GMS (GMS) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 FY2025 rose 2.8% year-over-year to $1.45 billion, driven by acquisitions and single-family volume growth, but offset by steel framing price deflation and softening commercial and multifamily demand.

• Net income declined 34.1% to $57.2 million, impacted by higher interest and SG&A expenses, lower gross margin, and the absence of a prior year tax benefit.

• Adjusted EBITDA was $145.9 million, down 15.8% year-over-year, with margin dropping to 10.1% from 12.3%.

• Recent acquisitions, including Howard & Sons, Yvon, and R.S. Elliott, expanded geographic reach and product offerings.

• A $25 million annualized cost reduction program was implemented to address margin pressures.

Financial highlights

• Gross margin for the quarter was 31.2%, down 80 basis points year-over-year, mainly due to steel price deflation and a shift to lower-margin single-family deliveries.

• SG&A expenses rose to $315.2 million, or 21.8% of net sales, up from 20.3%, driven by acquisitions and inflation.

• Adjusted net income was $77.6 million ($1.93 per diluted share), down from $103.2 million ($2.49 per share) in the prior year.

• Cash from operations was a use of $22.9 million; free cash flow was a use of $31.9 million; cash on hand was $53.2 million with $565.3 million available under the revolving credit facility.

• Net debt leverage increased to 2.1x from 1.5x year-over-year, following recent acquisitions.

Outlook and guidance

• Q2 FY2025 net sales expected to be up low to mid-single digits year-over-year, with organic sales down low single digits due to continued steel price deflation.

• Gross margin for Q2 expected to improve sequentially to 31.6%-31.8%; adjusted EBITDA projected at $163-$168 million, with margin around 11%.

• Q2 net income guidance: $67–$69 million; full-year FY25 interest expense expected at $83–$85 million; capex ~$50 million.

• Single-family wallboard volumes expected up mid-single digits, multifamily down low double digits, and commercial down high single digits in Q2.

• Multifamily market recovery not expected until the back half of calendar 2025.