amount of $499.5 million and pay related fees. The net $0.5 million increase in aggregate principal amount consisted of a $211.7 million cashless roll by existing lenders, $288.3 million of proceeds received from new lenders and $287.8 million of payments to lenders who did not participate in the refinancing. The Company corrected the presentation of the cash flows associated with the refinancing from a net presentation

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

as shown in the Condensed Consolidated Statement of Cash Flows included in the Quarterly Report on Form 10-Q for the period ended July 31, 2023 to a presentation reporting the gross cash inflows and outflows within financing activities in the Condensed Consolidated Statement of Cash Flows included in this Quarterly Report on Form 10-Q. There was no impact to any of the cash flow subtotals (operating, investing, or financing) as a result of this correction of an immaterial cash flow misstatement. The amendment also amended the Term Loan Facility to, among other things, (i) replace the administrative and collateral agent, (ii) extend the maturity date by seven years from the date of the amendment to May 12, 2030 and (iii) modify certain thresholds, baskets and amounts referenced therein. The Company recorded a write-off of debt discount and deferred financing fees of $1.4 million, which is included in write-off of debt discount and deferred financing fees in the Consolidated Statement of Operations and Comprehensive Income for the nine months ended January 31, 2024.

Senior Notes

The Company has senior unsecured notes due May 2029 (the “Senior Notes”) in the aggregate principal amount of $350.0 million. The Senior Notes bear interest at 4.625% per annum and mature on May 1, 2029. Interest is payable semi-annually in arrears on May 1 and November 1.

Asset Based Lending Facility

The Company has an ABL Facility that provides for aggregate revolving commitments of $950.0 million. Extensions of credit under the ABL Facility are limited by a borrowing base calculated periodically based on specified percentages of the value of eligible inventory and accounts receivable, subject to certain reserves and other adjustments.

At the Company’s option, the interest rates applicable to the loans under the ABL Facility are based on SOFR or base rate plus, in each case, an applicable margin. The margins applicable for each elected interest rate are subject to a pricing grid, as defined in the ABL Facility agreement, based on average daily availability for the most recent fiscal quarter. The ABL Facility also contains an unused commitment fee. As of January 31, 2025, the weighted average interest rate on borrowings was 5.97%.

As of January 31, 2025, the Company had available borrowing capacity of approximately $469.7 million under the ABL Facility. The ABL Facility matures on December 22, 2027. The ABL Facility contains a cross-default provision with the Term Loan Facility.

On May 23, 2024, the Company amended its ABL Facility to replace the Canadian Dollar Offered Rate (CDOR) with the Canadian Overnight Repo Rate Average (CORRA) as the benchmark rate for borrowings under the Canadian revolving credit subfacility.

Debt Covenants

The Term Loan Facility and the indenture governing the Senior Notes contain a number of covenants that limit our ability and the ability of our restricted subsidiaries, as described in the respective credit agreement and the indenture, to incur more indebtedness; pay dividends, redeem or repurchase stock or make other distributions; make investments; create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers; create liens securing indebtedness; transfer or sell assets; merge or consolidate; enter into certain transactions with our affiliates; and prepay or amend the terms of certain indebtedness. Such covenants are subject to several important exceptions and qualifications set forth in the Term Loan Facility and the indenture governing the Senior Notes. As of January 31, 2025, the Company was in compliance with all covenants contained in the Term Loan Facility and the indenture governing the Senior Notes.

The ABL Facility contains certain covenants, including financial and other reporting requirements. The Company was in compliance with all such covenants as of January 31, 2025.

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Debt Maturities

As of January 31, 2025, the maturities of long-term debt were as follows:


	Term Loan Facility		Senior Notes		ABL Facility		Finance Leases		Installment Notes		Total
Year Ending April 30,	(in thousands)
2025 (remaining three months)	$	1,248	$	—	$	—	$	12,460	$	205	$	13,913
2026	4,988		—		—		47,225		3,527		55,740
2027	4,988		—		—		42,820		2,131		49,939
2028	4,988		—		372,763		37,241		2,057		417,049
2029	4,988		—		—		26,963		2,840		34,791
Thereafter	472,563		350,000		—		24,476		—		847,039
	$	493,763	$	350,000	$	372,763	$	191,185	$	10,760	$	1,418,471

6. Leases

The components of lease expense were as follows:


	Three Months Ended January 31,				Nine Months Ended January 31,
	2025		2024		2025		2024
	(in thousands)
Finance lease cost:
Amortization of right-of-use assets	$	8,867	$	7,419	$	25,559	$	21,297
Interest on lease liabilities	2,961		2,072		8,304		5,826
Operating lease cost	21,422		16,231		61,310		47,980
Variable lease cost	3,217		4,155		12,124		12,594
Total lease cost	$	36,467	$	29,877	$	107,297	$	87,697

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended January 31,
	2025		2024
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	59,453	$	46,835
Operating cash flows from finance leases	8,304		5,826
Financing cash flows from finance leases	34,114		30,381
Right-of-use assets obtained in exchange for lease obligations
Operating leases	96,245		39,865
Finance leases	54,648		55,662

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Other information related to leases was as follows:


	January 31, 2025			April 30, 2024
	(in thousands)
Finance leases included in property and equipment
Property and equipment	$	342,107		$	289,707
Accumulated depreciation	(97,469)			(78,170)
Property and equipment, net	$	244,638		$	211,537
Weighted-average remaining lease term (years)
Operating leases	7.0			6.9
Finance leases	4.4			4.0
Weighted-average discount rate
Operating leases	6.7		%	6.3		%
Finance leases	6.0		%	5.7		%

Future minimum lease payments under non-cancellable leases as of January 31, 2025 were as follows:


	Finance		Operating
Year Ending April 30,	(in thousands)
2025 (remaining three months)	$	15,112	$	15,987
2026	56,456		76,439
2027	49,493		65,427
2028	41,496		55,464
2029	29,162		47,797
Thereafter	25,395		156,889
Total lease payments	217,114		418,003
Less imputed interest	25,929		92,303
Total	$	191,185	$	325,700

7. Income Taxes

General. The Company’s effective income tax rate on continuing operations was 33.0% and 24.5% for the nine months ended January 31, 2025 and 2024, respectively. The difference in the effective income tax rate over the U.S. federal statutory rate of 21.0% for the nine months ended January 31, 2025 and 2024 was primarily due to the impact of the impairment of goodwill which was non-deductible for income tax purposes, foreign taxes, state taxes and equity compensation.

Valuation allowance. The Company had a valuation allowance of $12.2 million and $12.5 million against its deferred tax assets as of January 31, 2025 and April 30, 2024, respectively. To the extent the Company generates sufficient taxable income in the future to utilize the tax benefits of the net deferred tax assets on which a valuation allowance is recorded, the effective tax rate may decrease as the valuation allowance is reversed.

Uncertain tax positions. The Company had no uncertain tax positions as of January 31, 2025 or April 30, 2024.

