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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2024
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)
______________________________________________________________
Delaware46-2931287
(State or other jurisdiction of incorporation(IRS Employer Identification No.)
or organization)
100 Crescent Centre Parkway, Suite 800
Tucker,
Georgia30084
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareGMSNew 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. YesNo ◻
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). YesNo
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 filerSmaller 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 39,833,628 shares of the registrant’s common stock, par value $0.01 per share, outstanding as of February 27, 2024.



FORM 10-Q
TABLE OF CONTENTS
Page
PART I
Item 1
Item 2
Item 3
Item 4
PART II
Item 1
Item 1A
Item 2
Item 3
Item 4
Item 5
Item 6

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 our future financial performance, growth or future developments relating to economic conditions, our markets or the commercial and residential construction industries and statements about our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events contained in this Quarterly Report on Form 10-Q are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed under the heading “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2023, filed with the U.S. Securities and Exchange Commission (the “SEC”), may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:
general business, financial market and economic conditions, including inflation and deflation, rising interest rates, supply chain disruptions, labor shortages and increased labor costs, fuel costs, geopolitical conflicts, an economic downturn or recession and capital market volatility;
our dependency upon the cyclical commercial and residential construction markets, both new and repair and remodeling, or R&R, including any impact from a decline in residential or commercial construction activity, including from disruptions caused by the inability of commercial borrowers to repay their debt obligations;
competition in our industry and the markets in which we operate;
consolidation in our industry;
the fluctuations in prices and mix of the products we distribute and our ability to pass on price increases to our customers and effectively manage inventories and margins in both inflationary and deflationary pricing environments;
our ability to successfully implement our growth strategy, including identifying, successfully consummating and integrating acquisitions, opening new branches and expanding our product offerings;
our ability to successfully expand into new geographic markets;
product shortages, other disruptions in our supply chain or distribution network and potential loss of relationships with key suppliers, including increased shipping costs and delays and heightened risks relating to sourcing products from international suppliers;
our ability to manage operating costs and achieve the anticipated benefits from our cost reduction and productivity initiatives;
the potential loss of any significant customers or reduction in volume in purchases by our significant customers of products our customers purchase;
our ability to renew leases for our facilities on acceptable terms or secure new facilities on acceptable terms;
our ability to effectively manage our inventory as our sales volume or the prices of the products we distribute fluctuate;
significant fluctuations in fuel costs or shortages in the supply of fuel;
3


natural or man-made disruptions to our facilities or equipment;
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, including through consummating acquisitions;
our ability to obtain additional financing on acceptable terms, if at all;
the effects of widespread public health crises on our business, industry and results of operations;
our ability to attract and retain key employees while controlling costs, including the impact of labor and trucking shortages;
a cybersecurity breach, including misappropriation of our customers’, employees’ or suppliers’ confidential information, and the potential costs related thereto;
a disruption in our IT systems and costs necessary to maintain and update our IT systems; and
the imposition of 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,
2024
April 30,
2023
Assets
Current assets:  
Cash and cash equivalents$88,341 $164,745 
Trade accounts and notes receivable, net of allowances of $15,548 and $13,636, respectively
794,721 792,232 
Inventories, net582,613 575,495 
Prepaid expenses and other current assets35,239 17,051 
Total current assets1,500,914 1,549,523 
Property and equipment, net of accumulated depreciation of $295,789 and $264,650, respectively
437,386 396,419 
Operating lease right-of-use assets192,358 189,351 
Goodwill723,025 700,813 
Intangible assets, net382,614 399,660 
Deferred income taxes23,103 19,839 
Other assets12,153 11,403 
Total assets$3,271,553 $3,267,008 
Liabilities and Stockholders’ Equity
Current liabilities:    
Accounts payable$323,263 $377,003 
Accrued compensation and employee benefits98,447 119,887 
Other accrued expenses and current liabilities106,643 107,675 
Current portion of long-term debt48,094 54,035 
Current portion of operating lease liabilities47,915 47,681 
Total current liabilities624,362 706,281 
Non-current liabilities:
Long-term debt982,667 1,044,642 
Long-term operating lease liabilities146,128 141,786 
Deferred income taxes, net55,261 51,223 
Other liabilities44,191 48,319 
Total liabilities1,852,609 1,992,251 
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01 per share, 500,000 shares authorized; 39,881 and 40,971 shares issued and outstanding as of January 31, 2024 and April 30, 2023, respectively
398 410 
Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of January 31, 2024 and April 30, 2023
  
