Q3 2024 GMS Inc Earnings Call

Participants

Carey Phelps; Vice President; GMS Inc

John Turner; CEO, President; GMS Inc

Scott Deakin; SVP, CFO; GMS Inc

David Manthey; Analyst; Robert W. Baird & Co., Inc.

Noah Merkousko; Analyst; Stephens Inc.

Kurt Yinger; Analyst; D.A. Davidson

Keith Hughes; Analyst; Truist Securities

Steven Ramsey; Analyst; Thompson Research Group

Mike Dahl; Analyst; RBC Capital Markets

Zack Pacheco; Analyst; Loop Capital

Presentation

Operator

Greetings, and welcome to GMS Inc. Third Quarter 2024 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Carey Phelps, Vice President and Investor Relations. Thank you, Ms. Phelps, you may be.

Carey Phelps

Thank you. Good morning, and thank you for joining us for the GMS earnings conference call for the third quarter of fiscal 2020. For I'm joined today by John Turner, President and Chief Executive Officer, and Scott Milligan, Senior Vice President and Chief Financial Officer. In addition to the press release issued this morning, we have posted PowerPoint slides to accompany this call in the Investors section of our website at www.GMS.com.
As detailed on slide 2 on today's call, management's prepared remarks and answers to your questions may contain forward looking statements as defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements address matters that are subject to risks and uncertainties, many of which are beyond our control and may cause actual results to differ from those discussed today. As a reminder, forward-looking statements represent management's current estimates and expectations.
The Company assumes no obligation to update any forward looking statements in the future listeners are encouraged to review the more detailed discussions related to these forward-looking statements contained in the Company's filings with the SEC, including the Risk Factors section in the Company's 10 K and other periodic reports.
Today's presentation also includes a discussion of certain non-GAAP measures. Definitions and reconciliations of these non-GAAP measures are provided in the press release and presentation slides. Please note that references on this call to the third quarter of fiscal 2024 relate to the quarter ended January 31st, 2024.
Finally, once we begin the question and answer the question and answer session of the call and the interest of time, we kindly request that you limit yourself to one question and one follow-up. With that, I'll turn the call over to John Turner for his discussion will begin on Slide 3. J.p.

John Turner

Thank you, Gary, and thank you all for joining us today. I would also like to thank our team for once again executing against our key initiatives and delivering outstanding service and solid results this quarter. Volume growth was realized across all of our major product categories as we benefited both from our organic efforts and from the contributions of recent acquisitions. And except in steel, pricing remained resilient and in total accretive to growth as compared with a year ago.
Our increase in total net sales versus last year was achieved despite significant steel price inflation, which we expected along with the near term headwind of adverse weather conditions that we faced in late January, the difficult weather forced all but one of our geographic divisions to shut down locations temporarily during the week of January 15th, delaying sales into the early part of our fourth quarter, Phil, even with these challenges, we were pleased to deliver third quarter net income of $51.9 million and adjusted EBITDA of $128 million, which were both above our previously communicated expectations during the quarter.
Strong multifamily and commercial end market demand, along with an improving single-family backdrop and gains from acquisitions helped drive volume growth in wallboard, ceilings, steel framing and complementary products. And these trends are expected to continue as we anticipate delivering both year-over-year and sequential growth in net sales for our fourth quarter as we close out fiscal 2024 at the end of April.
While multifamily permits and starts do indicate a forthcoming slowdown likely in the back half of this calendar year for now, there remains a significant number of units still under construction. Commercial is also expected to continue its current pace of solid demand as our internal and external channel checks indicate levels of backlog consistent with those we experienced in our third quarter for single family.
We are encouraged by the continuing uptick in new home orders reported by our builder customers and the three month consecutive rise and builder confidence levels, reflecting expectations for an improving mortgage rate environment and the pronounced foundation of pent-up need for housing and a relatively supply-constrained environment.
In addition, we are pleased with the continued resilience of pricing in wallboard, reinforcing what we continue to believe is a structurally changed industry with low levels of recent new or planned capacity and rising manufacturing costs, particularly given the declining availability of synthetic gypsum pricing in ceilings and complementary products has also held up well, while steel framing has performed as expected, with prices down substantially year over year.
Although raw steel price indices began escalating roughly four months ago, it appears that these have now reached a near term peak as such, while we expect our prices to slightly increase sequentially for our fiscal fourth quarter. Those prices will likely flatten for at least the near term thereafter, while navigating the near-term dynamics and market demand and pricing our teams have continued to deliver solid results and have maintained their focus on the successful execution of our four strategic pillars, which are highlighted on slide 4.
First, measuring against data from the Gypsum Association, the steel framing Industry Association and manufacturer disclosures. We believe that we have continued to expand our share in each of our core product categories. Customers across our end markets are seeing the value that our scale expertise, product breadth and commitment to delivering outstanding service provide.
In recent months, we have successfully secured a range of new projects, including expanding activity with some of the nation's largest residential homebuilders, while also winning commercial work in most sectors, which remain most active, primarily manufacturing, medical, education, government and data centers as well as participation in many of the mega projects underway across the country.
Second, our complementary products category continues to grow as an increasingly important part of our product mix. This category has made up 30% of our sales so far this fiscal year. And as we've said in previous quarters, our aim is to grow this category at twice the rate of our core products. In particular, we are placing emphasis on tools and fasteners, Easton, stucco and insulation, which collectively grew 11.7% for the quarter, while the total complementary products category grew 7.3% over time.
We expect to continue to drive accelerated growth in this margin accretive segment as a percentage of our overall net sales. Third, we are seeing success with our many productivity initiatives and our push to drive complexity costs out of the business while further realizing the benefits of our attractive scale position, equipping our yard operators with the right tools and technologies continue to improve the efficiency of their operations.
Our e-commerce advancements are providing an enhanced customer experience and among other features, offer an avenue for quick product pricing and order information together with easy online payments, which customers are increasingly taking advantage of.
Additionally, we are consolidating a number of our legacy legal entities and merging back-of-house functionality, thereby reducing organizational and process complexity along with costs, while also leveraging the standardization of our product vendor customer and other operational data across the business. Collectively, these initiatives help drive additional profitability in the business and make us better operators further positioning GM.s as the provider of choice for our customers.
Finally, our fourth strategic pillar is to expand our platform through accretive acquisitions and greenfield opportunities.
During the third quarter, we opened three new rebuilds, and we continue to focus on M&A to drive growth with attractive opportunities in both our core and complementary businesses. In late December.
As highlighted on slide 5, we capitalize on one of these opportunities and announced our agreement to purchase Cameco Supply Corporation, a leading distributor of building products in the New York City market. We are very excited about the prospects of this transaction, which we expect to close in the coming days.
Cameco's values and highly regarded execution discipline align very well with our own, and we are pleased to welcome the company's leadership and employees as they join GMF. Bringing Kimco into the GMS. family of brands represents a unique opportunity to advance our strategic priority, including expanding share in our core products and geographic expansion in the highly attractive New York City market.
Additionally, as we continue to drive Complementary product sales. This transaction will present cross-selling opportunities with other GM.s operations in the area, including further expanding our leadership position in wallboard, we are very excited about becoming one of the top distributors in this key region and will look to leverage Cameco's excellent reputation for customer service and operational execution as a base for further organic and inorganic expansion.
Before turning the call over to Scott, who will cover more on this exciting transaction and our business results. I want once again to thank our team for maintaining our high level of service and performance during the quarter, we again successfully demonstrated the benefits of our end market balance and the flexibility and expertise we have in servicing each one. I am confident that we will continue to drive further growth and profitability as we execute on our strategic priorities.
With that, I will turn the call over to Scott.

