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, 2023

OR

☐    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 41,305,471 shares of the registrant’s common stock, par value $0.01 per share, outstanding as of February 28, 2023.

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 (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	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4	Controls and Procedures	39
PART II	Other Information	40
Item 1	Legal Proceedings	40
Item 1A	Risk Factors	40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3	Defaults Upon Senior Securities	41
Item 4	Mine Safety Disclosures	41
Item 5	Other Information	41
Item 6	Exhibits	42
Signatures		43

2

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 the growth of or other future developments relating to our various markets and statements about our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance 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, 2022, 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:

•the ongoing effects of the COVID-19 pandemic and other widespread public health crises on our business, industry and results of operations;

•general business, financial market and economic conditions, including inflation and deflation, rising interest rates, supply chain disruptions, labor shortages and capital market volatility;

•our dependency upon the cyclical commercial and residential construction markets, both new and repair and remodeling, including any impact from the developing slow-down in single-family construction;

•competition in our highly fragmented industry and the markets in which we operate;

•consolidation in our industry;

•the fluctuations in prices and mix of the products we distribute, including fluctuations caused by geopolitical conflicts, 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 through making and integrating acquisitions, opening new branches and expanding our product offerings;

•our ability to 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;

•our ability to drive improved productivity and profitability, including managing operating costs and achieving productivity initiatives;

•the potential loss of any significant customers, a reduction of the quantity of products our customers purchase or inability to pay;

•our ability to renew leases for our facilities on favorable 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;

3

•natural or man-made disruptions to our facilities;

•the risk of 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 impact of federal, state, provincial and local regulations, including potential changes in our effective tax rate;

•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 potential to incur additional indebtedness;

•our ability to obtain additional financing on acceptable terms, if at all;

•our ability to attract and retain key employees while controlling costs, including the impact of labor and trucking shortages;

•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 tariffs and other trade barriers, 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.

4

PART I – Financial Information

Item 1. Financial Statements

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)

	January 31, 2023		April 30, 2022
Assets
Current assets:
Cash and cash equivalents	$	186,663	$	101,916
Trade accounts and notes receivable, net of allowances of $10,653 and $9,346, respectively	775,118		750,046
Inventories, net	586,651		550,953
Prepaid expenses and other current assets	19,215		20,212
Total current assets	1,567,647		1,423,127
Property and equipment, net of accumulated depreciation of $257,697 and $227,288, respectively	375,115		350,679
Operating lease right-of-use assets	153,524		153,271
Goodwill	693,871		695,897
Intangible assets, net	403,851		454,747
Deferred income taxes	21,343		17,883
Other assets	18,106		8,795
Total assets	$	3,233,457	$	3,104,399
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	314,349	$	367,315
Accrued compensation and employee benefits	91,724		107,925
Other accrued expenses and current liabilities	117,737		127,938
Current portion of long-term debt	54,222		47,605
Current portion of operating lease liabilities	41,518		38,415
Total current liabilities	619,550		689,198
Non-current liabilities:
Long-term debt, less current portion	1,169,258		1,136,585
Long-term operating lease liabilities	110,240		112,161
Deferred income taxes, net	48,183		46,802
Other liabilities	55,530		55,155
Total liabilities	2,002,761		2,039,901
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01 per share, 500,000 shares authorized; 41,347 and 42,773 shares issued and outstanding as of January 31, 2023 and April 30, 2022, respectively	413		428
Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of January 31, 2023 and April 30, 2022	—		—
Additional paid-in capital	451,210		522,136
Retained earnings	805,375		547,977
Accumulated other comprehensive loss	(26,302)		(6,043)
Total stockholders' equity	1,230,696		1,064,498
Total liabilities and stockholders' equity	$	3,233,457	$	3,104,399

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

5

GMS Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(in thousands, except per share data)

	Three Months Ended January 31,				Nine Months Ended January 31,
	2023		2022		2023		2022
Net sales	$	1,234,618	$	1,153,595	$	4,025,150	$	3,346,222
Cost of sales (exclusive of depreciation and amortization shown separately below)	832,370		785,823		2,723,681		2,270,747
Gross profit	402,248		367,772		1,301,469		1,075,475
Operating expenses:
Selling, general and administrative	267,380		241,040		814,063		685,652
Depreciation and amortization	31,419		29,750		96,085		86,867
Total operating expenses	298,799		270,790		910,148		772,519
Operating income	103,449		96,982		391,321		302,956
Other (expense) income:
Interest expense	(16,943)		(15,429)		(47,659)		(43,830)
Other income, net	1,966		1,041		5,458		2,771
Total other expense, net	(14,977)		(14,388)		(42,201)		(41,059)
Income before taxes	88,472		82,594		349,120		261,897
Provision for income taxes	23,697		21,211		91,722		64,951
Net income	$	64,775	$	61,383	$	257,398	$	196,946
Weighted average common shares outstanding:
Basic	41,578		43,094		42,119		43,106
Diluted	42,232		43,945		42,812		43,937
Net income per common share:
Basic	$	1.56	$	1.42	$	6.11	$	4.57
Diluted	$	1.53	$	1.40	$	6.01	$	4.48
Comprehensive income
Net income	$	64,775	$	61,383	$	257,398	$	196,946
Foreign currency translation adjustments	10,215		(15,185)		(21,728)		(19,304)
Changes in other comprehensive income, net of tax	(1,880)		4,023		1,469		9,274
Comprehensive income	$	73,110	$	50,221	$	237,139	$	186,916

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

6

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, 2022	42,773	$	428	$	522,136	$	547,977	$	(6,043)	$	1,064,498
Net income	—	—		—		89,470		—		89,470
Foreign currency translation adjustments	—	—		—		—		2,642		2,642
Other comprehensive income, net of tax	—	—		—		—		2,219		2,219
Repurchase and retirement of common stock	(516)	(5)		(23,790)		—		—		(23,795)
Equity-based compensation	—	—		3,132		—		—		3,132
Exercise of stock options	1	—		29		—		—		29
Vesting of restricted stock units	7	—		—		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(300)		—		—		(300)
Issuance of common stock pursuant to employee stock purchase plan	33	—		1,329		—		—		1,329
Balances as of July 31, 2022	42,298	423		502,536		637,447		(1,182)		1,139,224
Net income	—	—		—		103,153		—		103,153
Foreign currency translation adjustments	—	—		—		—		(34,585)		(34,585)
Other comprehensive income, net of tax	—	—		—		—		1,130		1,130
Repurchase and retirement of common stock	(601)	(6)		(25,770)		—		—		(25,776)
Equity-based compensation	—	—		3,781		—		—		3,781
Exercise of stock options	53	—		672		—		—		672
Vesting of restricted stock units	101	1		(1)		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(3,660)		—		—		(3,660)
Balances as of October 31, 2022	41,851	418		477,558		740,600		(34,637)		1,183,939
Net income	—	—		—		64,775		—		64,775
Foreign currency translation adjustments	—	—		—		—		10,215		10,215
Other comprehensive loss, net of tax	—	—		—		—		(1,880)		(1,880)
Repurchase and retirement of common stock	(656)	(6)		(33,190)		—		—		(33,196)
Equity-based compensation	—	—		3,285		—		—		3,285
Exercise of stock options	104	1		1,728		—		—		1,729
Vesting of restricted stock units	2	—		—		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(45)		—		—		(45)
Issuance of common stock pursuant to employee stock purchase plan	46	—		1,874		—		—		1,874
Balances as of January 31, 2023	41,347	$	413	$	451,210	$	805,375	$	(26,302)	$	1,230,696

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

7

GMS Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands)