Additional paid-in capital345,818 428,508 
Retained earnings1,100,660 880,968 
Accumulated other comprehensive loss(27,932)(35,129)
Total stockholders' equity1,418,944 1,274,757 
Total liabilities and stockholders' equity$3,271,553 $3,267,008 

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,
2024202320242023
Net sales$1,258,348 $1,234,618 $4,088,878 $4,025,150 
Cost of sales (exclusive of depreciation and amortization shown separately below)843,628 832,370 2,764,975 2,723,681 
Gross profit414,720 402,248 1,323,903 1,301,469 
Operating expenses:
Selling, general and administrative295,691 267,380 883,381 814,063 
Depreciation and amortization32,804 31,419 97,759 96,085 
Total operating expenses328,495 298,799 981,140 910,148 
Operating income86,225 103,449 342,763 391,321 
Other (expense) income:
Interest expense(18,784)(16,943)(56,440)(47,659)
Write-off of debt discount and deferred financing fees  (1,401) 
Other income, net1,932 1,966 6,177 5,458 
Total other expense, net(16,852)(14,977)(51,664)(42,201)
Income before taxes69,373 88,472 291,099 349,120 
Provision for income taxes17,468 23,697 71,407 91,722 
Net income$51,905 $64,775 $219,692 $257,398 
Weighted average common shares outstanding:
Basic39,864 41,578 40,360 42,119 
Diluted40,512 42,232 41,026 42,812 
Net income per common share:
Basic$1.30 $1.56 $5.44 $6.11 
Diluted$1.28 $1.53 $5.35 $6.01 
Comprehensive income
Net income$51,905 $64,775 $219,692 $257,398 
Foreign currency translation adjustments14,404 10,215 4,638 (21,728)
Changes in other comprehensive income, net of tax(7,044)(1,880)2,559 1,469 
Comprehensive income$59,265 $73,110 $226,889 $237,139 

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 StockAdditional
 Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
SharesAmount
Balances as of April 30, 202340,971 $410 $428,508 $880,968 $(35,129)$1,274,757 
Net income— — — 86,830 — 86,830 
Foreign currency translation adjustments— — — — 11,398 11,398 
Other comprehensive income, net of tax— — — — 5,389 5,389 
Repurchase and retirement of common stock(469)(5)(30,779)— — (30,784)
Equity-based compensation— — 3,304 — — 3,304 
Exercise of stock options46 — 1,248 — — 1,248 
Issuance of common stock pursuant to employee stock purchase plan58 1 2,663 — — 2,664 
Balances as of July 31, 202340,606 406 404,944 967,798 (18,342)1,354,806 
Net income— — — 80,957 — 80,957 
Foreign currency translation adjustments— — — — (21,164)(21,164)
Other comprehensive income, net of tax— — — — 4,214 4,214 
Repurchase and retirement of common stock(689)(6)(44,566)— — (44,572)
Equity-based compensation— — 5,111 — — 5,111 
Exercise of stock options19 — 508 — — 508 
Vesting of restricted stock units119 1 (1)— —  
Tax withholding related to net share settlements of equity awards— — (3,975)— — (3,975)
Balances as of October 31, 202340,055 401 362,021 1,048,755 (35,292)1,375,885 
Net income— — — 51,905 — 51,905 
Foreign currency translation adjustments— — — — 14,404 14,404 
Other comprehensive loss, net of tax— — — — (7,044)(7,044)
Repurchase and retirement of common stock(370)(4)(24,932)— — (24,936)
Equity-based compensation— — 3,559 — — 3,559 
Exercise of stock options163 1 3,296 — — 3,297 
Vesting of restricted stock units2 — — — — — 
Tax withholding related to net share settlements of equity awards— — (48)— — (48)
Issuance of common stock pursuant to employee stock purchase plan31 — 1,922 — — 1,922 
Balances as of January 31, 202439,881 $398 $345,818 $1,100,660 $(27,932)$1,418,944 


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


7


GMS Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(in thousands)
Common StockAdditional
Paid-in
 Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
SharesAmount
Balances as of April 30, 202242,773 $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 options1 — 29 — — 29 
Vesting of restricted stock units7 — — — — — 
Tax withholding related to net share settlements of equity awards— — (300)— — (300)
Issuance of common stock pursuant to employee stock purchase plan33 — 1,329 — — 1,329 
Balances as of July 31, 202242,298 423 502,536 637,447 (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 options53 — 672 — — 672 
Vesting of restricted stock units101 1 (1)— —  
Tax withholding related to net share settlements of equity awards— — (3,660)— — (3,660)
Balances as of October 31, 202241,851 418 477,558 740,600 (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 options104 1 1,728 — — 1,729 
Vesting of restricted stock units2 — — — — — 
Tax withholding related to net share settlements of equity awards— — (45)— — (45)
Issuance of common stock pursuant to employee stock purchase plan46 — 1,874 — — 1,874 
Balances as of January 31, 202341,347 $413 $451,210 $805,375 $(26,302)$1,230,696 

