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GI

GMS Inc. (GMS)·Q1 2026 Earnings Summary

Executive Summary

  • Net sales of $1.41B and adjusted EBITDA of $135.5M came in consistent with company expectations; sequential improvement in profitability from Q4 as cost actions flowed through and margins expanded to 9.6% adjusted EBITDA margin .
  • Year-over-year, net sales fell 2.4% with wallboard and steel pricing/volume headwinds offset by strength in ceilings; GAAP diluted EPS declined to $1.13 vs $1.42 a year ago, while adjusted diluted EPS was $1.76 vs $1.93 .
  • Prior-quarter guidance for Q1 (net sales down low-mid single digits, adjusted EBITDA $132–$137M, margins ~9.5%–9.8%) was effectively met, reinforcing operational discipline amid a soft demand backdrop .
  • Strategic overhang: announced tender offer by The Home Depot at $110 per share pending regulatory and closing conditions; transaction costs tied to the pending merger were called out in Q1 adjustments and may drive near-term stock dynamics more than fundamentals .

What Went Well and What Went Wrong

What Went Well

  • Ceilings delivered growth: net sales +6.6% YoY, with solid price/mix and continued benefits from architectural specialties focus and prior Camco acquisition .
  • Sequential margin recovery: adjusted EBITDA rose to $135.5M from $109.8M in Q4, lifting adjusted EBITDA margin to 9.6% vs 8.2% prior quarter as cost reductions took hold .
  • Management execution on structural cost-out: cumulative $55M annualized savings completed in FY2025, with expected full quarterly run-rate realization beginning Q1 FY2026; management emphasized ongoing digital investments and upcoming AI use-cases to automate order entry .

What Went Wrong

  • Wallboard and steel framing declined YoY: wallboard −5.4% and steel −6.3% (organic −6.8% and −8.2%), reflecting soft demand and steel price headwinds .
  • Free cash flow negative in Q1: $(39.4)M as working capital outflows more than offset earnings, and cash used in operations was $(30.9)M .
  • Adjusted EBITDA margin down YoY: 9.6% vs 10.1% a year ago; vendor incentives lower on reduced volumes and price deflation in steel remain headwinds despite resilient pricing in other categories .

Financial Results

Headline Metrics vs Prior Quarters and YoY

MetricQ3 FY2025Q4 FY2025Q1 FY2026
Net Sales ($USD Millions)$1,260.7 $1,333.8 $1,414.3
GAAP Diluted EPS ($)$(0.55) $0.67 $1.13
Adjusted Diluted EPS ($)$0.92 $1.29 $1.76
Adjusted EBITDA ($USD Millions)$93.0 $109.8 $135.5
Adjusted EBITDA Margin (%)7.4% 8.2% 9.6%

Segment Net Sales and YoY Change (Q1 FY2026)

Product GroupNet Sales ($USD Millions)% of TotalYoY Change
Wallboard$556.4 39.3% (5.4%)
Ceilings$220.9 15.6% 6.6%
Steel Framing$196.6 13.9% (6.3%)
Complementary Products$440.5 31.1% (0.7%)
Total$1,414.3 —(2.4%)

KPIs

KPIQ4 FY2025Q1 FY2026
Cash and Cash Equivalents ($USD Millions)$55.6 $39.9
Free Cash Flow ($USD Millions)$183.4 $(39.4)
Net Debt ($USD Millions)$1,208.7 $1,273.7
Net Debt / Pro Forma Adjusted EBITDA (x)2.4x 2.6x
Adjusted SG&A ($USD Millions)$308.2 $302.3
Adjusted SG&A Margin (%)23.1% 21.4%