	Common Stock			Additional Paid-in  Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
	Shares	Amount
Balances as of April 30, 2021	43,073	$	431	$	542,737	$	274,535	$	4,759	$	822,462
Net income	—	—		—		61,202		—		61,202
Foreign currency translation adjustments	—	—		—		—		(8,233)		(8,233)
Other comprehensive income, net of tax	—	—		—		—		1,962		1,962
Repurchase and retirement of common stock	(85)	(1)		(3,854)		—		—		(3,855)
Equity-based compensation	—	—		1,958		—		—		1,958
Exercise of stock options	44	1		862		—		—		863
Vesting of restricted stock units	8	—		—		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(256)		—		—		(256)
Issuance of common stock pursuant to employee stock purchase plan	43	—		1,140		—		—		1,140
Balances as of July 31, 2021	43,083	431		542,587		335,737		(1,512)		877,243
Net income	—	—		—		74,361		—		74,361
Foreign currency translation adjustments	—	—		—		—		4,114		4,114
Other comprehensive income, net of tax	—	—		—		—		3,289		3,289
Repurchase and retirement of common stock	(195)	(2)		(9,267)		—		—		(9,269)
Equity-based compensation	—	—		3,215		—		—		3,215
Exercise of stock options	52	1		976		—		—		977
Vesting of restricted stock units	112	1		(1)		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(2,579)		—		—		(2,579)
Balances as of October 31, 2021	43,052	431		534,931		410,098		5,891		951,351
Net income	—	—		—		61,383		—		61,383
Foreign currency translation adjustments	—	—		—		—		(15,185)		(15,185)
Other comprehensive income, net of tax	—	—		—		—		4,023		4,023
Repurchase and retirement of common stock	(87)	(1)		(4,733)		—		—		(4,734)
Equity-based compensation	—	—		3,077		—		—		3,077
Exercise of stock options	101	1		2,183		—		—		2,184
Vesting of restricted stock units	2	—		—		—		—		—
Tax withholding related to net share settlements of equity awards	—	—		(15)		—		—		(15)
Issuance of common stock pursuant to employee stock purchase plan	27	—		1,192		—		—		1,192
Balances as of January 31, 2022	43,095	$	431	$	536,635	$	471,481	$	(5,271)	$	1,003,276

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

8

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Nine Months Ended January 31,
	2023		2022
Cash flows from operating activities:
Net income	$	257,398	$	196,946
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	96,085		86,867
Amortization of debt discount and debt issuance costs	1,176		2,037
Equity-based compensation	17,289		12,461
Gain on disposal of assets	(614)		(474)
Deferred income taxes	(1,951)		(1,740)
Other items, net	5,891		5,357
Changes in assets and liabilities net of effects of acquisitions:
Trade accounts and notes receivable	(28,148)		(109,948)
Inventories	(34,717)		(191,103)
Prepaid expenses and other assets	(907)		2,215
Accounts payable	(51,491)		(46,310)
Accrued compensation and employee benefits	(16,469)		3,618
Other accrued expenses and liabilities	(6,615)		20,187
Cash provided by (used in) operating activities	236,927		(19,887)
Cash flows from investing activities:
Purchases of property and equipment	(33,250)		(33,161)
Proceeds from sale of assets	1,661		1,124
Acquisition of businesses, net of cash acquired	(20,415)		(345,376)
Cash used in investing activities	(52,004)		(377,413)
Cash flows from financing activities:
Repayments on revolving credit facilities	(361,247)		(823,583)
Borrowings from revolving credit facilities	390,113		1,182,774
Payments of principal on long-term debt	(3,832)		(3,832)
Payments of principal on finance lease obligations	(26,167)		(23,154)
Repurchases of common stock	(82,767)		(17,858)
Payment of acquisition holdback liability	(13,500)		—
Payment for debt issuance costs	(3,157)		—
Proceeds from exercises of stock options	2,430		4,024
Payments for taxes related to net share settlement of equity awards	(4,005)		(2,850)
Proceeds from issuance of stock pursuant to employee stock purchase plan	3,203		2,332
Cash (used in) provided by financing activities	(98,929)		317,853
Effect of exchange rates on cash and cash equivalents	(1,247)		(590)
Increase (decrease) in cash and cash equivalents	84,747		(80,037)
Cash and cash equivalents, beginning of period	101,916		167,012
Cash and cash equivalents, end of period	$	186,663	$	86,975
Supplemental cash flow disclosures:
Cash paid for income taxes	$	85,642	$	61,066
Cash paid for interest	49,193		35,721

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

9

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 wholly owned operating subsidiaries, operates a network of approximately 300 distribution centers with extensive product offerings of wallboard, ceilings, steel framing and complementary construction products. The Company also operates approximately 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 unique 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, 2022.

Principles of Consolidation

The condensed consolidated financial statements present the results of operations, financial position, stockholders’ equity and cash flows of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The results of operations of businesses acquired are included from their respective dates of acquisition.

Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

Assets and liabilities of the Company’s Canadian subsidiaries are translated at the exchange rate prevailing at the balance sheet date, while income and expenses are translated at average rates for the period. Translation gains and losses are reported as a separate component of stockholders’ equity and other comprehensive income (loss). Gains and losses on foreign currency transactions are recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income within other income, net.

Insurance Liabilities

The Company is self-insured for certain losses related to medical claims. The Company has stop-loss coverage to limit the exposure arising from medical claims. In addition, the Company has deductible-based insurance policies for certain losses related to general liability, automobile and workers’ compensation. The expected ultimate cost for claims incurred as of the balance sheet date is not discounted and is recognized as a liability if probable and estimable. Insurance losses for claims filed and claims incurred but not reported are accrued based upon estimates of the aggregate liability for uninsured claims using historical loss development factors and actuarial assumptions followed in the insurance industry.

10

GMS Inc.

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

The following table presents the Company’s aggregate liabilities for medical self-insurance, general liability, automobile and workers’ compensation and the expected recoveries for medical self-insurance, general liability, automobile and workers’ compensation. 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. 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, 2023		April 30, 2022
	(in thousands)
Medical self‑insurance	$	4,602	$	3,371
General liability, automobile and workers’ compensation	27,353		21,707
Expected recoveries for insurance liabilities	(8,321)		(4,973)

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.

Income Taxes

The Company considers each interim period an integral part of the annual period and measures tax expense (benefit) using an estimated annual effective income tax rate. Estimates of the annual effective income tax rate at the end of interim periods are, out of necessity, based on evaluation of possible future events and transactions and may be subject to subsequent refinement or revision. The Company forecasts its estimated annual effective income tax rate and then applies that rate to its year-to-date pre-tax ordinary income (loss), subject to certain loss limitation provisions. In addition, certain specific transactions are excluded from the Company’s estimated annual effective tax rate computation but are discretely recognized within income tax expense (benefit) in their respective interim period. Future changes in annual income (loss) projections, tax rate changes, or discrete tax items could result in significant adjustments to quarterly income tax expense (benefit) in future periods.

The Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required. In this evaluation, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The primary negative evidence considered includes the cumulative operating losses generated in prior periods. The primary positive evidence considered includes the reversal of deferred tax liabilities related to depreciation and amortization that would occur within the same jurisdiction and during the carryforward period necessary to absorb the federal and state net operating losses and other deferred tax assets.

Deferred tax assets and liabilities are computed by applying the federal, provincial and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carry-forwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of outstanding shares of common stock for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options and restricted stock units (collectively “Common Stock Equivalents”), were exercised or converted into common stock. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. In

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GMS Inc.

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

applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise and the amount of compensation cost attributed to future services and not yet recognized. Diluted earnings per share is computed by increasing the weighted-average number of outstanding shares of common stock computed in basic earnings per share to include the dilutive effect of Common Stock Equivalents for the period. In periods of net loss, the number of shares used to calculate diluted loss per share is the same as basic net loss per share.

Recently Issued Accounting Pronouncements

Reference Rate Reform – In March 2020, the Financial Accounting Standards Board (“FASB”) issued new guidance to temporarily ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). The guidance was effective upon issuance and generally could be applied through December 31, 2022. However, the new guidance was not applicable to contract modifications made, and hedging relationships entered into or evaluated after, December 31, 2022. The Company adopted this guidance when its relevant contracts were modified to alternative reference rates. The adoption did not have a material impact on the Company's consolidated financial statements.

Business Combinations – In October 2021, the FASB issued new guidance which requires the recognition and measurement of contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Code 606, "Revenue from Contracts with Customers." This creates an exception to the general recognition and measurement principles in existing business combination guidance. The new guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The amendments in this new guidance should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company does not expect the adoption of this guidance to have a material impact 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 the 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. The results of operations of acquisitions are reflected in the Company’s Consolidated Financial Statements from the date of acquisition.

Westside Acquisition

During the nine months ended January 31, 2023, the Company settled its $13.5 million holdback liability related to the acquisition of Westside Building Material (“Westside”) in accordance with the terms of the purchase agreement. The holdback liability was for general representations and warranties of the sellers and was settled 15 months after the acquisition date.