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,
20242023
Cash flows from operating activities:  
Net income$219,692 $257,398 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization97,759 96,085 
Write-off and amortization of debt discount and debt issuance costs3,374 1,176 
Equity-based compensation16,507 17,289 
Gain on disposal of assets(663)(614)
Deferred income taxes(6,410)(1,951)
Other items, net3,876 5,891 
Changes in assets and liabilities net of effects of acquisitions:
Trade accounts and notes receivable2,691 (28,148)
Inventories7 (34,717)
Prepaid expenses and other assets(19,184)(907)
Accounts payable(56,803)(51,491)
Accrued compensation and employee benefits(21,505)(16,469)
Other accrued expenses and liabilities(10,315)(6,615)
Cash provided by operating activities229,026 236,927 
Cash flows from investing activities:
Purchases of property and equipment(39,728)(33,250)
Proceeds from sale of assets1,948 1,661 
Acquisition of businesses, net of cash acquired(55,402)(20,415)
Cash used in investing activities(93,182)(52,004)
Cash flows from financing activities:
Repayments on revolving credit facilities(525,009)(361,247)
Borrowings from revolving credit facilities443,973 390,113 
Payments of principal on long-term debt(1,250)(3,832)
Borrowings from term loan amendment288,266  
Repayments from term loan amendment(287,769) 
Payments of principal on finance lease obligations(30,381)(26,167)
Repurchases of common stock(100,292)(82,767)
Payment of acquisition holdback liability (13,500)
Payment for debt issuance costs(5,825)(3,157)
Proceeds from exercises of stock options5,053 2,430 
Payments for taxes related to net share settlement of equity awards(4,023)(4,005)
Proceeds from issuance of stock pursuant to employee stock purchase plan4,586 3,203 
Cash used in financing activities(212,671)(98,929)
Effect of exchange rates on cash and cash equivalents423 (1,247)
(Decrease) increase in cash and cash equivalents(76,404)84,747 
Cash and cash equivalents, beginning of period164,745 101,916 
Cash and cash equivalents, end of period$88,341 $186,663 
Supplemental cash flow disclosures:
Cash paid for income taxes$93,661 $85,642 
Cash paid for interest57,300 49,193 
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 operating subsidiaries, operates a network of more than 300 distribution centers with extensive product offerings of wallboard, ceilings, steel framing and complementary construction products. The Company also operates more than 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, 2023.
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. 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 in the Condensed Consolidated Balance Sheets. Expected recoveries for insurance liabilities are included in prepaid expenses and other current assets and other assets in the Condensed Consolidated Balance Sheets.
January 31,
2024
April 30,
2023
(in thousands)
Medical self‑insurance$3,725 $4,275 
General liability, automobile and workers’ compensation23,745 20,502 
Expected recoveries for insurance liabilities(5,477)(3,531)

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
11

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
Segment Reporting. In November 2023, the Financial Accounting Standards Board ("FASB") issued new guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker ("CODM"). The new guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The new guidance will apply retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
Income Taxes. In December 2023, the FASB issued new guidance to enhance income tax disclosures primarily through changes in the rate reconciliation and income taxes paid disclosures. The new guidance is effective for fiscal years beginning after December 15, 2024. The new guidance will apply on a prospective basis to annual financial statements for periods beginning after the effective date. However, retrospective application in all prior periods presented is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
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.
Pending Acquisition
On December 18, 2023, the Company entered into a definitive agreement to acquire Kamco Supply Corporation and affiliates ("Kamco") for a purchase price of $321.5 million, inclusive of additional consideration in connection with the exit of a legacy pension fund. The Company expects to fund this transaction with cash on hand and borrowings under the Company’s revolving credit facility. Kamco is a leading regional supplier of ceilings, wallboard, steel, lumber, and other related construction products. Kamco operates five distribution facilities in the greater New York City area and services the New York metro and tri-state area. The transaction is expected to close during the fourth quarter of fiscal 2024, subject to the satisfaction of customary closing conditions.
Fiscal 2024 Acquisitions
On May 1, 2023, the Company acquired Jawl Lumber Corporation ("Jawl"), which provides service to the Vancouver Island market in Canada under the Home Lumber and Building Supplies ("Home Lumber") brand name. Home Lumber is a leading supplier of lumber, engineered wood, doors, framing packages and siding as well as other key complementary building materials. Home Lumber operates from a single location in Victoria, Canada. The primary purpose of the transaction was to expand the geographical coverage of the Company and grow the business. The impact of this acquisition is not material to the Company’s Consolidated Financial Statements.
On October 1, 2023, the Company acquired AMW Construction Supply, LLC ("AMW"), a tools and fasteners and other complementary products distributor servicing the Phoenix, Arizona metro area. AMW operates from a single location in Phoenix, Arizona. The primary purpose of the transaction was to expand the Company's complementary product offerings and grow the business. The impact of this acquisition is not material to the Company’s Consolidated Financial Statements.
12