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

8. Stockholders’ Equity

Share Repurchases

On December 2, 2024, the Company’s Board of Directors approved a renewal of the share repurchase program authorizing the Company to repurchase up to $250.0 million of its outstanding common stock (such new repurchase program, the “2024 Repurchase Plan”). The 2024 Repurchase Plan replaces the Company’s previous share repurchase authorization. The Company may conduct repurchases under the 2024 Repurchase Plan through a variety of methods, which may include open market transactions, block trades, accelerated share repurchases, under trading plans in accordance with SEC Rule 10b5-1, in privately negotiated transactions or in any combination of such methods, in each case in compliance with Rule 10b-18 under the Exchange Act. The timing and amount of any purchases of our common stock are subject to a variety of factors, including, but not limited to, our liquidity, credit availability, general business and market conditions, stock price, our debt covenants and the availability of alternative investment opportunities. The 2024 Repurchase Program does not obligate the Company to acquire any amount of common stock, and it may be suspended or terminated at any time at the Company’s discretion. As of January 31, 2025, the Company had $218.4 million of remaining repurchase authorization under the 2024 Repurchase Plan.

Share repurchases in excess of issuances are subject to a 1% excise tax. The Company includes the applicable excise tax as part of the cost basis of the shares acquired and records the taxes as a liability in accrued expenses and other liabilities in the Consolidated Balance Sheet.

Shares repurchased pursuant to the Company’s share repurchase program are retired. The Company’s accounting policy related to its share repurchases is to reduce its common stock based on the par value of the shares and charge any excess of cost over par value to additional paid-in capital. The following table presents share repurchase activity for the nine months ended January 31, 2025:


	Nine Months Ended January 31,
	2025		2024
	(in thousands)
Amount repurchased pursuant to repurchase program	$	137,789	$	99,609
Excise tax on repurchases	1,113		683
Repurchases of common stock	$	138,902	$	100,292

Number of shares repurchased	1,576		1,528

Accumulated Other Comprehensive Loss

The following table sets forth the changes to accumulated other comprehensive loss, net of tax, by component for the nine months ended January 31, 2025:


	Foreign Currency Translation		Derivative Financial Instruments		Accumulated Other Comprehensive Loss
	(in thousands)
Balance as of April 30, 2024	$	(40,000)	$	8,481	$	(31,519)
Other comprehensive loss before reclassification	(15,851)		(2,743)		(18,594)
Losses on intra-entity transactions that are of a long-term investment nature	(12,997)		—		(12,997)
Reclassification to earnings from accumulated other comprehensive loss	—		(1,903)		(1,903)
Balance as of January 31, 2025	$	(68,848)	$	3,835	$	(65,013)

Other comprehensive loss before reclassification on derivative instruments for the nine months ended January 31, 2025 is net of $0.9 million of tax. Reclassification to earnings from accumulated other comprehensive loss for the nine months ended January 31, 2025 is net of tax of $0.6 million. Losses on intra-entity transactions that are of a long-term investment nature for the nine months ended January 31, 2025 are net of tax of $4.3 million.

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

9. Equity-Based Compensation

General

Equity-based compensation expense related to stock options and restricted stock units was $10.8 million and $11.0 million during the nine months ended January 31, 2025 and 2024, respectively, and is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Stock Option Awards

The following table presents stock option activity for the nine months ended January 31, 2025:


	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
	(shares and dollars in thousands)
Outstanding as of April 30, 2024	968	$	41.79	6.7	$	49,086
Options granted	134	92.63
Options exercised	(106)	29.37
Options forfeited	(10)	60.86
Outstanding as of January 31, 2025	986	$	49.87	6.6	$	35,098
Exercisable as of January 31, 2025	696	$	37.87	5.7	$	32,324
Vested and Expected to vest as of January 31, 2025	972	$	49.37	6.5	$	35,011

The aggregate intrinsic value represents the excess of the Company’s closing stock price on the last trading day of the period over the weighted average exercise price, multiplied by the number of options outstanding, exercisable or expected to vest. Options expected to vest are unvested shares, net of expected forfeitures. The total intrinsic value of options exercised during the nine months ended January 31, 2025 and 2024 was $6.0 million and $12.4 million, respectively. As of January 31, 2025, there was $6.9 million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a weighted-average period of 1.7 years.

The fair value of stock options granted during the nine months ended January 31, 2025 and 2024 was estimated using the Black-Scholes option-pricing model with the following assumptions and resulting weighted average grant date fair value:


	Nine Months Ended January 31,
	2025			2024
Volatility	37.53		%	38.70		%
Expected life (years)	6.0			6.0
Risk-free interest rate	3.95		%	4.29		%
Dividend yield	—		%	—		%
Grant date fair value	$	39.88		$	33.33

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Restricted Stock Units

The following table presents restricted stock unit activity for the nine months ended January 31, 2025:


	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value
	(shares in thousands)
Outstanding as of April 30, 2024	314	$	60.74
Granted	119	92.63
Vested	(174)	58.34
Forfeited	(10)	74.64
Outstanding as of January 31, 2025	249	$	77.08

The fair value of restricted stock units that vested during the nine months ended January 31, 2025 and 2024 was $16.0 million and $13.0 million, respectively. As of January 31, 2025, there was $10.0 million of total unrecognized compensation cost related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 1.5 years.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan (“ESPP”), the terms of which allow for qualified employees to participate in the purchase of shares of the Company’s common stock at a price equal to 90% of the lower of the closing price at the beginning or end of the purchase period, which is a six-month period ending on December 31 and June 30 of each year. The Company recognized $1.2 million and $1.0 million of stock-based compensation expense related to the ESPP during the nine months ended January 31, 2025 and 2024, respectively.

The following table presents the number of shares of the Company’s common stock purchased under the ESPP and average price per share:


	Nine Months Ended January 31,
	2025		2024
	(shares in thousands)
Number of shares purchased under the ESPP	83		89
Average purchase price	$	71.33	$	51.74

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

10. Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests

The following table presents a summary of changes to the liabilities for stock appreciation rights, deferred compensation and redeemable noncontrolling interests:


	Stock Appreciation Rights		Deferred Compensation		Redeemable Noncontrolling Interests
	(in thousands)
Balance as of April 30, 2024	$	36,013	$	2,060	$	10,259
Amounts redeemed	(4,764)		(785)		(3,935)
Change in fair value	1,331		183		966
Balance as of January 31, 2025	$	32,580	$	1,458	$	7,290

Classified as current as of April 30, 2024	$	11,038	$	733	$	3,666
Classified as long-term as of April 30, 2024	24,975		1,327		6,593

Classified as current as of January 31, 2025	$	16,218	$	1,458	$	7,290
Classified as long-term as of January 31, 2025	16,362		—		—

Total expense related to these instruments was $2.5 million and $4.5 million during the nine months ended January 31, 2025 and 2024, respectively, and was included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Current and long-term liabilities for stock appreciation rights, deferred compensation and redeemable noncontrolling interests are included in other accrued expenses and current liabilities and other liabilities, respectively, in the Condensed Consolidated Balance Sheets. See Note 13, “Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests,” in the Company’s Annual Report on Form 10-K for the year ended April 30, 2024 for more information regarding stock appreciation rights, deferred compensation and redeemable noncontrolling interests.

11. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the estimated carrying amount and fair value of the Company’s assets and liabilities measured at fair value on a recurring basis:


	January 31, 2025		April 30, 2024
	(in thousands)
Assets:
Interest rate swaps and collars (Level 2)	$	5,108	$	11,260

Liabilities:
Contingent consideration (Level 3)	$	26,316	$	—

Interest rate swaps and collars. The Company has (a) interest rate swap agreements for two years with notional amounts totaling $300.0 million to convert the variable interest rate on a portion of the term loans outstanding to a fixed 1-month SOFR interest rate of 3.899%, and (b) forward interest rate collars with notional amounts totaling $300.0 million for years 2025 through 2029. The objective of such hedging instruments is to reduce the variability of interest payment cash flows associated with the variable interest rates under the Term Loan Facility and otherwise hedge exposure to future interest rate fluctuations. The Company believes there have been no material changes in the creditworthiness of the counterparties to these interest rate swaps and believes the risk of nonperformance by each party is minimal. The Company designated the interest rate swaps and collars as cash flow hedges.