Fiscal 2023 Acquisitions

On June 1, 2022, the Company acquired certain assets of Construction Supply of Southwest Florida, Inc. (“CSSWF”). CSSWF is a distributor of various stucco, building and waterproofing supplies serving markets in the southwest Florida area. The impact of this acquisition is not material to the Company’s Consolidated Financial Statements.

On December 30, 2022, the Company acquired certain assets of Tanner Bolt and Nut, Inc. ("Tanner"). Tanner is a distributor of various tools, fasteners, sealants and related construction products to the broader New York City market through its four distribution facilities. The impact of this acquisition is not material to the Company’s Consolidated Financial Statements.

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 dates. The primary areas of the preliminary acquisition accounting that are not yet finalized relate to preliminary fair value estimates, working capital adjustments and residual goodwill.

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GMS Inc.

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

The following table summarizes the preliminary acquisition accounting for the Company's fiscal 2023 acquisitions based on currently available information:

	Preliminary Acquisition Accounting
	(in thousands)
Trade accounts and notes receivable	$	5,487
Inventories	7,824
Prepaid and other current assets	1,607
Property and equipment	1,336
Customer relationships	4,800
Tradenames	1,400
Goodwill	2,094
Accounts payable and other liabilities	(4,249)
Fair value of consideration transferred	$	20,299

Goodwill recognized is attributable to expected synergies, increased market presence and the expected value to expand and enhance the Company's complementary product offerings. Goodwill is expected to be deductible for U.S. federal income tax purposes. The estimated useful life for the customer relationships is ten years and the estimated useful life for the tradenames is 15 years.

Pro Forma Financial Information

The following table presents the unaudited pro forma consolidated net sales and net income for the Company for the period indicated:

	Three Months		Nine Months
	Ended		Ended
	January 31, 2022		January 31, 2022
	(in thousands)
Net sales	$	1,160,211	$	3,429,878
Net income	62,625		205,050

On July 1, 2021, the Company acquired substantially all the assets of Westside. On December 1, 2021, the Company acquired Ames Taping Tools Holding LLC (“Ames”). The above pro forma results have been calculated by combining the historical results of the Company, Westside and Ames as if the acquisitions of Westside and Ames had occurred on May 1, 2021, the first day of the comparable prior reporting period presented. The pro forma results include estimates for intangible asset amortization, depreciation, interest expense and income taxes. The pro forma information is not necessarily indicative of the results that would have been achieved had the transactions occurred on the first day of each of the periods presented or that may be achieved in the future. See Note 2, "Business Combinations," in the Company's Annual Report on Form 10-K for the year ended April 30, 2022 for more information regarding these acquisitions.

3. Accounts Receivable

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

	January 31, 2023		April 30, 2022
	(in thousands)
Trade receivables	$	660,092	$	675,724
Other receivables	125,679		83,668
Allowance for expected credit losses	(5,774)		(5,087)
Other allowances	(4,879)		(4,259)
Trade accounts and notes receivable	$	775,118	$	750,046

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GMS Inc.

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

The following table presents the change in the allowance for expected credit losses during the nine months ended January 31, 2023:

	(in thousands)
Balance as of April 30, 2022	$	5,087
Provision	1,897
Other	(1,210)
Balance as of January 31, 2023	$	5,774

Receivables from contracts with customers, net of allowances, were $649.4 million and $666.4 million as of January 31, 2023 and April 30, 2022, respectively. The Company did not have material amounts of contract assets or liabilities as of January 31, 2023 or April 30, 2022.

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, 2022	$	762,424	$	(66,527)	$	695,897
Goodwill recognized from acquisitions	2,094		—		2,094
Acquisition accounting adjustments from prior period	701		—		701
Translation adjustment	(6,847)		2,026		(4,821)
Balance as of January 31, 2023	$	758,372	$	(64,501)	$	693,871

During the nine months ended January 31, 2023, the Company recorded measurement period adjustments related to its Westside and Ames acquisitions.

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GMS Inc.

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

Intangible Assets

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

	Estimated Useful Lives (years)	Weighted Average Amortization Period	January 31, 2023
			Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
	(dollars in thousands)
Customer relationships	5-16	12.5	$	663,190	$	(421,171)	$	242,019
Definite-lived tradenames	5-20	15.6	97,526		(23,915)		73,611
Vendor agreements	8-10	10.0	1,000		(550)		450
Developed technology	5-10	6.9	8,315		(5,318)		2,997
Other	3-5	3.5	1,821		(1,414)		407
Definite-lived intangible assets			$	771,852	$	(452,368)	$	319,484
Indefinite-lived intangible assets							84,367
Total intangible assets, net							$	403,851

	Estimated Useful Lives (years)	Weighted Average Amortization Period	April 30, 2022
			Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
	(dollars in thousands)
Customer relationships	5-16	12.5	$	669,018	$	(381,650)	$	287,368
Definite-lived tradenames	5-20	15.6	97,453		(19,496)		77,957
Vendor agreements	8-10	10.0	1,000		(475)		525
Developed technology	5-10	6.8	8,471		(4,462)		4,009
Other	3-5	3.6	1,761		(1,240)		521
Definite-lived intangible assets			$	777,703	$	(407,323)	$	370,380
Indefinite-lived intangible assets							84,367
Total intangible assets, net							$	454,747

Amortization expense related to definite-lived intangible assets was $16.3 million and $15.9 million for the three months ended January 31, 2023 and 2022, respectively, and $50.9 million and $46.4 million for the nine months ended January 31, 2023 and 2022, respectively.

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)
2023 (remaining three months)	$	15,031
2024	55,037
2025	46,289
2026	39,155
2027	34,042
Thereafter	129,930
Total	$	319,484

The Company’s indefinite-lived intangible assets as of January 31, 2023 and April 30, 2022 consisted of indefinite-lived tradenames.

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GMS Inc.

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

5. Long-Term Debt

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

	January 31, 2023		April 30, 2022
	(in thousands)
Term Loan Facility	$	500,780	$	504,613
Unamortized discount and deferred financing costs on Term Loan Facility	(2,719)		(3,581)
Senior Notes	350,000		350,000
Unamortized discount and deferred financing costs on Senior Notes	(4,280)		(4,836)
ABL Facility	240,000		211,134
Finance lease obligations	131,690		120,138
Installment notes at fixed rates up to 5.0%, due in monthly and annual installments through 2025	8,164		7,086
Unamortized discount on installment notes	(155)		(364)
Carrying value of debt	1,223,480		1,184,190
Less current portion	54,222		47,605
Long-term debt	$	1,169,258	$	1,136,585

Term Loan Facility

The Company has a senior secured first lien term loan facility (the “Term Loan Facility”). 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, with the remaining balance due in June 2025. The Term Loan Facility bears interest at a floating rate based on the Secured Overnight Financing Rate ("SOFR") plus 2.50% plus a credit spread adjustment. As of January 31, 2023, the applicable rate of interest was 6.94%. The Company has interest rate swap 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 December 22, 2022, the Company amended its Term Loan Facility to, among other things, add the Company’s indirect Canadian subsidiaries (the “Canadian Subsidiaries”) as loan parties under the Term Loan Facility, permit the amendments to the Company's asset based revolving credit facility and replace LIBOR as the benchmark rate with SOFR. The indebtedness and obligations under the Term Loan Facility are (or, with respect to the Company's Canadian Subsidiaries, will be) secured by a second-priority security interest in substantially all of the current assets of the Company and its subsidiaries (including the Canadian Subsidiaries) and a first-priority security interest in substantially all of the fixed assets of the Company and its subsidiaries (including the Canadian Subsidiaries), subject to exclusions as set forth in the Term Loan Facility and related loan documents.

Senior Notes

The Company has senior unsecured notes due May 2029 (the "Senior Notes"). 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 asset based revolving credit facility (the “ABL Facility”) that provides for aggregate revolving commitments of $950.0 million as of January 31, 2023. 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.

On December 22, 2022, the Company amended its ABL Facility to, among other things, (i) increase the commitments thereunder by $405.0 million from $545.0 million to $950.0 million, (ii) join the Company’s Canadian Subsidiaries as credit parties thereunder, (iii) include certain assets of the Canadian Subsidiaries in the borrowing base, (iv) include the ability to borrow in Canadian dollars in an amount not to exceed $200 million, (v) extend the maturity date by five years from the closing

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GMS Inc.

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

date of the amendment to December 22, 2027 and (vi) increase the incremental debt capacity available thereunder. In connection with the amendment, the Company terminated its revolving credit facility it had through one of its Canadian subsidiaries (the “Canadian Facility”).