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The assets acquired and liabilities assumed were recognized at their acquisition date fair values. The acquisition accounting is subject to change as the Company obtains additional information during the measurement period about the facts and circumstances that existed as of the acquisition date. The primary areas of the preliminary acquisition accounting that are not yet finalized relate to preliminary fair value estimates, working capital adjustments and residual goodwill.
The following table summarizes the preliminary acquisition accounting for the Company's fiscal 2024 acquisitions of Jawl and AMW based on currently available information:
Preliminary
Acquisition
Accounting
AdjustmentsPreliminary
Acquisition
Accounting
(in thousands)
Cash$3,027 $— $3,027 
Trade accounts and notes receivable4,602 (176)4,426 
Inventories8,181 — 8,181 
Other assets2,945 — 2,945 
Customer relationships27,554 (4,353)23,201 
Tradenames6,064 (664)5,400 
Goodwill17,443 3,487 20,930 
Accounts payable and other liabilities(3,622)24 (3,598)
Deferred income taxes(6,586)1,181 (5,405)
Fair value of consideration transferred$59,608 $(501)$59,107 

Goodwill recognized is attributable to synergies achieved through the streamlining of operations combined with improved margins attainable through increased market presence and is attributable to the Company's geographic divisions reportable segment. Goodwill of $17.0 million is not expected to be deductible for U.S. federal income tax purposes and goodwill of $3.9 million is expected to be deductible for U.S. federal income tax purposes. The estimated useful life for the customer relationships is 10 years and the estimated useful life for the tradenames is 15 years.
3. Accounts Receivable
The Company’s trade accounts and notes receivable consisted of the following:
January 31,
2024
April 30,
2023
(in thousands)
Trade receivables$671,201 $713,372 
Other receivables139,068 92,496 
Allowance for expected credit losses(9,132)(8,606)
Other allowances(6,416)(5,030)
Trade accounts and notes receivable$794,721 $792,232 
The following table presents the change in the allowance for expected credit losses during the nine months ended January 31, 2024:
(in thousands)
Balance as of April 30, 2023$8,606 
Provision783 
Other, net(257)
Balance as of January 31, 2024$9,132 

Receivables from contracts with customers, net of allowances, were $655.7 million and $699.7 million as of January 31, 2024 and April 30, 2023, respectively. The Company did not have material amounts of contract assets or liabilities as of January 31, 2024 or April 30, 2023.
13

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


4. Goodwill and Intangible Assets
Goodwill
The following table presents changes in the carrying amount of goodwill:
GrossAccumulatedNet
Carrying AmountImpairment LossCarrying Amount
(in thousands)
Balance as of April 30, 2023$765,314 $(64,501)$700,813 
Goodwill recognized from acquisitions20,930 — 20,930 
Acquisition accounting adjustments from prior period(132)— (132)
Translation adjustment1,907 (493)1,414 
Balance as of January 31, 2024$788,019 $(64,994)$723,025 
As of January 31, 2024, $615.2 million of goodwill was assigned to the Company's geographic divisions reportable segment and $107.8 million was assigned to the Company's other segment. During the nine months ended January 31, 2024, the Company recorded measurement period adjustments related to its Engler, Meier and Justus, Inc. and Blair Building Materials, Inc. acquisitions.
Intangible Assets