As of January 31, 2025, $0.4 million of the interest rate swap and collar assets were classified in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet and $4.7 million were classified in other assets. The

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Company recognized gains of $0.5 million and $0.8 million during the three months ended January 31, 2025 and 2024, respectively, related to its interest rate swaps. The Company recognized gains of $2.5 million and $2.1 million during the nine months ended January 31, 2025 and 2024, respectively, related to its interest rate swaps. These amounts are included in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and within cash flows from operating activities within the Condensed Consolidated Statements of Cash Flows. As of January 31, 2025, the Company expects that approximately $0.4 million of pre-tax earnings will be reclassified from accumulated other comprehensive income (loss) into earnings during the next twelve months.

The fair value of interest rate swap and collar agreements is determined using Level 2 inputs. Generally, the Company obtains the Level 2 inputs from its counterparties. Substantially all the inputs throughout the full term of the instruments can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. The fair value of the Company’s interest rate swap and collar agreements was determined using widely accepted valuation techniques, including a discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs, including interest rate curves and implied volatilities.

Contingent consideration. As discussed in Note 2, “Business Combinations,” the Company entered into contingent consideration arrangements in connection with its acquisition of Yvon in which the Company will make additional payments to the sellers ranging from zero dollars to a maximum amount of $33.5 million ($46.0 million Canadian dollars) based on the purchase volumes of certain customers. The fair value of contingent consideration is determined using a Monte Carlo simulation which uses Level 3 unobservable inputs. The significant unobservable inputs used to calculate the fair value of the contingent consideration include estimated future cash flows, discount rates, and volatility of forecasted revenue. Actual results may differ from the projected results and could have a significant impact on the estimated fair value of the contingent consideration. Additionally, as the liability is stated at present value, the passage of time alone will increase the estimated fair value of the liability each reporting period. Changes in fair value are recorded in other income in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The following table presents the changes in the fair value of the Company’s Level 3 liabilities during the nine months ended January 31, 2025:


	Contingent Consideration
	(in thousands)
Balance as of April 30, 2024	$	—
Additions	26,348
Change in fair value	1,414
Translation adjustment	(1,446)
Balance as of January 31, 2025	$	26,316

The contingent consideration is classified in the Condensed Consolidated Balance Sheet based on expected payment dates. As of January 31, 2025, $5.3 million of the contingent consideration liability was classified within other accrued expenses and current liabilities in the Condensed Consolidated Balance Sheet and $21.0 million was classified within other liabilities.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Disclosures are required for certain assets and liabilities that are measured at fair value on a nonrecurring basis in periods after initial recognition. Such measurements of fair value relate primarily to assets and liabilities measured at fair value in connection with business combinations, long-lived asset impairments and goodwill impairment. For more information on business combinations, see Note 2, “Business Combinations.” For more information on the goodwill impairment, see Note 4, “Goodwill and Intangible Assets.” During the nine months ended January 31, 2025, the Company recorded $3.4 million for impairment of operating lease ROU assets. There were no other material long-lived asset impairments during the nine months ended January 31, 2025 or 2024.

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Fair Value of Debt

The estimated fair value of the Company’s Senior Notes was determined based on Level 2 inputs using observable market prices in less active markets. The carrying amounts of the Company’s Term Loan Facility and ABL Facility approximate their fair value, as the interest rates are variable and reflective of market rates. The following table presents the carrying amount and fair value of the Company’s Senior Notes:


	January 31, 2025				April 30, 2024
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
Senior Notes	$	350,000	$	333,813	$	350,000	$	323,330

12. Commitments and Contingencies

The Company is a defendant in various lawsuits and administrative actions associated with personal injuries, property damage, environmental matters, product liability claims, claims of former employees and other events arising in the normal course of business. As discussed in Note 1 “—Insurance Liabilities”, the Company records liabilities for these claims, and assets for amounts recoverable from the insurer, for claims covered by insurance.

13. Segments

There have been no changes to the Company’s reportable segments during the nine months ended January 31, 2025. For more information regarding the Company’s reportable segments, see Note 16, “Segments,” in the Company’s Annual Report on Form 10-K for the year ended April 30, 2024.

Segment Results

The following tables present segment results:


	Three Months Ended January 31, 2025
	Net Sales		Depreciation and Amortization		Adjusted EBITDA
	(in thousands)
Geographic divisions	$	1,233,944	$	39,060	$	89,419
Other	26,766		3,298		3,622
Corporate	—		72		—
	$	1,260,710	$	42,430	$	93,041


	Three Months Ended January 31, 2024
	Net Sales		Depreciation and Amortization		Adjusted EBITDA
	(in thousands)
Geographic divisions	$	1,224,907	$	29,179	$	124,911
Other	33,441		3,544		3,109
Corporate	—		81		—
	$	1,258,348	$	32,804	$	128,020

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


	Nine Months Ended January 31, 2025
	Net Sales		Depreciation and Amortization		Adjusted EBITDA
	(in thousands)
Geographic divisions	$	4,092,243	$	112,229	$	379,168
Other	87,699		10,085		11,978
Corporate	—		226		—
	$	4,179,942	$	122,540	$	391,146


	Nine Months Ended January 31, 2024
	Net Sales		Depreciation and Amortization		Adjusted EBITDA
	(in thousands)
Geographic divisions	$	3,992,941	$	86,289	$	454,503
Other	95,937		11,217		14,373
Corporate	—		253		—
	$	4,088,878	$	97,759	$	468,876

The following table presents a reconciliation of Adjusted EBITDA to net income:


	Three Months Ended January 31,				Nine Months Ended January 31,
	2025		2024		2025		2024
	(in thousands)
Net income (loss)	$	(21,409)	$	51,905	$	89,375	$	219,692
Interest expense	23,069		18,784		68,979		56,440
Write-off of debt discount and deferred financing fees	—		—		—		1,401
Interest income	(189)		(378)		(752)		(1,144)
Provision for income taxes	4,177		17,468		44,013		71,407
Depreciation expense	21,271		17,276		61,028		50,566
Amortization expense	21,159		15,528		61,512		47,193
Impairment of goodwill	42,454		—		42,454		—
Stock appreciation rights(a)	691		1,789		1,331		3,408
Redeemable noncontrolling interests and deferred compensation(b)	34		461		1,149		1,125
Equity-based compensation(c)	3,422		3,559		12,025		11,974
Severance and other permitted costs(d)	2,282		1,033		9,698		2,321
Transaction costs (acquisitions and other)(e)	789		765		3,262		3,373
Gain on disposal of assets(f)	(5,333)		(222)		(4,826)		(663)
Effects of fair value adjustments to inventory(g)	3		8		484		450
Change in fair value of contingent consideration(h)	621		—		1,414		—
Debt transaction costs(i)	—		44		—		1,333
Adjusted EBITDA(j)	$	93,041	$	128,020	$	391,146	$	468,876

__________________________________________

(a)Represents changes in the fair value of stock appreciation rights.

(b)Represents changes in the fair values of noncontrolling interests and deferred compensation agreements.

(c)Represents non-cash equity-based compensation expense related to the issuance of share-based awards.

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

(d)Represents severance expenses and certain other cost adjustments as permitted under the ABL Facility and the Term Loan Facility.

