How did GMS perform in Q4 2024 compared to forecasts?

GMS Inc. faced challenges in Q4 2024 as evidenced by lower-than-expected net income and revenue compared to the previous year, despite a slight increase in net sales.

1. Net Income and Revenue Performance:
   • GMS reported net income of $53.5 million for Q2 2025, which is a decrease from the $80.96 million reported in the same period the previous year.
   • The net sales for the quarter were $1,470.8 million, reflecting a 3.5% increase year-over-year, primarily driven by contributions from recent acquisitions and resilient pricing in certain product categories.
   • However, when comparing Q2 2024 to Q2 2023, net income decreased by 33.9%, and organic sales fell by 4.6% due to hurricanes and softening demand, especially in multifamily and commercial markets.

2. Gross Profit and Margin:
   • Gross profit for the quarter was $461.1 million, indicating a slight increase of 0.5% compared to the previous year.
   • The gross margin decreased by 90 basis points year-over-year to 31.4%, primarily due to cost-price dynamics and a shift in demand from commercial to single-family deliveries.
3. Operating Expenses and Profitability:
   • Selling, general, and administrative expenses increased to $324.225 million, primarily due to incremental expenses from acquisitions and severance costs related to cost reduction initiatives.
   • Adjusted EBITDA decreased by 9.2% year-over-year to $152.2 million, with an EBITDA margin of 10.3% compared to 11.8% a year ago.
4. Cash Flow and Financial Position:
   • Cash provided by operating activities was $92,662,000, while cash used in investing activities was $233,189,000, largely due to acquisitions.
   • The company maintained a strong balance sheet with $83.9 million in cash and $458.6 million of available liquidity under revolving credit facilities.

In conclusion, while GMS experienced a slight increase in net sales and gross profit, the decrease in net income and gross margin, along with increased operating expenses, indicates a challenging operating environment in Q4 2024. The company's strategic initiatives, such as acquisitions and expanding its platform, have shown resilience in navigating these challenges.