The following tables present the components of the Company’s intangible assets:
Estimated
Useful
Lives
(years)
Weighted
Average
Amortization
Period
January 31, 2024
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
(dollars in thousands)
Customer relationships
5-16
12.4$686,471 $(466,614)$219,857 
Definite-lived tradenames
5-20
15.5106,118 (30,735)75,383 
Vendor agreements
10
10.01,000 (650)350 
Developed technology
5-10
6.98,313 (5,882)2,431 
Other
3-5
3.21,551 (1,325)226 
Definite-lived intangible assets12.7$803,453 $(505,206)$298,247 
Indefinite-lived intangible assets84,367 
Total intangible assets, net$382,614 
Estimated
Useful
Lives
(years)
Weighted
Average
Amortization
Period
April 30, 2023
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
(dollars in thousands)
Customer relationships
5-16
12.4$669,142 $(432,220)$236,922 
Definite-lived tradenames
5-20
15.6100,326 (25,407)74,919 
Vendor agreements
8-10
10.01,000 (575)425 
Developed technology
5-10
6.98,261 (5,596)2,665 
Other
3-5
3.21,551 (1,189)362 
Definite-lived intangible assets12.8$780,280 $(464,987)$315,293 
Indefinite-lived intangible assets84,367 
Total intangible assets, net$399,660 
14

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Amortization expense related to definite-lived intangible assets was $15.5 million and $16.3 million for the three months ended January 31, 2024 and 2023, respectively, and $47.2 million and $50.9 million for the nine months ended January 31, 2024 and 2023, 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)
2024 (remaining three months)$14,236 
202553,109 
202644,908 
202738,761 
202832,141 
Thereafter115,092 
Total$298,247 
The Company’s indefinite-lived intangible assets as of January 31, 2024 and April 30, 2023 consisted of indefinite-lived tradenames.

5. Long-Term Debt

The Company’s long-term debt consisted of the following:
January 31,
2024
April 30,
2023
(in thousands)
Term Loan Facility$498,750 $499,503 
Unamortized discount and deferred financing costs on Term Loan Facility(6,106)(2,442)
Senior Notes350,000 350,000 
Unamortized discount and deferred financing costs on Senior Notes(3,596)(4,113)
ABL Facility29,000 110,000 
Finance lease obligations158,437 137,303 
Installment notes at fixed rates up to 5.0%, due in monthly and annual installments through 2028
4,293 8,529 
Unamortized discount on installment notes(17)(103)
Carrying value of debt1,030,761 1,098,677 
Less current portion48,094 54,035 
Long-term debt$982,667 $1,044,642 
Term Loan Facility
The Company has a senior secured first lien term loan facility (the “Term Loan Facility”) with $498.8 million outstanding as of January 31, 2024. 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, beginning January 1, 2024 with the remaining balance due May 12, 2030. As of January 31, 2024, the applicable rate of interest under the Term Loan Facility was 8.33%. As discussed in Note 15, “Subsequent Event”, the Term Loan Facility was amended on February 2, 2024, to reduce the interest rate applicable to the outstanding borrowings under the Term Loan Facility. Following such amendment, borrowings under the Term Loan Facility bear interest at a floating rate per annum based on the Secured Overnight Financing Rate ("SOFR") plus 2.25%. The Company
15

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

has interest rate swap and collar agreements to convert the variable interest rate on a portion of its Term Loan Facility to a fixed rate. For more information, see Note 11, "Fair Value Measurements."
On May 12, 2023, the Company amended the Term Loan Facility to provide refinancing term loans in the aggregate principal amount of $500.0 million, the net proceeds of which were used, together with cash on hand, to refinance the then outstanding borrowings under the Term Loan Facility in the principal amount of $499.5 million and pay related fees. The net $0.5 million increase in aggregate principal amount consisted of a $211.7 million cashless roll by existing lenders, $288.3 million of proceeds received from new lenders and $287.8 million of payments to lenders who did not participate in the refinancing. During the six months ended October 31, 2023, the Company corrected the presentation of the cash flows associated with the refinancing from a net presentation as shown in the cash flow statement for the three-month period ended July 31, 2023 to a presentation reporting the gross cash inflows and outflows within financing activities in the Condensed Consolidated Statement of Cash Flows. There was no impact to any of the cash flow subtotals (operating, investing, or financing) as a result of this correction of an immaterial cash flow misstatement. The amendment also amended the Term Loan Facility to, among other things, (i) replace the administrative and collateral agent, (ii) extend the maturity date by seven years from the date of the amendment to May 12, 2030 and (iii) modify certain thresholds, baskets and amounts referenced therein. The Company recorded a write-off of debt discount and deferred financing fees of $1.4 million, which is included in write-off of debt discount and deferred financing fees in the Consolidated Statement of Operations and Comprehensive Income for the nine months ended January 31, 2024.
Senior Notes
The Company has senior unsecured notes due May 2029 (the "Senior Notes") in the aggregate principal amount of $350.0 million. The Senior Notes bear interest at 4.625% per annum and mature on May 1, 2029. Interest is payable semi-annually in arrears on May 1 and November 1.
Asset Based Lending Facility
The Company has an asset based revolving credit facility (the “ABL Facility”) that provides for aggregate revolving commitments of $950.0 million as of January 31, 2024. 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.
As of January 31, 2024, 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, 2024, the weighted average interest rate on borrowings was 8.75%.
As of January 31, 2024, the Company had available borrowing capacity of approximately $813.4 million under the ABL Facility. The ABL Facility matures on December 22, 2027. The ABL Facility contains a cross default provision with the Term Loan Facility.
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, 2024, the Company was in compliance with all covenants contained in the Term Loan Facility and the indenture governing the Senior Notes.
The ABL Facility contains certain covenants, including financial and other reporting requirements. The Company was in compliance with all such covenants as of January 31, 2024.
16