(e)Represents costs related to acquisitions paid to third parties.

(f)Includes gains from the sale of assets and the sale of the Company’s Michigan-based installed insulation contracting business, net of losses and impairments.

(g)Represents the non-cash cost of sales impact of acquisition accounting adjustments to increase inventory to its estimated fair value.

(h)Represents the change in fair value of contingent consideration arrangements.

(i)Represents costs paid to third-party advisors related to debt refinancing activities.

(j)For a detailed discussion of the Company’s use of non-GAAP financial measures, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation – Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q.

Revenues by Product

The following table presents the Company’s net sales to external customers by main product lines:


	Three Months Ended January 31,				Nine Months Ended January 31,
	2025		2024		2025		2024
	(in thousands)
Wallboard	$	501,703	$	520,686	$	1,671,751	$	1,677,285
Complementary products	398,647		378,555		1,308,988		1,233,084
Steel framing	179,682		203,363		606,928		672,231
Ceilings	180,678		155,744		592,275		506,278
Total net sales	$	1,260,710	$	1,258,348	$	4,179,942	$	4,088,878

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The following table presents additional detail on the Company’s net sales of complementary products:


	Three Months Ended January 31,				Nine Months Ended January 31,
	2025		2024		2025		2024
	(in thousands)
Tools and fasteners	$	80,326	$	85,164	$	261,238	$	255,204
Insulation	92,045		78,552		277,930		239,007
Joint treatment	65,454		61,219		216,971		193,915
Lumber	36,169		31,134		121,487		113,645
EIFS/stucco	47,165		38,349		153,781		132,053
Other	77,488		84,137		277,581		299,260
Complementary products	$	398,647	$	378,555	$	1,308,988	$	1,233,084

Geographic Information

The following table presents the Company’s net sales by major geographic area:


	Three Months Ended January 31,				Nine Months Ended January 31,
	2025		2024		2025		2024
	(in thousands)
United States	$	1,081,371	$	1,107,244	$	3,594,427	$	3,564,530
Canada	179,339		151,104		585,515		524,348
Total net sales	$	1,260,710	$	1,258,348	$	4,179,942	$	4,088,878

The following table presents the Company’s property and equipment, net, by major geographic area:


	January 31, 2025		April 30, 2024
	(in thousands)
United States	$	455,447	$	425,429
Canada	60,005		46,828
Total property and equipment, net	$	515,452	$	472,257

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

14. Earnings (Loss) Per Common Share

The following table sets forth the computation of basic and diluted earnings (loss) per share of common stock:


	Three Months Ended January 31,				Nine Months Ended January 31,
	2025		2024		2025		2024
	(in thousands, except per share data)
Net income (loss)	$	(21,409)	$	51,905	$	89,375	$	219,692
Basic earnings (loss) per common share:
Basic weighted average common shares outstanding	38,708		39,864		39,125		40,360
Basic earnings (loss) per common share	$	(0.55)	$	1.30	$	2.28	$	5.44
Diluted earnings (loss) per common share:
Basic weighted average common shares outstanding	38,708		39,864		39,125		40,360
Add: Common Stock Equivalents	—		648		602		666
Diluted weighted average common shares outstanding	38,708		40,512		39,727		41,026
Diluted earnings (loss) per common share	$	(0.55)	$	1.28	$	2.25	$	5.35

For the three months ended January 31, 2025, 0.5 million Common Stock Equivalents were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. During the nine months ended January 31, 2025 and the three and nine months ended and January 31, 2024, the number of Common Stock Equivalents excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive was not material. Anti-dilutive securities could be dilutive in future periods.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Cautionary Note Regarding Forward-Looking Statements,” and discussed in the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the year ended April 30, 2024.

Overview

Founded in 1971, GMS Inc. (“we,” “our,” “us,” or the “Company”), through its operating subsidiaries, operates a network of more than 300 distribution centers with extensive product offerings of wallboard, ceilings, steel framing and complementary construction products. We also operate nearly 100 tool sales, rental and service centers. Through these operations, we provide a comprehensive selection of building products and solutions for our residential and commercial contractor customer base across the United States and Canada. Our operating model combines the benefits of a national platform and strategy with a local go-to-market focus, enabling us to generate significant economies of scale while maintaining high levels of customer service.

Market Conditions and Outlook

We believe the Company continues to be well-positioned to meet demand in our end markets and respond to fluctuations therein due to our broad mix of customers, including commercial, single-family and multi-family builders and contractors, our diverse product offerings and our expansive geographic scope.

Commercial

Demand for commercial projects in most of the sectors GMS serves was solid through the end of fiscal 2024, as driven by stimulus and technology related spending and post-COVID population shifts. However, after two years of U.S. commercial wallboard volume growth through the end of fiscal 2024, demand for wallboard in this end market declined year-over-year during the first half of fiscal 2025 and deteriorated further during the last half of the third quarter of fiscal 2025. This is reflective of an uncertain economic climate and a challenging financing environment for commercial projects. Unfavorable winter weather conditions also negatively impacted demand during the third quarter of fiscal 2025. While a number of projects have been delayed or cancelled for now, construction to support certain commercial applications, including medical and governmental projects, particularly those associated with reshoring activities and those driven by governmental programs, such as development associated with the CHIPS Act of 2022, continue. Larger, privately-funded “mega” projects and data center construction demand are also favorable in this environment. Looking forward, financing availability and cost, coupled with labor constraints, other inflationary pressures and general policy-related economic uncertainty, appear to be headwinds until these conditions improve.

As with residential contractors, both we and our commercial contractor customers face inflationary pressures for labor, certain building products and other miscellaneous expenses.

Residential – Single-Family

Single-family starts began to pull back in the summer of 2022 amid rising interest rates coupled with broader macroeconomic and other affordability concerns. As a result, a slowdown in demand for single-family construction products followed, and we began to see its impacts in our results during the latter half of fiscal 2023 for most of our geographic regions. These lasted through much of fiscal 2024. After mortgage rates peaked in October 2023, they moderated slightly and sentiment from many of our homebuilder customers improved as the market favorably adjusted to the current rates, particularly with the support of incentives from larger homebuilders. In the fourth quarter of fiscal 2024, year-over-year wallboard volume growth for single-family housing units turned positive for the first time since the fall of 2022 and was again positive in the first half of fiscal 2025. Since that time, however, affordability challenges, driven in part by high mortgage rates, coupled with widespread uncertainty, heightened by questions around the scope and scale of potential tariffs and other policy decisions, have curtailed demand for this end market. As a result of these issues, while we continue to believe that solid underlying demand fundamentals remain, punctuated by a marked structural undersupply of both new and existing homes, we expect single-family housing starts to remain muted in the near term.

Residential – Multi-Family

Given the structural need for additional residential housing units, coupled with affordability concerns for prospective homebuyers and a lack of existing homes for sale, multi-family construction activity was robust throughout calendar 2023 and into the fourth quarter of fiscal 2024. However, given the significant decline in starts over the last year, this end market peaked for the short term and demand for our products declined year-over-year during the first three quarters of fiscal 2025 as most geographies have completed the bulk of their remaining projects.

While absorption rates in this market remain favorable, creating optimism for further development, interest rates and suppressed commercial real estate lending continue to constrain projects in the near term. More broadly, the solid underlying demand fundamentals of the housing market, including favorable demographics, low levels of supply of new homes, a chronic undersupply of homes in general, and easing regulatory constraints for development are expected to provide support for the residential multi-family markets in the longer term.