As of January 31, 2023, at the Company’s option, the interest rates applicable to the loans under the ABL Facility were 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, 2023, the weighted average interest rate on borrowings was 6.09%.

As of January 31, 2023, the Company had available borrowing capacity of approximately $574.4 million under the ABL Facility. The ABL Facility matures on December 22, 2027 (or, if earlier, 91 days before the maturity date of the Term Loan Facility). The ABL Facility contains a cross default provision with the Term Loan Facility.

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, 2023, 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 affirmative covenants, including financial and other reporting requirements. The Company was in compliance with all such covenants as of January 31, 2023.

Debt Maturities

As of January 31, 2023, 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)
2023 (remaining three months)	$	1,277	$	—	$	—	$	11,149	$	165	$	12,591
2024	5,110		—		—		38,522		7,211		50,843
2025	5,110		—		—		29,289		788		35,187
2026	489,283		—		—		22,713		—		511,996
2027	—		—		—		16,458		—		16,458
Thereafter	—		350,000		240,000		13,559		—		603,559
	$	500,780	$	350,000	$	240,000	$	131,690	$	8,164	$	1,230,634

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GMS Inc.

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

6. Leases

The components of lease expense were as follows:

	Three Months Ended January 31,				Nine Months Ended January 31,
	2023		2022		2023		2022
	(in thousands)
Finance lease cost:
Amortization of right-of-use assets	$	6,121	$	5,557	$	17,918	$	16,713
Interest on lease liabilities	1,800		1,954		5,361		6,378
Operating lease cost	13,293		12,628		39,272		34,955
Variable lease cost	4,919		4,440		16,499		12,992
Total lease cost	$	26,133	$	24,579	$	79,050	$	71,038

Supplemental cash flow information related to leases was as follows:

	Nine Months Ended January 31,
	2023		2022
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	39,675	$	35,385
Operating cash flows from finance leases	5,361		6,378
Financing cash flows from finance leases	26,167		23,154
Right-of-use assets obtained in exchange for lease obligations
Operating leases	34,607		53,549
Finance leases	42,421		24,887

Other information related to leases was as follows:

	January 31, 2023			April 30, 2022
	(in thousands)
Finance leases included in property and equipment
Property and equipment	$	221,974		$	193,380
Accumulated depreciation	(65,209)			(57,363)
Property and equipment, net	$	156,765		$	136,017
Weighted-average remaining lease term (years)
Operating leases	4.5			4.6
Finance leases	3.8			3.7
Weighted-average discount rate
Operating leases	4.7		%	4.7		%
Finance leases	4.7		%	4.2		%

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GMS Inc.

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

Future minimum lease payments under non-cancellable leases as of January 31, 2023 were as follows:

	Finance		Operating
Year Ending April 30,	(in thousands)
2023 (remaining three months)	$	12,854	$	9,942
2024	43,528		49,426
2025	32,532		38,503
2026	24,773		25,650
2027	17,607		16,307
Thereafter	14,052		29,733
Total lease payments	145,346		169,561
Less imputed interest	13,656		17,803
Total	$	131,690	$	151,758

7. Income Taxes

General. The Company’s effective income tax rate on continuing operations was 26.3% and 24.8% for the nine months ended January 31, 2023 and 2022, 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, 2023 and 2022 was primarily due to the impact of foreign and state taxes.

Valuation allowance. The Company had a valuation allowance of $11.7 million against its deferred tax assets related to certain U.S. tax jurisdictions as of January 31, 2023 and April 30, 2022. 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, 2023 or April 30, 2022.

8. Stockholders’ Equity

Share Repurchases

On June 20, 2022, the Company's Board of Directors approved an expanded share repurchase program under which the Company is authorized to repurchase up to $200.0 million of its outstanding common stock. This expanded program replaced the Company’s previous share repurchase authorization of $75.0 million. The Company may conduct repurchases under the share repurchase program through open market transactions, under trading plans in accordance with SEC Rule 10b5-1 and/or in privately negotiated transactions, in each case in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The timing and amount of any purchases of the Company's common stock are subject to a variety of factors, including, but not limited to, the Company’s liquidity, credit availability, general business and market conditions, debt covenants and the availability of alternative investment opportunities. The share 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.

The Company repurchased approximately 1.8 million shares of its common stock for $82.8 million during the nine months ended January 31, 2023, of which $10.8 million was repurchased under the previous authorization and $72.0 million was repurchased under the new authorization. The Company repurchased approximately 0.4 million shares of its common stock for $17.9 million during the nine months ended January 31, 2022. As of January 31, 2023, the Company had $128.0 million of remaining repurchase authorization under its stock repurchase program. 

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GMS Inc.

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

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, 2023:

	Foreign Currency Translation		Derivative Financial Instruments		Accumulated Other Comprehensive Loss
	(in thousands)
Balance as of April 30, 2022	$	(5,041)	$	(1,002)	$	(6,043)
Other comprehensive income (loss) before reclassification	(21,728)		957		(20,771)
Reclassification to earnings from accumulated other comprehensive loss	—		512		512
Balance as of January 31, 2023	$	(26,769)	$	467	$	(26,302)

Other comprehensive income (loss) before reclassification on derivative instruments for the nine months ended January 31, 2023 is net of $0.3 million of tax. Reclassification to earnings from accumulated other comprehensive loss is net of $0.2 million of tax.

9. Equity-Based Compensation

General

Equity-based compensation expense related to stock options and restricted stock units was $9.4 million and $7.7 million during the nine months ended January 31, 2023 and 2022, respectively, and is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Stock Option Awards

The following table presents stock option activity for the nine months ended January 31, 2023:

	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, 2022	1,245	$	25.65	6.4	$	28,121
Options granted	184	53.60
Options exercised	(195)	16.27
Options forfeited	(2)	32.76
Outstanding as of January 31, 2023	1,232	$	31.31	6.6	$	34,511
Exercisable as of January 31, 2023	815	$	24.18	5.6	$	28,635
Vested and Expected to vest as of January 31, 2023	1,230	$	31.29	6.6	$	34,486

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, 2023 and 2022 was $6.5 million and $6.6 million, respectively. As of January 31, 2023, there was $6.2 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.

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GMS Inc.

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

The fair value of stock options granted during the nine months ended January 31, 2023 and 2022 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,
	2023			2022
Volatility	45.80		%	43.13		%
Expected life (years)	6.0			6.0
Risk-free interest rate	2.67		%	0.89		%
Dividend yield	—		%	—		%
Grant date fair value	$	25.26		$	20.86

Restricted Stock Units

The following table presents restricted stock unit activity for the nine months ended January 31, 2023:

	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value
	(shares in thousands)
Outstanding as of April 30, 2022	330	$	35.83
Granted	201	53.72
Vested	(171)	33.20
Forfeited	(1)	44.04
Outstanding as of January 31, 2023	359	$	47.04

As of January 31, 2023, there was $8.9 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 1.6 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 $0.8 million and $0.5 million of stock-based compensation expense related to the ESPP during the nine months ended January 31, 2023 and 2022, 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,
	2023		2022
	(shares in thousands)
Number of shares purchased under the ESPP	79		70
Average purchase price	$	40.47	$	33.19

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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, 2022	$	30,878	$	2,205	$	11,026
Amounts redeemed	(5,627)		—		—
Change in fair value	5,887		200		1,003
Balance as of January 31, 2023	$	31,138	$	2,405	$	12,029
Classified as current as of April 30, 2022	$	1,532	$	—	$	—
Classified as long-term as of April 30, 2022	29,346		2,205		11,026
Classified as current as of January 31, 2023	$	5,611	$	541	$	2,707
Classified as long-term as of January 31, 2023	25,527		1,864		9,322

Total expense related to these instruments was $7.1 million and $4.2 million during the nine months ended January 31, 2023 and 2022, respectively, and was included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income. Current and long-term liabilities for stock appreciation rights, deferred compensation and redeemable noncontrolling interests are included in other accrued expenses and 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, 2022 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, 2023		April 30, 2022
	(in thousands)
Interest rate swaps (Level 2)	$	810	$	(1,136)

The Company has interest rate swap agreements with a notional amount of $500.0 million to convert the variable interest rate on a portion of its Term Loan Facility to a fixed 1-month LIBOR interest rate of 2.46%. The contracts were effective on February 28, 2019 and terminate on February 28, 2023. The objective of the interest rate swap agreements is to eliminate the variability of interest payment cash flows associated with variable interest rates. 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 as cash flow hedges.