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Debt Maturities
As of January 31, 2024, the maturities of long-term debt were as follows:
Term Loan
Facility
Senior NotesABL FacilityFinance
Leases
Installment
Notes
Total
Year Ending April 30,(in thousands)
2024 (remaining three months)$1,250 $ $ $11,103 $74 $12,427 
20255,000   41,549 1,615 48,164 
20265,000   35,742 714 41,456 
20275,000   30,220 694 35,914 
20285,000  29,000 23,409 620 58,029 
Thereafter477,500 350,000  16,414 576 844,490 
$498,750 $350,000 $29,000 $158,437 $4,293 $1,040,480 

6. Leases
The components of lease expense were as follows:
Three Months Ended
January 31,
Nine Months Ended
January 31,
2024202320242023
(in thousands)
Finance lease cost:
Amortization of right-of-use assets$7,419 $6,121 $21,297 $17,918 
Interest on lease liabilities2,072 1,800 5,826 5,361 
Operating lease cost16,231 13,293 47,980 39,272 
Variable lease cost4,155 4,919 12,594 16,499 
Total lease cost$29,877 $26,133 $87,697 $79,050 
Supplemental cash flow information related to leases was as follows:
Nine Months Ended
January 31,
20242023
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$46,835 $39,675 
Operating cash flows from finance leases5,826 5,361 
Financing cash flows from finance leases30,381 26,167 
Right-of-use assets obtained in exchange for lease obligations
Operating leases39,865 34,607 
Finance leases55,662 42,421 
17

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Other information related to leases was as follows:
January 31,
2024
April 30,
2023
(in thousands)
Finance leases included in property and equipment
Property and equipment$269,168 $231,488 
Accumulated depreciation(71,529)(65,274)
Property and equipment, net$197,639 $166,214 
Weighted-average remaining lease term (years)
Operating leases5.35.2
Finance leases4.03.9
Weighted-average discount rate
Operating leases5.6 %5.0 %
Finance leases5.5 %4.9 %
Future minimum lease payments under non-cancellable leases as of January 31, 2024 were as follows:
FinanceOperating
Year Ending April 30,(in thousands)
2024 (remaining three months)$13,149 $12,390 
202548,416 57,863 
202640,708 45,063 
202733,504 33,420 
202825,196 23,704 
Thereafter17,140 54,334 
Total lease payments178,113 226,774 
Less imputed interest19,676 32,731 
Total$158,437 $194,043 

7. Income Taxes

General. The Company’s effective income tax rate on continuing operations was 24.5% and 26.3% for the nine months ended January 31, 2024 and 2023, 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, 2024 and 2023 was primarily due to the impact of foreign taxes, state taxes and equity compensation.
Valuation allowance. The Company had a valuation allowance of $11.8 million and $11.7 million against its deferred tax assets as of January 31, 2024 and April 30, 2023, respectively. To the extent the Company generates sufficient taxable income in the future to utilize the tax benefits of the net deferred tax assets on which a valuation allowance is recorded, the effective tax rate may decrease as the valuation allowance is reversed.
Uncertain tax positions. The Company had no uncertain tax positions as of January 31, 2024 or April 30, 2023.