Business Strategy

The key elements of our business strategy are as follows:

•Expand Core Products. Our business strategy includes an emphasis on expanding our market share in our core products (wallboard, ceilings and steel framing) both organically and through acquisitions.

•Grow Complementary Products. We are focused on growing our complementary product lines, with a particular emphasis on achieving growth in tools and fasteners, insulation and External Insulation and Finishing Systems (“EIFS”) and stucco, and to diversify and expand our product offerings in order to better serve our customers.

•Expand our Platform. Our growth strategy includes the pursuit of both greenfield openings and strategic acquisitions to further broaden our geographic markets, enhance our service levels and expand our product offerings.

◦Greenfield openings. Our strategy for opening new branches is generally to further penetrate existing markets or enter new markets adjacent to our existing operations. For adjacent markets, we typically have pre-existing customer relationships in those markets but need a new location to fully serve those relationships.

◦Acquisitions. We have a proven history of consummating complementary acquisitions in new and contiguous markets. Due to the large, fragmented nature of our markets and our reputation throughout the industry, we believe we will continue to have access to a robust acquisition pipeline to supplement our organic growth. We use a rigorous targeting process to identify acquisition candidates that we believe will fit our culture and business model and we have built an experienced team of professionals to manage the acquisition and integration processes. As a result of our scale, purchasing power and ability to improve operations through implementing best practices, we believe we can continue to achieve substantial synergies, better serve our customers and drive earnings accretion from our acquisition strategy.

•Drive Improved Productivity and Profitability. Our business strategy entails a focus on reduced complexity, enhanced productivity and improved profitability across the organization, seeking to leverage our scale and employ both technology and other best practices to lower our costs in order to deliver further margin expansion and earnings growth. We also expect to continue to capture profitable market share in our existing footprint by delivering industry-leading customer service.

Highlights

Key highlights in our business during the nine months ended January 31, 2025 are described below:

•Generated net sales of $4,179.9 million during the nine months ended January 31, 2025, a 2.2% increase from the prior year period, primarily due to contributions from recent acquisitions and resilient pricing in wallboard, ceilings and certain complementary products. These factors helped to offset softening market conditions, a challenging pricing environment in steel framing and unfavorable weather conditions.

•Generated net income of $89.4 million during the nine months ended January 31, 2025, a 59.3% decrease compared to the prior year, primarily due to a $42.5 million impairment of goodwill, as further discussed below; increased selling, general and administrative expenses, driven by incremental expense from recent acquisitions and operating cost

inflation, partially offset by costs savings from our initial cost reduction initiatives and reduced activity from changes in demand; and a decrease in gross margin, primarily due to weakening demand, negative price and cost dynamics in wallboard and steel framing, and lower rebates as compared with a year ago due to reduced volumes. Net income as a percentage of sales was 2.1% and 5.4% during the nine months ended January 31, 2025 and 2024, respectively.

•Generated Adjusted EBITDA (a non-GAAP measure, see “Non-GAAP Financial Measures” in this Item 2) of $391.1 million during the nine months ended January 31, 2025, a 16.6% decrease compared to the prior year. Adjusted EBITDA, as a percentage of net sales, decreased to 9.4% for the nine months ended January 31, 2025 compared to 11.5% for the nine months ended January 31, 2024, primarily due to gross margin contraction and the increased selling, general and administrative expenses discussed above.

•Completed three acquisitions and opened three greenfield locations, as further described below.

Recent Developments

Acquisitions

On May 1, 2024, the Company acquired Howard & Sons Building Materials, Inc. (“Howard & Sons”), a distributor of wallboard, steel framing and complementary products from a single location in Pomona, California.

On July 2, 2024, the Company acquired Yvon Building Supply, Inc., Yvon Insulation Corporation, Yvon Insulation Windsor, Laminated Glass Technologies, Inc. and Right Fit Foam Insulation Ltd. (collectively, “Yvon”). Yvon provides drywall, insulation, steel, ceilings and other complementary products and related services, including installed insulation. Yvon operates through seven locations across Greater Toronto and Ontario, Canada. The Company funded this transaction with cash on hand and borrowings under its asset based revolving credit facility (the “ABL Facility”). The Company also entered into contingent consideration arrangements that are based on purchases of certain customers and are payable in cash over five years.

On August 26, 2024, the Company acquired R.S. Elliott Specialty Supply, Inc. (“R.S. Elliott”), a leading regional distributor of stucco, plaster, siding, EIFS and related construction supplies, servicing markets across Florida from five locations in Orlando, Wildwood, Tampa, West Palm Beach and Jacksonville.

For more information regarding our acquisitions, see Note 2 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Greenfields

During the nine months ended January 31, 2025, the Company opened new greenfield locations in Summerville, South Carolina; Middleton, Massachusetts and Clackamas, Oregon.

Cost Reduction Initiatives

During the second quarter of fiscal 2025, the Company implemented a strategic cost reduction plan to improve operational efficiency, including a reduction in workforce. The Company recorded $6.2 million of onetime costs during the second quarter of fiscal 2025. The cost reduction plan is expected to result in $25 million to $30 million of annualized cost savings. Subsequent to the third quarter of fiscal 2025, the Company took additional actions to further improve operational efficiency and implemented an additional $20 million in annualized cost reductions, bringing the total annualized run rate of reductions taken to $50 million since the start of the fiscal year. The initiatives also included the closure of four distribution centers.

Sale of Business

Results of Operations

The following table summarizes key components of our results of operations for the three and nine months ended January 31, 2025 and 2024:


	Three Months Ended January 31,						Nine Months Ended January 31,
	2025			2024			2025			2024
	(dollars in thousands)
Statement of operations data:
Net sales	$	1,260,710		$	1,258,348		$	4,179,942		$	4,088,878
Cost of sales (exclusive of depreciation and amortization shown separately below)	867,620			843,628			2,874,162			2,764,975
Gross profit	393,090			414,720			1,305,780			1,323,903
Operating expenses (income):
Selling, general and administrative expenses	310,815			295,691			950,192			883,381
Depreciation and amortization	42,430			32,804			122,540			97,759
Impairment of goodwill	42,454			—			42,454			—
Gain on sale of business	(7,393)			—			(7,393)			—
Total operating expenses	388,306			328,495			1,107,793			981,140
Operating income	4,784			86,225			197,987			342,763
Other (expense) income:
Interest expense	(23,069)			(18,784)			(68,979)			(56,440)
Write-off of debt discount and deferred financing fees	—			—			—			(1,401)
Other income, net	1,053			1,932			4,380			6,177
Total other expense, net	(22,016)			(16,852)			(64,599)			(51,664)
Income (loss) before taxes	(17,232)			69,373			133,388			291,099
Provision for income taxes	4,177			17,468			44,013			71,407
Net income (loss)	$	(21,409)		$	51,905		$	89,375		$	219,692
Non-GAAP measures:
Adjusted EBITDA(1)	$	93,041		$	128,020		$	391,146		$	468,876
Adjusted EBITDA margin(1)(2)	7.4		%	10.2		%	9.4		%	11.5		%

___________________________________

(1)Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See “—Non-GAAP Financial Measures—Adjusted EBITDA” for how we define and calculate Adjusted EBITDA and Adjusted EBITDA margin, reconciliations thereof to net income and a description of why we believe these measures are useful.

(2)Adjusted EBITDA margin is Adjusted EBITDA as a percentage of net sales.