As of January 31, 2023, the interest rate swap assets were classified in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet. As of April 30, 2022, the interest rate swap liabilities were classified in other accrued expenses and current liabilities in the Condensed Consolidated Balance Sheet. The Company recognized gains, net of tax, of $1.6 million and losses, net of tax, of $2.3 million during the three months ended January 31, 2023 and 2022, respectively, related to its interest rate swaps. The Company recognized losses, net of tax, of $0.5 million and $6.8 million during the nine months ended January 31, 2023 and 2022, respectively. These amounts are included in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive Income and within cash flows from operating activities within the Condensed Consolidated Statements of Cash Flows. As of January 31, 2023, the Company expects that approximately $0.8

22

GMS Inc.

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

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 swaps 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 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.

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 and long-lived asset impairments. For more information on business combinations, see Note 2, “Business Combinations.” There were no material long-lived asset impairments during the nine months ended January 31, 2023 or 2022.

Fair Value of Debt

The estimated fair value of the Company’s Senior Notes was determined based on Level 2 input 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, 2023				April 30, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
Senior Notes	$	350,000	$	290,500	$	350,000	$	310,625

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.

23

GMS Inc.

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

13. Segments

There have been no changes to the Company's reportable segments during the nine months ended January 31, 2023. For more information regarding the Company's reportable segments, see Note 17, "Segments," in the Company's Annual Report on Form 10-K for the year ended April 30, 2022.

Segment Results

The following tables present segment results:

	Three Months Ended January 31, 2023
	Net Sales		Gross Profit		Depreciation and Amortization		Adjusted EBITDA
	(in thousands)
Geographic divisions	$	1,201,183	$	384,093	$	27,159	$	133,792
Other	33,435		18,155		4,140		7,036
Corporate	—		—		120		—
	$	1,234,618	$	402,248	$	31,419	$	140,828

	Three Months Ended January 31, 2022
	Net Sales		Gross Profit		Depreciation and Amortization		Adjusted EBITDA
	(in thousands)
Geographic divisions	$	1,130,130	$	356,811	$	28,154	$	129,725
Other	23,465		10,961		1,102		5,330
Corporate	—		—		494		—
	$	1,153,595	$	367,772	$	29,750	$	135,055

	Nine Months Ended January 31, 2023
	Net Sales		Gross Profit		Depreciation and Amortization		Adjusted EBITDA
	(in thousands)
Geographic divisions	$	3,928,170	$	1,244,099	$	82,887	$	486,968
Other	96,980		57,370		12,827		24,387
Corporate	—		—		371		—
	$	4,025,150	$	1,301,469	$	96,085	$	511,355

	Nine Months Ended January 31, 2022
	Net Sales		Gross Profit		Depreciation and Amortization		Adjusted EBITDA
	(in thousands)
Geographic divisions	$	3,303,170	$	1,057,417	$	84,572	$	404,665
Other	43,052		18,058		1,278		8,008
Corporate	—		—		1,017		—
	$	3,346,222	$	1,075,475	$	86,867	$	412,673

24

GMS Inc.

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

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

	Three Months Ended January 31,				Nine Months Ended January 31,
	2023		2022		2023		2022
	(in thousands)
Net income	$	64,775	$	61,383	$	257,398	$	196,946
Interest expense	16,943		15,429		47,659		43,830
Interest income	(180)		(40)		(390)		(67)
Provision for income taxes	23,697		21,211		91,722		64,951
Depreciation expense	15,162		13,816		45,213		40,444
Amortization expense	16,257		15,934		50,872		46,423
Stock appreciation rights(a)	314		1,251		5,888		3,126
Redeemable noncontrolling interests and deferred compensation(b)	368		182		1,203		1,085
Equity-based compensation(c)	3,285		3,077		10,198		8,250
Severance and other permitted costs(d)	(315)		273		416		669
Transaction costs (acquisitions and other)(e)	476		921		1,154		3,889
Gain on disposal of assets(f)	(411)		(252)		(614)		(474)
Effects of fair value adjustments to inventory(g)	457		1,870		636		3,601
Adjusted EBITDA	$	140,828	$	135,055	$	511,355	$	412,673

__________________________________________

(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.

(d)Represents severance expenses and other costs permitted in the calculation of Adjusted EBITDA under the ABL Facility and the Term Loan Facility.

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

(f)Includes gains and losses from the sale and disposal of assets.

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

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,
	2023		2022		2023		2022
	(in thousands)
Wallboard	$	500,710	$	415,132	$	1,606,821	$	1,219,789
Ceilings	146,810		139,894		473,686		418,831
Steel framing	234,451		282,764		787,499		751,040
Complementary products	352,647		315,805		1,157,144		956,562
Total net sales	$	1,234,618	$	1,153,595	$	4,025,150	$	3,346,222

25

GMS Inc.

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

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,
	2023		2022		2023		2022
	(in thousands)
United States	$	1,089,888	$	1,016,425	$	3,530,083	$	2,867,318
Canada	144,730		137,170		495,067		478,904
Total net sales	$	1,234,618	$	1,153,595	$	4,025,150	$	3,346,222

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

	January 31, 2023		April 30, 2022
	(in thousands)
United States	$	336,825	$	311,061
Canada	38,290		39,618
Total property and equipment, net	$	375,115	$	350,679

14. Earnings Per Common Share

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

	Three Months Ended January 31,				Nine Months Ended January 31,
	2023		2022		2023		2022
	(in thousands, except per share data)
Net income	$	64,775	$	61,383	$	257,398	$	196,946
Basic earnings per common share:
Basic weighted average common shares outstanding	41,578		43,094		42,119		43,106
Basic earnings per common share	$	1.56	$	1.42	$	6.11	$	4.57
Diluted earnings per common share:
Basic weighted average common shares outstanding	41,578		43,094		42,119		43,106
Add: Common Stock Equivalents	654		851		693		831
Diluted weighted average common shares outstanding	42,232		43,945		42,812		43,937
Diluted earnings per common share	$	1.53	$	1.40	$	6.01	$	4.48

During the three and nine months ended January 31, 2023 and 2022, 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.

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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, 2022.

Overview

Founded in 1971, GMS Inc. (“we,” “our,” “us,” or the “Company”), through its wholly owned operating subsidiaries, operates a network of approximately 300 distribution centers with extensive product offerings of wallboard, ceilings, steel framing and complementary construction products. GMS also operates approximately 100 tool sales, rental and service centers. Through these operations, GMS 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 unique operating model combines the benefits of a national platform and strategy with a local go-to-market focus, enabling GMS to generate significant economies of scale while maintaining high levels of customer service.

Market Conditions and Outlook

Residential

After experiencing strong underlying demand for our residential products since mid-2020 as favorable demographics, low interest rates, low levels of new and existing homes for sale, a strong job market and a change in workplace habits and preferences resulting from COVID-19 helped drive new home purchases, we are now starting to see the early stages of a slowdown in single-family construction demand, primarily as a result of rising interest rates and inflation, along with broader macroeconomic and geopolitical concerns. However, while multi-family starts have moderated from their exceptionally high levels during calendar year 2022, we expect strength in multi-family residential construction demand to continue through at least mid-year calendar 2023 as there remains a large backlog between starts and completions in that industry segment.

More broadly, while affordability issues have created some near-term uncertainty, the solid underlying demand fundamentals of the housing market, including favorable demographics and low levels of supply of new homes, are expected to provide support for that market in the longer term. In addition, we believe the Company continues to be well-positioned to adjust as needed to meet demand in all of our end markets due to our broad mix of customers, including commercial, multi-family and single-family builders and contractors, product offerings and geographic scope.

Commercial

Demand for commercial projects was severely impacted by COVID-19 and has been slow to recover in certain sectors. However, we are starting to see some improvement, including stronger year-over-year commercial wallboard sales and volumes. Construction to support medical, hospitality and governmental projects has started to rebound, particularly where commercial development has followed residential expansion. Larger office projects, both new and for repair and remodeling (“R&R”), however, remain tempered, particularly in more mature urban markets.

As with residential contractors, both we and commercial contractors face inflationary pressures and availability constraints for fuel, labor, building products and other miscellaneous expenses.