18

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

8. Stockholders’ Equity
Share Repurchases
On October 18, 2023, the Company's Board of Directors approved an expanded share repurchase program under which the Company is authorized to repurchase up to $250.0 million of its outstanding common stock. This expanded program replaced the Company’s previous share repurchase authorization of $200.0 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. As of January 31, 2024, the Company had $216.5 million of remaining repurchase authorization under its stock repurchase program. 
Beginning January 1, 2023, share repurchases in excess of issuances are subject to a 1% excise tax. The Company includes the applicable excise tax as part of the cost basis of the shares acquired and records the taxes as a corresponding liability in accrued expenses and other liabilities in the Consolidated Balance Sheet.
The following table presents share repurchase activity for the nine months ended January 31, 2024:
Nine Months Ended
January 31,
20242023
(in thousands)
Amount repurchased pursuant to repurchase program$99,609 $82,767 
Excise taxes on repurchases683 — 
Repurchases of common stock$100,292 $82,767 
Number of shares repurchased
1,528 1,773 
Accumulated Other Comprehensive Loss
The following table sets forth the changes to accumulated other comprehensive loss, net of tax, by component for the nine months ended January 31, 2024:
Foreign
Currency
Translation
Derivative
Financial
Instruments
Accumulated
Other
Comprehensive
Loss
(in thousands)
Balance as of April 30, 2023$(35,129)$ $(35,129)
Other comprehensive income (loss) before reclassification(2,725)4,643 1,918 
Gains on intra-entity transactions that are of a long-term investment nature7,363  7,363 
Reclassification to earnings from accumulated other comprehensive loss(2,084)(2,084)
Balance as of January 31, 2024$(30,491)$2,559 $(27,932)
Other comprehensive income before reclassification on derivative instruments for the nine months ended January 31, 2024 is net of $1.5 million of tax. Reclassification to earnings from accumulated other comprehensive loss for the nine months ended January 31, 2024 is net of tax of $0.7 million. Gains on intra-entity transactions that are of a long-term investment nature for the nine months ended January 31, 2024 are net of tax of $1.2 million.

19

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

9. Equity-Based Compensation
General

Equity-based compensation expense related to stock options and restricted stock units was $11.0 million and $9.4 million during the nine months ended January 31, 2024 and 2023, 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, 2024:
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, 20231,106 $32.60 6.5$28,155 
Options granted151 74.75 
Options exercised(228)22.12 
Options forfeited(13)42.11 
Outstanding as of January 31, 20241,016 $41.11 6.8$43,710 
Exercisable as of January 31, 2024680 $30.63 5.8$36,409 
Vested and Expected to vest as of January 31, 20241,015 $41.11 6.8$43,701 
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, 2024 and 2023 was $12.4 million and $6.5 million, respectively. As of January 31, 2024, there was $6.7 million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a weighted-average period of 1.8 years.
The fair value of stock options granted during the nine months ended January 31, 2024 and 2023 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,
20242023
Volatility38.70 %45.80 %
Expected life (years)6.06.0
Risk-free interest rate4.29 %2.67 %
Dividend yield % %
Grant date fair value$33.33 $25.26 
20

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Restricted Stock Units
The following table presents restricted stock unit activity for the nine months ended January 31, 2024:
Number of
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
(shares in thousands)
Outstanding as of April 30, 2023353 $46.97 
Granted141 74.80 
Vested(175)44.52 
Forfeited(5)52.39 
Outstanding as of January 31, 2024314 $60.74 
The total fair value of awards vested during the nine months ended January 31, 2024 and 2023 was $13.0 million and $8.8 million, respectively. As of January 31, 2024, there was $9.5 million of total unrecognized compensation cost related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 1.5 years.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan (“ESPP”), the terms of which allow for qualified employees to participate in the purchase of shares of the Company’s common stock at a price equal to 90% of the lower of the closing price at the beginning or end of the purchase period, which is a six-month period ending on December 31 and June 30 of each year. The Company recognized $1.0 million and $0.8 million of stock-based compensation expense related to the ESPP during the nine months ended January 31, 2024 and 2023, 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,
20242023
(shares in thousands)
Number of shares purchased under the ESPP
89 79 
Average purchase price$51.74 $40.47 