Three Months Ended January 31, 2025 and 2024

Net Sales


	Three Months Ended January 31,				Change
	2025		2024		Dollar		Percent
	(dollars in thousands)
Wallboard	$	501,703	$	520,686	$	(18,983)	(3.6)	%
Complementary products	398,647		378,555		20,092		5.3	%
Steel framing	179,682		203,363		(23,681)		(11.6)	%
Ceilings	180,678		155,744		24,934		16.0	%
Total net sales	$	1,260,710	$	1,258,348	$	2,362	0.2	%

The following table presents the impact of changes in volume and pricing on net sales of wallboard, steel framing and ceilings products on a per day basis during the three months ended January 31, 2025 compared to the prior year period:


	Volume		Price/Mix
Wallboard	(4.9)	%	1.3	%
Steel framing	(5.6)	%	(6.0)	%
Ceilings	8.2	%	7.8	%

The increase in net sales during the three months ended January 31, 2025 compared to the prior year period was primarily due to contributions from recent acquisitions and resilient pricing in wallboard, ceilings and certain complementary products. These factors helped to partially offset demand contraction across multi-family, commercial and single-family markets amid broader economic uncertainty, unfavorable winter weather conditions and the negative impact of foreign currency translation. The increase in net sales consisted of the following:

•an increase in ceilings sales, which are principally impacted by commercial construction activity, primarily due to an increase in price/product mix, higher volume and positive contributions from acquisitions;

•an increase in complementary products sales, which include insulation, joint treatment, tools (including automatic taping and finishing tools), lumber and various other specialty building products, primarily due to positive contributions from acquisitions and an increase in pricing in certain product categories;

•partially offset by a decrease in steel framing sales, which are principally impacted by commercial construction activity, primarily due to a decrease in price/product mix and lower volume; and

•a decrease in wallboard sales, which are impacted by both commercial and residential construction activity, primarily due to lower volume, partially offset by an increase in price/product mix.

The following table breaks out our net sales into organic, or base business, net sales and recently acquired net sales for the three months ended January 31, 2025. When calculating organic sales growth, we exclude the net sales of acquired businesses until the first anniversary of the acquisition date. In addition, we exclude the impact of foreign currency translation in our calculation of organic net sales growth.


	Three Months Ended January 31,				Change
	2025		2024		Dollar		Percent
	(dollars in thousands)
Net sales	$	1,260,710
Recently acquired net sales (1)	(95,777)
Impact of foreign currency (2)	9,063
Base business net sales (3)	$	1,173,996	$	1,258,348	$	(84,352)	(6.7)	%

___________________________________

(1)Represents net sales of branches acquired by us until the first anniversary of the acquisition date. For the three months ended January 31, 2025, net sales includes sales from the following acquisitions: Kamco Supply Corporation and affiliates acquired on March 1, 2024; Howard & Sons acquired on May 1, 2024; Yvon acquired on July 2, 2024; and R.S. Elliott acquired on August 26, 2024.

(2)Represents the impact of foreign currency translation on net sales.

(3)Represents net sales of existing branches and branches that were opened by us during the period presented.

The decrease in organic net sales was primarily driven by demand contraction across multi-family, commercial and single-family markets and unfavorable weather conditions. These decreases were partially offset by resilient pricing in wallboard, ceilings and certain complementary products.

Gross Profit and Gross Margin


	Three Months Ended January 31,						Change
	2025			2024			Dollar		Percent
	(dollars in thousands)
Gross profit	$	393,090		$	414,720		$	(21,630)	(5.2)	%
Gross margin	31.2		%	33.0		%

The decrease in gross profit during the three months ended January 31, 2025 compared to the prior year period was primarily due to gross margin contraction, partially offset by contributions from recent acquisitions. The decrease in gross margin on net sales for the three months ended January 31, 2025 compared to the prior year period was primarily due to weakening demand, negative price and cost dynamics, and lower vendor incentive income due to reduced volumes.

Selling, General and Administrative Expenses


	Three Months Ended January 31,						Change
	2025			2024			Dollar		Percent
	(dollars in thousands)
Selling, general and administrative expenses	$	310,815		$	295,691		$	15,124	5.1	%
% of net sales	24.7		%	23.5		%

Selling, general and administrative expenses consist of warehouse, delivery and general and administrative expenses. The increase in selling, general and administrative expenses during the three months ended January 31, 2025 compared to the prior year was primarily due to approximately $24.0 million of incremental selling, general and administrative expenses from acquisitions. The increase was partially offset by lower overall operating costs, reflective of realized savings from our initial cost reduction initiatives and reduced activity from changes in demand. The increase in selling, general and administrative expenses as a percentage of our net sales during the three months ended January 31, 2025 compared to the prior year period was primarily due to operating cost inflation, higher insurance claims and impacts from unfavorable weather conditions.

Depreciation and Amortization Expense


	Three Months Ended January 31,				Change
	2025		2024		Dollar		Percent
	(dollars in thousands)
Depreciation	$	21,271	$	17,276	$	3,995	23.1	%
Amortization	21,159		15,528		5,631		36.3	%
Depreciation and amortization	$	42,430	$	32,804	$	9,626	29.3	%

Depreciation and amortization expense includes depreciation of property and equipment and amortization of definite-lived intangible assets acquired in purchases of businesses. The increase in depreciation expense during the three months ended January 31, 2025 compared to the prior year period was primarily due to incremental expense resulting from property and equipment obtained in acquisitions and capital expenditures over the past year. The increase in amortization expense during the three months ended January 31, 2025 was primarily due to incremental expense resulting from definite-lived intangible assets obtained in acquisitions over the past year, partially offset by the time-based progression of our use of the accelerated method of amortization for acquired customer relationships.

Impairment of Goodwill

During the three months ended January 31, 2025, we recognized a $42.5 million non-cash impairment charge to write off a portion of the goodwill assigned to our Ames reporting unit in conjunction with an interim goodwill impairment test. After analysis of a number of factors, including budgeted-to-actual performance, a downward revision to forecasted future cash flows and the prior year excess of fair value over carrying value, we determined it was appropriate to perform an interim goodwill impairment test as of January 31, 2025. The primary factor contributing to the impairment was a decrease in the reporting unit’s forecasted future cash flows, primarily due to softness in the markets the reporting unit operates in stemming from high interest rates and other economic factors as well as delay in the projected timing of a recovery. Also contributing was an increase in the

discount rate and a decrease in market multiples. The impairment charge was equal to the excess of the reporting unit’s carrying value over its fair value. As of January 31, 2025, we had $65.3 million of remaining goodwill assigned to our Ames reporting unit. Deterioration in market conditions or estimated future cash flows in this reporting unit could result in future goodwill impairment. We continue to monitor events and circumstances which may affect the fair value of this reporting unit.

We test goodwill annually during the fourth quarter of our fiscal year or when events and circumstances indicate that those assets might not be recoverable. Impairment testing of goodwill is required at the reporting unit level. The impairment test involves comparing the estimated fair values of our reporting units with the reporting units’ carrying amounts, including goodwill. We estimated the fair value of our Ames reporting unit based on a weighting of the income and market approaches. These models use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Under the income approach, the Company calculated the fair value of the reporting unit based on the present value of estimated cash flows using a discounted cash flow method. The significant assumptions used in the discounted cash flow method include internal forecasts and projections developed by management for planning purposes, available industry/market data, discount rates and the growth rate to calculate the terminal value. Under the market approach, fair value is estimated using the guideline company method. The Company selects guideline companies in the industry in which each reporting unit operates. We primarily use EBITDA multiples based on the multiples of the selected guideline companies.