Versus Estimates

  • S&P Global consensus estimates were unavailable for GMS due to missing CIQ mapping; therefore, we cannot assess beats/misses vs Street for Q1 FY2026 (consensus not retrievable).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales (YoY)Q1 FY2026Down low- to mid-single digits YoY No update in Q1 PR Maintained
Adjusted EBITDA ($M)Q1 FY2026$132–$137; margin ~9.5%–9.8% No update in Q1 PR; actual $135.5 (in range) Maintained (met)
Gross Margin (%)Q1 FY2026~31.2% consistent with Q4/prior year No update in Q1 PR Maintained
Capex ($M)FY2026$40–$45 No update in Q1 PR Maintained
Free Cash Flow Conversion (%)FY202660–65% of adjusted EBITDA No update in Q1 PR Maintained
Wallboard Volumes (Organic)Q1 FY2026Down high-single digits total; price/mix roughly flat YoY No update in Q1 PR Maintained
Ceilings Price/MixQ1 FY2026Up mid- to high-single digits No update in Q1 PR Maintained
Steel FramingQ1 FY2026Volume down high-single digits; price/mix down low-single digits No update in Q1 PR Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2025)Previous Mentions (Q4 FY2025)Current Period (Q1 FY2026)Trend
AI/Technology & DigitalFocus on cost reductions; efficiency actions initiated Continued digital investment; AI planned for order entry; ERP/data standardization to unlock efficiencies Cost actions reflected in lower adjusted SG&A; ongoing transformation implied Improving operational efficiency
Supply Chain/WeatherWinter weather disruptions; insurance claims elevated Market conditions recovered slightly; operational streamlining Results consistent with expectations; no specific supply chain commentary Stabilizing
Tariffs/MacroSoft end market demand; steel pricing deteriorated Steel tariffs prompt supplier increase notices; minimal direct tariff exposure beyond steel Steel framing down YoY; pricing mix headwinds persist Steel headwinds persist
Product PerformanceCeilings strength; complementary resilient; steel weak Ceilings growth; complementary per-day growth streak; wallboard pricing resilient Ceilings +6.6% YoY; wallboard −5.4%; complementary −0.7% Mixed; ceilings outperform
Regional/End MarketsMulti-family and commercial weakness; single-family softness Single-family share gains; data center backlog into 2026 Category mix consistent with guidance; no region specifics in PR Awaiting demand recovery
Regulatory/LegalNone specificTender offer announced with HD; antitrust/HSR conditions Transaction costs tied to pending merger included in adjustments M&A overhang
Capital AllocationRepurchases; strong FCF Repurchases; debt reduction; disciplined cap allocation FCF negative in quarter; liquidity adequate Near-term WC drag; long-term discipline

Management Commentary

  • “We have implemented a total of $55 million of annualized cost savings during fiscal 2025... We expect to realize the full quarterly run rate of our fiscal 2025 cost actions during the fiscal first quarter of 2026.” .
  • “We have some AI applications we're looking at that are going to automate order entry for us this next year... our portal gets better all the time... almost 20% of accounts receivable being collected online.” .
  • “Notably, we have a data center backlog that extends well into 2026... these projects... utilize both our core and complementary products, often with higher-end specifications.” .
  • “Although we achieved a sequential reduction in net debt, our leverage ratio increased to 2.4 times adjusted EBITDA compared to 1.7 times a year ago, primarily due to the year-over-year decline in adjusted EBITDA.” .

Q&A Highlights

  • Single-family share gains and visibility: management cited share wins with large builders and regional strength; typical lead time of 3–6 months from starts to shipments .
  • Structural cost-out permanence: roughly half of cost savings expected to be permanent over a long run of growth; remaining variable costs may return with volume .
  • Wallboard pricing: regional increases being implemented; success contingent on demand; price/mix expected roughly flat YoY in Q1 .
  • Steel outlook: tariff-driven notices set likely pricing bottom, but soft consumption tempers near-term upside; assuming relatively flat steel prices near term .

Estimates Context

  • S&P Global consensus estimates for Q1 FY2026 revenue, EPS, and EBITDA were unavailable due to missing mapping for GMS in the dataset; as a result, we cannot provide a quantitative beat/miss assessment versus Street in this recap (consensus not retrievable).

Key Takeaways for Investors

  • Sequential improvement and delivery inline with guidance: adjusted EBITDA within prior range ($135.5M; 9.6% margin), confirming cost actions’ impact despite a soft macro backdrop .
  • Product mix favors ceilings and complementary: ceilings grew +6.6% YoY, complementary nearly flat, helping offset wallboard/steel volume and price headwinds; watch for continued architectural specialties momentum .
  • Working capital swing drove negative FCF in Q1; monitor cash conversion against FY2026 60–65% target as seasonality and demand normalize .
  • Leverage ticked up to 2.6x LTM on lower earnings; liquidity and cash remain adequate, but discipline on capex ($40–$45M FY2026) and buybacks important near-term .
  • Steel pricing remains a risk; tariff dynamics may set a floor, but consumption softness limits upside—focus on pricing/mix management and vendor incentives .
  • M&A overhang: pending Home Depot tender offer at $110 per share with antitrust conditions; transaction costs already appearing in adjustments—deal progress likely a primary stock catalyst .