21

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, 2023$32,432 $2,407 $12,002 
Amounts redeemed(1,810)(586)(2,931)
Change in fair value3,408 160 965 
Balance as of January 31, 2024$34,030 $1,981 $10,036 
Classified as current as of April 30, 2023$7,446 $545 $2,726 
Classified as long-term as of April 30, 202324,986 1,862 9,276 
Classified as current as of January 31, 2024$8,123 $684 $3,423 
Classified as long-term as of January 31, 202425,907 1,297 6,613 
Total expense related to these instruments was $4.5 million and $7.1 million during the nine months ended January 31, 2024 and 2023, 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 current liabilities and other liabilities, respectively, in the Condensed Consolidated Balance Sheets. See Note 13, "Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests," in the Company's Annual Report on Form 10-K for the year ended April 30, 2023 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,
2024
April 30,
2023
(in thousands)
Interest rate swaps and collars (Level 2)$3,390 $ 
In connection with the amendment to the Term Loan Facility in May 2023, the Company entered into (a) interest rate swap agreements for two years with notional amounts totaling $300.0 million to convert the variable interest rate on a portion of the term loans outstanding to a fixed 1-month SOFR interest rate of 3.899% and (b) forward interest rate collars with notional amounts totaling $300.0 million for years 2025 through 2029. The objective of such hedging instruments is to reduce the variability of interest payment cash flows associated with the variable interest rates under the Term Loan Facility and otherwise hedge exposure to future interest rate fluctuations. The Company believes there have been no material changes in the creditworthiness of the counterparties to these interest rate swaps and believes the risk of nonperformance by each party is minimal. The Company designated the interest rate swaps and collars as cash flow hedges.
As of January 31, 2024, $2.2 million of the interest rate swap assets were classified in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet and $1.2 million were classified in other assets. The Company recognized gains, net of tax, of $0.8 million and $2.1 million during the three and nine months ended January 31, 2024, respectively, related to its interest rate swaps. This amount is 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, 2024, the Company expects that approximately $2.2 million of pre-
22

GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

tax earnings will be reclassified from accumulated other comprehensive income (loss) into earnings during the next twelve months.
The fair value of interest rate swap and collar agreements is determined using Level 2 inputs. Generally, the Company obtains the Level 2 inputs from its counterparties. Substantially all the inputs throughout the full term of the instruments can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. The fair value of the Company’s interest rate swap and collar agreements was determined using widely accepted valuation techniques, including a discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs, including interest rate curves and implied volatilities.
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, 2024 or 2023.
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, 2024April 30, 2023
Carrying AmountFair ValueCarrying AmountFair Value
(in thousands)
Senior Notes$350,000 $324,188 $350,000 $308,000 

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, 2024. For more information regarding the Company's reportable segments, see Note 16, "Segments," in the Company's Annual Report on Form 10-K for the year ended April 30, 2023.
Segment Results
The following tables present segment results:
Three Months Ended January 31, 2024
Net SalesGross ProfitDepreciation and
Amortization
Adjusted
EBITDA
(in thousands)
Geographic divisions$1,224,907 $399,000 $29,179 $124,911 
Other33,441 15,720 3,544 3,109 
Corporate81 
$1,258,348 $414,720 $32,804 $128,020 
Three Months Ended January 31, 2023
Net SalesGross ProfitDepreciation and
Amortization
Adjusted
EBITDA
(in thousands)
Geographic divisions$1,201,183 $384,093 $27,159 $133,792 
Other33,435 18,155 4,140 7,036 
Corporate120 
$1,234,618 $402,248 $31,419 $140,828 

Nine Months Ended January 31, 2024
Net SalesGross ProfitDepreciation and
Amortization
Adjusted
EBITDA
(in thousands)
Geographic divisions$3,992,941 $1,272,880 $86,289 $454,503 
Other95,937 51,023 11,217 14,373 
Corporate253 
$4,088,878 $1,323,903 $97,759 $468,876 

Nine Months Ended January 31, 2023
Net SalesGross ProfitDepreciation and
Amortization
Adjusted
EBITDA
(in thousands)
Geographic divisions$3,928,170 $1,244,099 $82,887 $486,968 
Other96,980 57,370 12,827 24,387 
Corporate371 
$4,025,150 $1,301,469 $96,085 $511,355 

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,
2024202320242023
(in thousands)
Net income$51,905 $64,775 $219,692 $257,398 
Interest expense18,784 16,943 56,440 47,659 
Write-off of debt discount and deferred financing fees  1,401 
Interest income(378)(180)(1,144)(390)
Provision for income taxes17,468 23,697 71,407 91,722 
Depreciation expense17,276 15,162 50,566 45,213 
Amortization expense15,528 16,257 47,193 50,872 
Stock appreciation rights(a)1,789 314 3,408 5,888 
Redeemable noncontrolling interests and deferred compensation(b)461 368 1,125 1,203 
Equity-based compensation(c)3,559 3,285 11,974 10,198 
Severance and other permitted costs(d)1,033 (315)2,321 416 
Transaction costs (acquisitions and other)(e)765 476 3,373 1,154 
Gain on disposal of assets(f)(222)(411)(663)(614)
Effects of fair value adjustments to inventory(g)8 457 450 636 
Debt transaction costs(h)44  1,333  
Adjusted EBITDA$128,020 $140,828