Interest Expense


	Three Months Ended January 31,				Change
	2025		2024		Dollar		Percent
	(dollars in thousands)
Interest expense	$	23,069	$	18,784	$	4,285	22.8	%

Interest expense consists primarily of interest expense incurred on our debt and finance leases and amortization of deferred financing fees and debt discounts. The increase in interest expense during the three months ended January 31, 2025 compared to the prior year period was primarily due to an increase in outstanding debt and finance leases.

Income Taxes


	Three Months Ended January 31,						Change
	2025			2024			Dollar		Percent
	(dollars in thousands)
Provision for income taxes	$	4,177		$	17,468		$	(13,291)	(76.1)	%
Effective tax rate	(24.2)		%	25.2		%

The change in the effective income tax rate during the three months ended January 31, 2025 compared to the prior year period was primarily due to the impairment of goodwill which was non-deductible for income tax purposes, foreign taxes, state taxes and equity compensation.

Nine Months Ended January 31, 2025 and 2024

Net Sales


	Nine Months Ended January 31,				Change
	2025		2024		Dollar		Percent
	(dollars in thousands)
Wallboard	$	1,671,751	$	1,677,285	$	(5,534)	(0.3)	%
Complementary products	1,308,988		1,233,084		75,904		6.2	%
Steel framing	606,928		672,231		(65,303)		(9.7)	%
Ceilings	592,275		506,278		85,997		17.0	%
Total net sales	$	4,179,942	$	4,088,878	$	91,064	2.2	%

The following table presents the impact of changes in volume and pricing on net sales of wallboard, steel framing and ceilings products on a per day basis during the nine months ended January 31, 2025 compared to the prior year period:


	Volume		Price/Mix
Wallboard	(1.2)	%	0.9	%
Steel framing	0.8	%	(10.5)	%
Ceilings	8.4	%	8.6	%

The increase in net sales during the nine months ended January 31, 2025 compared to the prior year period was primarily due to contributions from recent acquisitions and resilient pricing in wallboard, ceilings and certain complementary products. These factors helped to partially offset softened demand across our end markets, price deflation in steel framing and unfavorable weather conditions. The increase in net sales consisted of the following:

•an increase in ceilings sales, which are principally impacted by commercial construction activity, primarily due to an increase in price/product mix and higher volume driven by positive contributions from acquisitions;

•partially offset by a decrease in steel framing sales, which are principally impacted by commercial construction activity, primarily due to a decrease in price/product mix, partially offset by higher volume driven by positive contributions from acquisitions; and

•a slight decrease in wallboard sales, which are impacted by both commercial and residential construction activity, primarily due to lower single-family volume, partially offset by an increase in price/product mix;

The following table breaks out our net sales into organic, or base business, net sales and recently acquired net sales for the nine months ended January 31, 2025. When calculating organic sales growth, we exclude the net sales of acquired businesses until the first anniversary of the acquisition date. In addition, we exclude the impact of foreign currency translation in our calculation of organic net sales growth.


	Nine Months Ended January 31,				Change
	2025		2024		Dollar		Percent
	(dollars in thousands)
Net sales	$	4,179,942
Recently acquired net sales (1)	(188,292)
Impact of foreign currency (2)	15,370
Base business net sales (3)	$	4,007,020	$	4,088,878	$	(81,858)	(2.0)	%

___________________________________

(1)Represents net sales of branches acquired by us until the first anniversary of the acquisition date. For the nine months ended January 31, 2025, net sales includes sales from the following acquisitions: AMW Construction Supply, LLC acquired on October 1, 2023; Kamco Supply Corporation and affiliates acquired on March 1, 2024; Howard & Sons acquired on May 1, 2024; Yvon acquired on July 2, 2024; and R.S. Elliott acquired on August 26, 2024.

(2)Represents the impact of foreign currency translation on net sales.

(3)Represents net sales of existing branches and branches that were opened by us during the period presented.

The decrease in organic net sales was primarily driven by softened demand across our end markets and price deflation in steel framing. These decreases were partially offset by resilient pricing in wallboard, ceilings and certain complementary products.

Gross Profit and Gross Margin


	Nine Months Ended January 31,						Change
	2025			2024			Dollar		Percent
	(dollars in thousands)
Gross profit	$	1,305,780		$	1,323,903		$	(18,123)	(1.4)	%
Gross margin	31.2		%	32.4		%

The decrease in gross profit during the nine months ended January 31, 2025 compared to the prior year period was primarily due to lower steel pricing and softened demand, partially offset by contributions from recent acquisitions. Gross margin on net sales for the nine months ended January 31, 2025 decreased compared to the prior year period, primarily due to the mix impacts of steel price deflation and price and cost dynamics in wallboard.

Selling, General and Administrative Expenses


	Nine Months Ended January 31,						Change
	2025			2024			Dollar		Percent
	(dollars in thousands)
Selling, general and administrative expenses	$	950,192		$	883,381		$	66,811	7.6	%
% of net sales	22.7		%	21.6		%

Approximately $61.8 million of the increase in selling, general and administrative expenses during the nine months ended January 31, 2025 compared to the prior year was due to incremental selling, general and administrative expenses from acquisitions. Also contributing to the increase was a $7.4 million increase in severance costs. The increase in selling, general and administrative expenses as a percentage of our net sales during the nine months ended January 31, 2025 compared to the prior year period was primarily due to operating cost inflation and activity-based increases, steel price deflation and costs associated with recent acquisitions negatively impacting leverage.

Depreciation and Amortization Expense


	Nine Months Ended January 31,				Change
	2025		2024		Dollar		Percent
	(dollars in thousands)
Depreciation	$	61,028	$	50,566	$	10,462	20.7	%
Amortization	61,512		47,193		14,319		30.3	%
Depreciation and amortization	$	122,540	$	97,759	$	24,781	25.3	%

The increase in depreciation expense during the nine months ended January 31, 2025 compared to the prior year period was primarily due to incremental expense resulting from property and equipment obtained in acquisitions and capital expenditures over the past year. The increase in amortization expense during the nine months ended January 31, 2025 was primarily due to incremental expense resulting from definite-lived intangible assets obtained in acquisitions over the past year, partially offset by the time-based progression of our use of the accelerated method of amortization for acquired customer relationships.

Impairment of Goodwill

During the nine months ended January 31, 2025, we recognized a $42.5 million non-cash impairment charge to write off goodwill related to our Ames reporting unit in conjunction with an interim goodwill impairment test. See discussion above for more information.

Interest Expense


	Nine Months Ended January 31,				Change
	2025		2024		Dollar		Percent
	(dollars in thousands)
Interest expense	$	68,979	$	56,440	$	12,539	22.2	%

The increase in interest expense during the nine months ended January 31, 2025 compared to the prior year period was primarily due to an increase in outstanding debt and finance leases.

Income Taxes


	Nine Months Ended January 31,						Change
	2025			2024			Dollar		Percent
	(dollars in thousands)
Provision for income taxes	$	44,013		$	71,407		$	(27,394)	(38.4)	%
Effective tax rate	33.0		%	24.5		%

The change in the effective income tax rate during the nine months ended January 31, 2025 compared to the prior year period was primarily due to the impairment of goodwill which was non-deductible for income tax purposes, foreign taxes, state taxes and equity compensation.

