GMS Inc. (NYSE:GMS) Q2 2023 Earnings Call Transcript

Trey Grooms: So if we could touch on commercial, so commercial sales up for, I think it was the second quarter in a row. You mentioned an improving commercial landscape for the near-term. First off, if you could maybe speak to where you are seeing relative strength and weakness on the commercial side and looking forward, what kind of visibility do you have there and how are you thinking about the commercial demand more kind of in the medium term, should that continue to hold up relatively well, or are you kind of bracing for a potential slowing on that side as well?

John Turner: No, I think that the headlines are just starting, right? If people are already worried after one month of the VABI being below 50, I mean we’re going to give that a little more time. I think we feel like the commercial market is going to remain relatively flat low single digits in the medium term Trey. And the big drag there is still office, right? Office is just not coming back. And, and that’s the driver of our steel framing decline as well right now in volume. So that’s the one, kind of elephant in the room is just the office component. The balance of the commercial space is continuing to do just fine. I mean, it really, almost everything else is either flat or up. Education’s flattish, hospitality’s been showing some real positives just recently, but the other trends have been more positive, but office is the one that we’re still waiting for recovery on.

Scott Deakin: And so our internal pipeline and our internal checks as well as external checks with our larger commercial contractors basically would tell us that we’re going to be flat to up slightly over the course of the next quarter or two.

Trey Grooms: Got it. Okay, perfect. That’s super helpful. And then you guys have been very acquisitive over the last, well, for as long as I’ve known you guys. And so I guess the question is, as we see some kind of slowing on the horizon, especially on the residential side, how are you thinking about M&A? How are you, what’s your appetite there? Do you kind of, do you feel like it’s appropriate to kind of take the foot off the gas some now or do you continue with the current strategy or just how are you approaching M&A and what’s your appetite there? And then I guess as part of that leverage is in a very nice place right now. I’ve seen you guys take it up higher than this on, for the right deal pointing to the Canadian acquisition you did a few years ago. But how are you also kind of thinking about the leverage with that backdrop as well? Thank you.

John Turner: Well, I’ll start with just the appetite for M&A. Nothing has really changed other than our valuation today is not where we’d like it to be. And our objective has always been to acquire at or better than our current valuation. And then enjoy the synergies internally that we bring to the new company or the new acquisition. So that’s been a little bit of a headwind. Valuation expectations on the seller’s side still appear to be a bit inflated. And then of course, you got risk out in the next six to nine months across the board. So it’s hard to pay with the anticipation of any kind of upside in growth. So all three of things make us a little more cautious than we normally would be. All that being said, continue to have great relationships with sellers and our pipeline and constantly are having conversations with them.