Cost Reduction Initiatives

Given recent end market dynamics, subsequent to January 31, 2023, we implemented cost reduction initiatives to better align our operations with the current demand outlook. These initiatives are expected to reduce fixed selling, general and administrative expenses.

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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).

•Grow Complementary Products. We are focused on growing our complementary product lines (insulation, lumber, ready-mix joint compound, tools, fasteners, exterior insulation finishing systems (EIFS) and various other construction products) to better serve our customers and diversify and expand our product offerings while driving higher sales and margins.

•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 distribution centers is to further penetrate markets that are adjacent to our existing operations. Typically, we have pre-existing customer relationships in these markets but need a new location to fully capitalize on those relationships.

◦Acquisitions. We also have a proven history of consummating acquisitions in new and contiguous markets and intend to continue to pursue acquisitions. Due to the large, highly 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 and drive earnings accretion from our acquisition strategy.

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

COVID-19 Update

We continue to actively monitor the ongoing impacts of COVID-19 and its contributory effects on the economy and on our business. We will continue to implement, as deemed necessary or advisable, procedures and processes to protect the health and safety of our employees, customers, partners and suppliers.

We may take actions that alter our business operations if required by federal, state, provincial or local authorities or that we determine are in the best interests of our employees, customers, suppliers and stockholders. Furthermore, while COVID-19 had a limited impact on our financial results and operations during the three and nine months ended January 31, 2023, there is no guarantee that COVID-19 or its contributory effects on the economy will not have a material impact on our future financial results or operations. See Item 1A, “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 for a discussion of risks which could have a material adverse effect on our operations and financial results and for more information regarding the impact of COVID-19 and our response.

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Highlights

    Key highlights in our business during the nine months ended January 31, 2023 are described below:

•Generated net sales of $4,025.2 million during the nine months ended January 31, 2023, a 20.3% increase from the prior year period, primarily due to inflationary pricing along with strength in multi-family residential construction activity and an improving commercial landscape, both of which helped drive volume growth in wallboard and complementary products. We also benefited from acquisitions we completed over the past year. In addition, there was one additional selling day during the nine months ended January 31, 2023 compared to the prior year period.

•Generated net income of $257.4 million during the nine months ended January 31, 2023, a 30.7% increase compared to the prior year, primarily due to the increase in net sales noted above, partially offset by increased selling, general and administrative expenses, and an increase in the provision for income taxes. Supply chain dynamics led to high levels of product inflation, which have been the principal driver of both sales growth and incremental profitability.

•Generated Adjusted EBITDA (a non-GAAP measure, see “Non-GAAP Financial Measures” in this Item 2) of $511.4 million during the nine months ended January 31, 2023, a 23.9% increase compared to the prior year, primarily due to the increase in net sales noted above. Adjusted EBITDA, as a percentage of net sales, increased to 12.7% for the nine months ended January 31, 2023 compared to 12.3% for the nine months ended January 31, 2022, primarily due to better operating leverage, as product price inflation on sales outpaced operating cost inflation.

•Completed two acquisitions and opened five greenfield locations.

Recent Developments

Acquisitions

On June 1, 2022, we acquired certain assets of Construction Supply of Southwest Florida, Inc. (“CSSWF”). CSSWF is a distributor of various stucco, building and waterproofing supplies serving markets in the southwest Florida area. On December 30, 2022, we acquired certain assets of Tanner Bolt and Nut, Inc. (“Tanner”). Tanner is a distributor of various tools, fasteners, sealants and related construction products to the broader New York City market through its four distribution facilities. 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 and Ames Stores

During the nine months ended January 31, 2023, we opened greenfield locations in Wildwood, Florida; Cleveland, Ohio; Greenville, North Carolina; Brooklyn, New York; and Chester, Virginia. We also opened nine new Ames Taping Tools Holding LLC ("Ames") stores.

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Results of Operations

The following table summarizes key components of our results of operations for the three and nine months ended January 31, 2023 and 2022:

	Three Months Ended January 31,						Nine Months Ended January 31,
	2023			2022			2023			2022
	(dollars in thousands)
Statement of operations data:
Net sales	$	1,234,618		$	1,153,595		$	4,025,150		$	3,346,222
Cost of sales (exclusive of depreciation and amortization shown separately below)	832,370			785,823			2,723,681			2,270,747
Gross profit	402,248			367,772			1,301,469			1,075,475
Operating expenses:
Selling, general and administrative expenses	267,380			241,040			814,063			685,652
Depreciation and amortization	31,419			29,750			96,085			86,867
Total operating expenses	298,799			270,790			910,148			772,519
Operating income	103,449			96,982			391,321			302,956
Other (expense) income:
Interest expense	(16,943)			(15,429)			(47,659)			(43,830)
Other income, net	1,966			1,041			5,458			2,771
Total other expense, net	(14,977)			(14,388)			(42,201)			(41,059)
Income before taxes	88,472			82,594			349,120			261,897
Provision for income taxes	23,697			21,211			91,722			64,951
Net income	$	64,775		$	61,383		$	257,398		$	196,946
Non-GAAP measures:
Adjusted EBITDA(1)	$	140,828		$	135,055		$	511,355		$	412,673
Adjusted EBITDA margin(1)(2)	11.4		%	11.7		%	12.7		%	12.3		%

___________________________________

(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, 2023 and 2022

Net Sales

	Three Months Ended January 31,				Change
	2023		2022		Dollar		Percent
	(dollars in thousands)
Wallboard	$	500,710	$	415,132	$	85,578	20.6	%
Ceilings	146,810		139,894		6,916		4.9	%
Steel framing	234,451		282,764		(48,313)		(17.1)	%
Complementary products	352,647		315,805		36,842		11.7	%
Total net sales	$	1,234,618	$	1,153,595	$	81,023	7.0	%

We generate net sales by providing a comprehensive product offering of wallboard, ceilings, steel framing and complementary products. The increase in net sales during the three months ended January 31, 2023 compared to the prior year period was primarily due to inflationary pricing along with strength in multi-family residential construction activity and an improving commercial landscape, both of which helped drive volume growth in wallboard and complementary products. We also benefited from the Ames acquisition. Partially offsetting these increases was declining single-family construction demand,

30

a challenging volume and pricing environment for steel framing and the negative impact of foreign currency translation on net sales during the three months ended January 31, 2023. The increase consisted of the following:

•an increase in wallboard sales, which are impacted by both commercial and residential construction activity, primarily due to an increase in price/product mix;

•an increase in ceilings sales, which are principally impacted by commercial construction activity, primarily due to an increase in price/product mix, partially offset by lower volume; and

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

•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.

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, 2023. 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
	2023		2022		Dollar		Percent
	(dollars in thousands)
Net sales	$	1,234,618
Recently acquired net sales (1)	(16,609)
Impact of foreign currency (2)	9,306
Base business net sales (3)	$	1,227,315	$	1,153,595	$	73,720	6.4	%

___________________________________

(1)Represents net sales of branches acquired by us until the first anniversary of the acquisition date. For the three months ended January 31, 2023, net sales includes sales from the following acquisitions: Ames acquired on December 1, 2021, Kimco Supply Company acquired on December 1, 2021, CSSWF acquired on June 1, 2022 and Tanner acquired on December 30, 2022.

(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 increase in organic net sales was primarily driven by inflationary pricing along with strength in multi-family residential construction activity and an improving commercial landscape, both of which helped drive volume growth in wallboard and complementary products. Partially offsetting these increases was declining single-family construction demand and a challenging volume and pricing environment for steel framing.

Gross Profit and Gross Margin

	Three Months Ended January 31,						Change
	2023			2022			Dollar		Percent
	(dollars in thousands)
Gross profit	$	402,248		$	367,772		$	34,476	9.4	%
Gross margin	32.6		%	31.9		%

The increase in gross profit during the three months ended January 31, 2023 compared to the prior year period was primarily due to the successful pass-through of product inflation, improving commercial wallboard sales, growth in complementary products and incremental gross profit from acquisitions. The increase in gross margin on net sales for the

31

three months ended January 31, 2023 compared to the prior year period was primarily due to an increase in margins for complementary products and steel framing, as well as a shift in end market mix.

