[Management View]
GMS Inc. ended Q4 FY2025 with significant operational cost reductions and historically high free cash flow, despite meaningful volume declines and margin compression across several core categories. Management confirmed that the largest negative trends came from multifamily and commercial markets, while ceilings products benefited from enhanced project mix and recent acquisitions. Strategic efforts centered on cost control, debt repayment, and digital transformation continue to support business resilience in the current challenging environment.

[Outlook]
Management projects wallboard price and mix to be "roughly flat" year-over-year in Q1 FY2026, with ceilings price/mix expected to increase mid to high single digits in Q1 FY2026 and steel framing prices expected to remain flat in Q1 FY2026 despite new supplier price announcements. Guidance includes a continued focus on operating leverage, with expectations for cash flow to remain at 60%–65% of adjusted EBITDA for FY2026.

[Financial Performance]
Net sales for Q4 FY2025 were $1.3 billion, down 5.6% on an absolute basis and 4.1% per day compared to the prior year. Organic sales decreased 9.7% (or 8.3% per day) in the fourth quarter of fiscal 2025 compared to the prior year period, slightly ahead of guidance. Adjusted EBITDA margin decreased to 8.2% from 10.4% in Q4 FY2024.

[Q&A Highlights]
Question 1: JT, you mentioned that sequential organic trends would be seasonally better next quarter. Why do you feel that way?
Answer: We referred specifically to the single family market improvement. We have achieved some share gain with bigger customers, which we will enjoy for the balance of this year. Recent commentary from Lennar and Horton suggests the market is not crashing, and we are experiencing normal seasonality and improvement in single family primarily.

Question 2: Can you talk about the technology you're implementing and any additional digital benefits beyond outlined savings?
Answer: We have continued to focus heavily on digital efforts, including our customer portal, ecommerce, and automation. Our efficiencies have improved year over year, allowing us to take out costs while delivering exceptional service. We are looking at AI applications for automating order entry and advancing our commerce capabilities.

Question 3: Help us understand the nature of the share gains in single family and how you're balancing share versus margin and price dynamics.
Answer: We leverage our scale to help builder partners, working diligently with supply chain relationships. We have regional strength and acquisition track record, picking up share in complementary products like stucco in Florida. Our service proposition appeals to big builders, ensuring no added cost in their process.

Question 4: How do you think about the margin target of 10% to 12% longer term?
Answer: We need the market to come back to put volume through the machine. Half of the margin improvement is volume-related, and the other half is being leaner with improved product mix and cost structure. We expect normalization in gross profit and leveraging our cost and product mix.

Question 5: What visibility do you have into the single family end market?
Answer: We have visibility for the quarter, with a lead time of three to six months. If starts collapse, the outlook changes, but we expect a little uptick going into next year's spring selling season. Historically, home starts decline for three to four years, and we are nearing the end of that cycle.

Question 6: How permanent are the SG&A savings, and what degree of cost structure reduction is expected?
Answer: Historically, our fixed-variable cost structure is 50-50. We have upside in volume before adding back variable costs. Over a long run of growth, 50% of the cost stays out, and 50% variable might come back.

Question 7: How does the return to office trend impact your business?
Answer: Longer term, it's a nice opportunity, but not yet driving tenant improvement work. Conversion of office space to residential in major metros is beneficial. We are cautiously optimistic, expecting improvement in calendar 2027.

Question 8: Can you give more color on wallboard pricing and its impact on GMS?
Answer: Our guide incorporates limited price increases and cost reduction. The current environment is understood by all parties, and we are working through it together. We expect resilience in pricing with a recovery outlook in calendar 2026.

Question 9: How do you view the industry's ability to hold pricing with expected operating rates?
Answer: There is still inflation on the manufacturer side, and investment challenges remain. We expect resilience in pricing with a recovery outlook in calendar 2026, unless a significant downturn occurs.

[Sentiment Analysis]
Analysts and management maintained a cautiously optimistic tone, acknowledging challenging market conditions but highlighting strategic efforts and operational efficiencies. Management expressed confidence in their ability to navigate the current environment and capitalize on future growth opportunities.

[Quarterly Comparison]
| Metric | Q4 FY2025 | Q4 FY2024 |
|--------|-----------|-----------|
| Net Sales | $1.3 billion | $1.38 billion |
| Organic Sales Decline | 8.3% per day | 5.4% per day |
| Adjusted EBITDA Margin | 8.2% | 10.4% |
| Free Cash Flow | $183.4 million | $186.7 million |

[Risks and Concerns]
Organic sales declined 8.3% per day in Q4 FY2025, with management citing a "continued challenging macro backdrop" and ongoing "pressure across the business." Stubbornly high interest rates and policy uncertainty remain primary impediments to growth, affecting residential and commercial segments. Multifamily revenues declined 32.4% per day, and commercial revenues fell 10.1% per day.

[Final Takeaway]
GMS Inc. navigated Q4 FY2025 with strategic cost reductions and strong free cash flow, despite facing significant volume declines and margin pressures. Management's focus on operational efficiency, debt repayment, and digital transformation positions the company to capitalize on long-term growth opportunities. While macroeconomic challenges persist, the company's strategic initiatives and market positioning provide a foundation for resilience and potential recovery in the coming quarters.