Liquidity and Capital Resources

Summary

We depend on cash flow from operations, cash on hand and funds available under our ABL Facility to finance working capital needs, capital expenditures and acquisitions. We believe that these sources of funds will be adequate to fund debt service requirements and provide cash, as required, to support our growth strategies, ongoing operations, capital expenditures, lease obligations and working capital for at least the next twelve months and in the long term. We also believe we would be able to take measures to preserve liquidity should there be an economic downturn, recession or other disruption to our business in the future.

As of January 31, 2025, we had available borrowing capacity of approximately $469.7 million under our ABL Facility. The ABL Facility is scheduled to mature on December 22, 2027. The ABL Facility contains a cross-default provision with the senior secured first lien term loan facility (the “Term Loan Facility”).

On May 23, 2024, we amended our ABL Facility to replace the Canadian Dollar Offered Rate (CDOR) with the Canadian Overnight Repo Rate Average (CORRA) as the benchmark rate for borrowings under the Canadian revolving credit subfacility.

For more information regarding our ABL Facility and other indebtedness, see Note 5 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Note 7 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2024.

We regularly evaluate opportunities to optimize our capital structure, including through consideration of the issuance or incurrence of additional debt, to refinance existing debt and to fund ongoing cash needs such as general corporate purposes, growth initiatives, acquisitions and our stock repurchase program.

Cash Flows

A summary of our operating, investing and financing activities is shown in the following table:


	Nine Months Ended January 31,
	2025		2024
	(in thousands)
Cash provided by operating activities	$	186,806	$	229,026
Cash used in investing activities	(227,738)		(93,182)
Cash used in financing activities	(65,930)		(212,671)
Effect of exchange rates on cash and cash equivalents	(257)		423
Decrease in cash and cash equivalents	$	(107,119)	$	(76,404)

Operating Activities

The decrease in cash provided by operating activities during the nine months ended January 31, 2025 compared to the prior year period was primarily due to a decrease in net income and an increase in cash paid for interest expense, partially offset by lower working capital.

Investing Activities

The increase in cash used in investing activities during the nine months ended January 31, 2025 compared to the prior year period was primarily due to a $148.9 million increase in cash used for acquisitions, partially offset by a $5.6 million decrease in capital expenditures and a $13.9 million increase in proceeds from sale of assets, primarily related to $12.5 million of cash received from the sale of our installed insulation contracting business on January 31, 2025.

Capital expenditures during the nine months ended January 31, 2025 primarily consisted of the purchase of delivery and warehouse equipment, building and leasehold improvements, and IT-related spending. Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions.

Financing Activities

The decrease in cash used in financing activities during the nine months ended January 31, 2025 compared to the prior year period was primarily due to net borrowings of $106.7 million under our ABL Facility during the nine months ended January 31, 2025, compared to net repayments of $81.0 million during the prior year period. Also contributing to the change was a $38.6 million increase in repurchases of common stock during the nine months ended January 31, 2025 compared to the prior year period and a $6.2 million increase in payments for principal on long-term debt and finance leases.

Share Repurchase Program

On December 2, 2024, the Company’s Board of Directors approved a renewal of the share repurchase program authorizing the Company to repurchase up to $250.0 million (such new repurchase program, the “2024 Repurchase Plan”). The 2024 Repurchase Plan replaces the Company’s previous share repurchase authorization of $250.0 million under the 2023 Repurchase Plan, which commenced in October 2023. See Note 8 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for more information regarding the 2024 Repurchase Plan.

We repurchased approximately 1.6 million shares of our common stock for $137.8 million pursuant to our repurchase plans during the nine months ended January 31, 2025, plus $1.1 million of excise taxes. As of January 31, 2025, we had $218.4 million of remaining purchase authorization under the 2024 Repurchase Plan.

Debt Covenants

The ABL Facility, the Term Loan Facility and the indenture governing the senior unsecured notes due May 2029 (the “Senior Notes”) contain a number of covenants that limit our ability and the ability of our restricted subsidiaries, as described in the respective credit agreement and the indenture, to incur more indebtedness; pay dividends, redeem or repurchase stock or make other distributions; make investments; create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers; create liens securing indebtedness; transfer or sell assets; merge or consolidate; enter into

certain transactions with our affiliates; and prepay or amend the terms of certain indebtedness. Such covenants are subject to several important exceptions and qualifications set forth in the ABL Facility, the Term Loan Facility and the indenture governing the Senior Notes. We were in compliance with all such covenants as of January 31, 2025.

Contractual Obligations

There have been no material changes to the contractual obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2024, other than those made in the ordinary course of business.

Off-Balance Sheet Arrangements

There have been no material changes to our off-balance sheet arrangements as discussed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2024.

Newly Issued Accounting Pronouncements

See Note 1 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding recently issued accounting pronouncements.

Critical Accounting Estimates

During the three months ended January 31, 2025, there were no material changes to our critical accounting estimates or our significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2024.

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. We report our financial results in accordance with GAAP; however, we present Adjusted EBITDA and Adjusted EBITDA margin because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes Adjusted EBITDA and Adjusted EBITDA margin are helpful in highlighting trends in our operating results, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and allocation, the tax jurisdictions in which companies operate and capital investments and acquisitions.

In addition, we utilize Adjusted EBITDA in certain calculations under our debt agreements. Our debt agreements permit us to make certain additional adjustments in calculating Consolidated EBITDA, such as projected net cost savings, which are not reflected in the Adjusted EBITDA data presented in this Quarterly Report on Form 10-Q.

We believe that Adjusted EBITDA and Adjusted EBITDA margin are frequently used by analysts, investors and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA or Adjusted EBITDA margin measure when reporting their results. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

We also include information concerning Adjusted EBITDA margin, which is calculated as Adjusted EBITDA divided by net sales. We present Adjusted EBITDA margin because it is used by management as a performance measure to judge the level of Adjusted EBITDA that is generated from net sales.

Adjusted EBITDA and Adjusted EBITDA margin have their limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

The following is a reconciliation of our net income to Adjusted EBITDA and Adjusted EBITDA margin:


	Three Months Ended January 31,						Nine Months Ended January 31,
	2025			2024			2025			2024
	(in thousands)
Net income (loss)	$	(21,409)		$	51,905		$	89,375		$	219,692
Interest expense	23,069			18,784			68,979			56,440
Write-off of debt discount and deferred financing fees	—			—			—			1,401
Interest income	(189)			(378)			(752)			(1,144)
Provision for income taxes	4,177			17,468			44,013			71,407
Depreciation expense	21,271			17,276			61,028			50,566
Amortization expense	21,159			15,528			61,512			47,193
Impairment of goodwill	42,454			—			42,454			—
Stock appreciation rights(a)	691			1,789			1,331			3,408
Redeemable noncontrolling interests and deferred compensation(b)	34			461			1,149			1,125
Equity-based compensation(c)	3,422			3,559			12,025			11,974
Severance and other permitted costs(d)	2,282			1,033			9,698			2,321
Transaction costs (acquisitions and other)(e)	789			765			3,262			3,373
Gain on disposal of assets(f)	(5,333)			(222)			(4,826)			(663)
Effects of fair value adjustments to inventory(g)	3			8			484			450
Change in fair value of contingent consideration(h)	621			—			1,414			—
Debt transaction fees(i)	—			44			—			1,333
Adjusted EBITDA	$	93,041		$	128,020		$	391,146		$	468,876

Net sales	$	1,260,710		$	1,258,348		$	4,179,942		$	4,088,878
Adjusted EBITDA Margin	7.4		%	10.2		%	9.4		%	11.5		%