Selling, General and Administrative Expenses

	Three Months Ended January 31,						Change
	2023			2022			Dollar		Percent
	(dollars in thousands)
Selling, general and administrative expenses	$	267,380		$	241,040		$	26,340	10.9	%
% of net sales	21.7		%	20.9		%

Selling, general and administrative expenses consist of warehouse, delivery and general and administrative expenses. Selling, general and administrative expenses increased during the three months ended January 31, 2023 compared to the prior year period, primarily due to increases in payroll and payroll-related costs, fuel costs, travel costs and facilities costs, which were driven by increased sales volume, inflationary pressures and incremental selling, general and administrative expenses from acquisitions. The increase in selling, general and administrative expenses as a percentage of our net sales during the three months ended January 31, 2023 compared to the prior year period was primarily due to declining single-family construction demand, resulting in a relative mix shift in end market volumes, which require a higher operational cost to serve. Also contributing to the increase was higher fuel costs and unusually unfavorable weather conditions in certain markets.

Depreciation and Amortization Expense

	Three Months Ended January 31,				Change
	2023		2022		Dollar		Percent
	(dollars in thousands)
Depreciation	$	15,162	$	13,816	$	1,346	9.7	%
Amortization	16,257		15,934		323		2.0	%
Depreciation and amortization	$	31,419	$	29,750	$	1,669	5.6	%

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, 2023 compared to the prior year period was primarily due to incremental expense resulting from property and equipment obtained in the acquisition of Ames and capital expenditures over the past year. The increase in amortization expense during the three months ended January 31, 2023 was primarily due to incremental expense resulting from definite-lived intangible assets obtained in the acquisition of Ames, partially offset by time-based progression of our use of the accelerated method of amortization for acquired customer relationships.

Interest Expense

	Three Months Ended January 31,				Change
	2023		2022		Dollar		Percent
	(dollars in thousands)
Interest expense	$	16,943	$	15,429	$	1,514	9.8	%

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, 2023 compared to the prior year period was primarily due to increases in interest rates and an increase in average debt outstanding.

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Income Taxes

	Three Months Ended January 31,						Change
	2023			2022			Dollar		Percent
	(dollars in thousands)
Provision for income taxes	$	23,697		$	21,211		$	2,486	11.7	%
Effective tax rate	26.8		%	25.7		%

The change in the effective income tax rate during the three months ended January 31, 2023 compared to the prior year period was primarily due to the impact of actions taken during the current year in anticipation of expected changes in Canadian tax regulations, as well as state and foreign taxes.

Nine Months Ended January 31, 2023 and 2022

Net Sales

	Nine Months Ended January 31,				Change
	2023		2022		Dollar		Percent
	(dollars in thousands)
Wallboard	$	1,606,821	$	1,219,789	$	387,032	31.7	%
Ceilings	473,686		418,831		54,855		13.1	%
Steel framing	787,499		751,040		36,459		4.9	%
Complementary products	1,157,144		956,562		200,582		21.0	%
Total net sales	$	4,025,150	$	3,346,222	$	678,928	20.3	%

The increase in net sales during the nine months ended January 31, 2023 compared to the prior year period was primarily due to inflationary pricing, strength in multi-family residential construction, volume growth in wallboard and complementary products, an improving commercial landscape and acquisitions over the past year. In addition, there was one additional selling day during the nine months ended January 31, 2023 compared to the prior year period. Partially offsetting these increases was the negative impact of foreign currency translation on net sales during the nine months ended January 31, 2023. The increase consisted of the following:

•an increase in wallboard sales, which are impacted by both commercial and residential construction activity, primarily due to an increase in price/product mix and higher volume;

•an increase in ceilings sales, which are principally impacted by commercial construction activity, primarily due to an increase in price/product mix;

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

•an increase in complementary products sales, which include insulation, joint treatment, tools (including ATF tools), lumber and various other specialty building products, primarily due to an increase in pricing in certain product categories, positive contributions from acquisitions and the execution of growth initiatives to increase product sales.

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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, 2023.

	Nine Months Ended January 31,				Change
	2023		2022		Dollar		Percent
	(dollars in thousands)
Net sales	$	4,025,150
Recently acquired net sales (1)	(126,242)
Impact of foreign currency (2)	27,887
Base business net sales (3)	$	3,926,795	$	3,346,222	$	580,573	17.4	%

___________________________________

(1)Represents net sales of branches acquired by us until the first anniversary of the acquisition date. For the nine months ended January 31, 2023, net sales includes sales from the following acquisitions: Westside Building Material ("Westside") acquired on July 1, 2021, Ames acquired on December 1, 2021, Kimco Supply Company acquired on December 1, 2021, CSSWF acquired on June 1, 2022 and Tanner acquired on December 30, 2022.

(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 increase in organic net sales was primarily driven by inflationary pricing, strength in multi-family residential construction, volume growth in wallboard and complementary products and an improving commercial landscape. Also contributing was one more selling day during the nine months ended January 31, 2023 compared to the prior year period.

Gross Profit and Gross Margin

	Nine Months Ended January 31,						Change
	2023			2022			Dollar		Percent
	(dollars in thousands)
Gross profit	$	1,301,469		$	1,075,475		$	225,994	21.0	%
Gross margin	32.3		%	32.1		%

The increase in gross profit during the nine months ended January 31, 2023 compared to the prior year period was primarily due to the successful pass-through of product inflation, strength in multi-family residential construction, improving commercial sales and incremental gross profit from acquisitions. The increase in gross margin on net sales for the nine months ended January 31, 2023 compared to the prior year period was primarily due to an increase in margins for complementary products and steel framing, as well as a shift in end market mix.

Selling, General and Administrative Expenses

	Nine Months Ended January 31,						Change
	2023			2022			Dollar		Percent
	(dollars in thousands)
Selling, general and administrative expenses	$	814,063		$	685,652		$	128,411	18.7	%
% of net sales	20.2		%	20.5		%

Selling, general and administrative expenses increased during the nine months ended January 31, 2023 compared to the prior year period, primarily due to increases in payroll and payroll-related costs, fuel costs, travel costs and facilities costs, which were driven by increased sales volume, inflationary pressures and incremental selling, general and administrative expenses from acquisitions. Selling, general and administrative expenses as a percentage of our net sales decreased during the nine months ended January 31, 2023 compared to the prior year period, primarily due to the impact of inflationary market pricing on sales, partially offset by declining single-family construction demand, resulting in an end market shift, which has a higher cost to serve, higher fuel costs and unusually unfavorable weather conditions in certain markets during the three months ended January 31, 2023.

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Depreciation and Amortization Expense

	Nine Months Ended January 31,				Change
	2023		2022		Dollar		Percent
	(dollars in thousands)
Depreciation	$	45,213	$	40,444	$	4,769	11.8	%
Amortization	50,872		46,423		4,449		9.6	%
Depreciation and amortization	$	96,085	$	86,867	$	9,218	10.6	%

The increase in depreciation expense during the nine months ended January 31, 2023 compared to the prior year period was primarily due to incremental expense resulting from property and equipment obtained in the acquisitions of Westside and Ames. The increase in amortization expense during the nine months ended January 31, 2023 was primarily due to incremental expense resulting from definite-lived intangible assets obtained in the acquisitions of Westside and Ames, partially offset by time-based progression of our use of the accelerated method of amortization for acquired customer relationships.

Interest Expense

	Nine Months Ended January 31,				Change
	2023		2022		Dollar		Percent
	(dollars in thousands)
Interest expense	$	47,659	$	43,830	$	3,829	8.7	%

The increase in interest expense during the nine months ended January 31, 2023 compared to the prior year period was primarily due to increases in interest rates and an increase in average debt outstanding.

Income Taxes

	Nine Months Ended January 31,						Change
	2023			2022			Dollar		Percent
	(dollars in thousands)
Provision for income taxes	$	91,722		$	64,951		$	26,771	41.2	%
Effective tax rate	26.3		%	24.8		%

The change in the effective income tax rate during the nine months ended January 31, 2023 compared to the prior year period was primarily due to the impact of actions taken during the year in anticipation of expected changes in Canadian tax regulations, as well as state and foreign taxes.

Liquidity and Capital Resources

Summary

We depend on cash flow from operations, cash on hand and funds available under our asset based revolving credit facility (the “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, 2023, we had available borrowing capacity of approximately $574.4 million under our ABL Facility. The ABL Facility is scheduled to mature on December 22, 2027 (or, if earlier, 91 days before the maturity date of the Term Loan Facility).

On December 22, 2022, we amended and restated our ABL Facility to, among other things, increase the commitments

thereunder by $405.0 million from $545.0 million to $950.0 million and extend the maturity to December 22, 2027. Under the

terms of the amended and restated ABL Facility, we have the ability to borrow up to $200.0 million in Canadian dollars, and

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therefore, in connection with this amendment, we have terminated our Canadian revolving credit facility.

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, 2022.

On June 20, 2022, our Board of Directors approved an expanded share repurchase program under which we are authorized to repurchase up to $200.0 million of our outstanding common stock. This expanded program replaces our previous share repurchase authorization of $75.0 million. We may conduct repurchases under the share repurchase program through open market transactions, under trading plans in accordance with SEC Rule 10b5-1 and/or in privately negotiated transactions, in each case in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. 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, our debt covenants and the availability of alternative investment opportunities. The share repurchase program does not obligate us to acquire any amount of common stock, and it may be suspended or terminated at any time at our discretion. We repurchased approximately 1.8 million shares of our common stock for $82.8 million during the nine months ended January 31, 2023, of which $10.8 million was repurchased under the previous authorization and $72.0 million was repurchased under the new authorization. As of January 31, 2023, we had $128.0 million of remaining purchase authorization. 

We regularly evaluate opportunities to optimize our capital structure, including through the issuance or incurrence of additional debt and by refinancing or repaying 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,
	2023		2022
	(in thousands)
Cash provided by (used in) operating activities	$	236,927	$	(19,887)
Cash used in investing activities	(52,004)		(377,413)
Cash (used in) provided by financing activities	(98,929)		317,853
Effect of exchange rates on cash and cash equivalents	(1,247)		(590)
Increase (decrease) in cash and cash equivalents	$	84,747	$	(80,037)

Operating Activities

The change in cash provided by (used in) operating activities during the nine months ended January 31, 2023 compared to the prior year period was primarily due to larger increases in inventory and accounts receivable in the prior year period related to ensuring product availability and managing price inflation amid an environment of tight and less reliable supply and a large increase in sales. We have experienced increases in our inventory and accounts receivable balances compared to historical levels due to product inflation.

Investing Activities

The decrease in cash used in investing activities during the nine months ended January 31, 2023 compared to the prior year period was primarily due to a $325.0 million decrease in cash used for acquisitions.

Capital expenditures during the nine months ended January 31, 2023 primarily consisted of building and leasehold improvements, the purchase of vehicles and IT-related spending. Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions.

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Financing Activities

The change in in cash (used in) provided by financing activities during the nine months ended January 31, 2023 compared to the prior year period was primarily due to net borrowings of $28.9 million under our revolving credit facilities during the nine months ended January 31, 2023, compared to net borrowings of $359.2 million during the prior year period. During the nine months ended January 31, 2022, we used our revolving credit facilities to help fund the Westside acquisition and for general working capital needs. Also contributing to the change was a $64.9 million increase in repurchases of common stock during the nine months ended January 31, 2023 compared to the prior year period and a $13.5 million holdback liability payment during the nine months ended January 31, 2023 related to our Westside acquisition in accordance with the terms of the acquisition agreement. The holdback was for general representations and warranties of the sellers and was settled 15 months after the July 1, 2021 acquisition date.

Debt Covenants

The senior secured first lien term loan 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 Term Loan Facility and the indenture governing the Senior Notes. The Company was in compliance with all covenants contained in the Term Loan Facility and the indenture governing the Senior Notes as of January 31, 2023.

The ABL Facility contains certain affirmative covenants, including financial and other reporting requirements. We were in compliance with all such covenants as of January 31, 2023.

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, 2022, 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, 2022.

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, which are not recognized financial measures under GAAP, 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 may in the future reflect such permitted adjustments in our calculations of Adjusted EBITDA.

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.

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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,
	2023			2022			2023			2022
	(in thousands)
Net income	$	64,775		$	61,383		$	257,398		$	196,946
Interest expense	16,943			15,429			47,659			43,830
Interest income	(180)			(40)			(390)			(67)
Provision for income taxes	23,697			21,211			91,722			64,951
Depreciation expense	15,162			13,816			45,213			40,444
Amortization expense	16,257			15,934			50,872			46,423
Stock appreciation rights(a)	314			1,251			5,888			3,126
Redeemable noncontrolling interests and deferred compensation(b)	368			182			1,203			1,085
Equity-based compensation(c)	3,285			3,077			10,198			8,250
Severance and other permitted costs(d)	(315)			273			416			669
Transaction costs (acquisitions and other)(e)	476			921			1,154			3,889
Gain on disposal of assets(f)	(411)			(252)			(614)			(474)
Effects of fair value adjustments to inventory(g)	457			1,870			636			3,601
Adjusted EBITDA	$	140,828		$	135,055		$	511,355		$	412,673
Net sales	$	1,234,618		$	1,153,595		$	4,025,150		$	3,346,222
Adjusted EBITDA Margin	11.4		%	11.7		%	12.7		%	12.3		%

___________________________________

(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.

(d)Represents severance expenses and other costs permitted in the calculation of Adjusted EBITDA under the ABL Facility and the Term Loan Facility.

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

(f)Includes gains and losses from the sale and disposal of assets.

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our exposure to market risks from those reported in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of January 31, 2023, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), which are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of January 31, 2023, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended January 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – Other Information

Item 1. Legal Proceedings

From time to time, we are involved in lawsuits that are brought against us in the normal course of business. We are not currently a party to any legal proceedings that in management's opinion would be expected, either individually or in the aggregate, to have a material adverse effect on our business or financial condition. For additional information, see Note 12 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

The building materials industry has been subject to personal injury and property damage claims arising from alleged exposure to raw materials contained in building products, as well as claims for incidents of catastrophic loss, such as building fires. As a distributor of building materials, we face an inherent risk of exposure to product liability claims if the use of the products we have distributed in the past or may in the future distribute is alleged to have resulted in economic loss, personal injury or property damage or to have violated environmental, health or safety or other laws. Such product liability claims have included and may in the future include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Certain of our subsidiaries have been the subject of claims related to alleged exposure to asbestos-containing products they distributed prior to 1979. Since 2002 and as of January 31, 2023, approximately 1,048 asbestos-related personal injury lawsuits have been filed, and we vigorously defend against them. Of these, 996 have been dismissed without any payment by us, 40 are pending and only 12 have been settled, which settlements have not materially impacted our financial condition or operating results. See “Risk Factors—Risks Relating to Our Business and Industry—We are exposed to product liability, warranty, casualty, construction defect, contract, tort, personal injury, employment and other claims and legal proceedings related to our business, the products we distribute, the services we provide and services provided for us by third parties” listed in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Item 1A. Risk Factors

There have been no material changes in the risks facing the Company as described in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The number of shares repurchased and the average price paid per share for each month in the three months ended January 31, 2023 were as follows:

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (1)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
					(in thousands)
November 1 through November 30	267,281	$	48.16	267,281	$	148,368
December 1 through December 31	221,165	51.60		221,165	136,957
January 1 through January 31	168,224	52.98		168,224	128,044
Total	656,670			656,670

___________________________________

(1)On June 20, 2022, our Board of Directors approved an expanded share repurchase program under which we are authorized to repurchase up to $200.0 million of our outstanding common stock. This expanded program replaced our previous share repurchase authorization of $75.0 million. We may conduct repurchases under the share repurchase program through open market transactions, under trading plans in accordance with SEC Rule 10b5-1 and/or in privately negotiated transactions, in each case in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. 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, our debt covenants and the availability of alternative investment opportunities. The share repurchase program does not obligate us to acquire any amount of common stock, and it may be suspended or terminated at any time at our discretion.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

(a)Exhibits. The following exhibits are filed as part of this report:

Exhibit No.		Exhibit Description
3.1		Third Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 23, 2020).
3.2		Second Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 23, 2020).
4.1		Specimen Common Stock Certificate of the Company (incorporated by reference to Exhibit 4.1 to Amendment No. 5 to the Company’s Registration Statement on Form S-1 filed on May 16, 2016 (File No. 333-205902)).
31.1	*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32.1	*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 INS	*	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.
101 SCH	*	Inline XBRL Taxonomy Extension Schema Document.
101 CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101 DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101 LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101 PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

*     Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GMS INC.
Date: March 2, 2023	By:	/s/ Scott M. Deakin
		Scott M. Deakin
		Chief Financial Officer
		(Principal Financial Officer)

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