Scott Deakin

Thanks, John. Good morning, everyone.
As just mentioned, in late December, we entered into an agreement to acquire Camco Supply Corporation and affiliates for a purchase price of $321.5 million, inclusive of additional consideration in connection with the exit of a legacy pension funds, Kimco, which generated $235 million in revenue during the 12 months ended December 31st, 2023 has borne legacy locations in the greater New York City market, including Yards in Brooklyn, Manhattan, Long Island and Patterson Plus a recently added an important new greenfield location in the Bronx which we believe will meaningfully add to Cameco's top line growth before any expected synergies.
Cameco has historically generated EBITDA margins of roughly in line with the broader GNS business. In addition, over the next 24 to 36 months. We expect this transaction to generate cost and revenue synergies through the integration of our distribution networks and purchasing programs, cross-selling opportunities, notably for wallboard and complementary products and SG&A savings.
Moreover, as an asset transaction, we will lose we will have substantial tax benefits from intangibles amortization all in, including the synergies and tax attributes, we expect to pay just above a 7.5 times pro forma EBITDA multiple for this business. We expect to fund this transaction with cash on hand and from borrowings under our ABL, which we expect would all else being equal, briefly raise our net debt leverage ratio by less than 1.5 turn before weren't returning to our current level over approximately the next year.
We are very pleased to be nearing the close of this highly strategic transaction, but that let me move on to our results for our fiscal third quarter.
Starting with slide 6. Net sales for the quarter increased 1.9% to $1.3 billion as volume growth across all our major product categories, coupled with resilient pricing for nearly all of our product lines helped to offset an estimated $55 million of steel price deflation.
Assuming current volumes have been sold at prior year. Prices also as JT mentioned, mid January, harsh weather conditions across much of our service territory, delayed project demand and slowed delivery execution, pushing an estimated $15 million of net sales into our fiscal fourth quarter, but also for some temporary operational inefficiencies as our teams added weekend and overtime hours to keep our customers' projects moving forward.
Commercial and multifamily activity levels remain solid during the quarter. While the sentiment around single-family demand is improving, our recent acquisitions, such as EMJ. and Tanner also contributed positively to our quarter's results. Organically, consolidated sales were essentially flat as compared with the same period a year ago. From U.S. end market perspective, multifamily sales dollars grew 8.2% year over year, while single-family sales dollars declined 6.1%, resulting in a total residential sales dollar decline of 2.4%.
Commercial sales in the US grew 1.7% as increased sales volumes were muted by significant steel price deflation. Wallboard sales of $520.7 million were up 4% over the same period last year, with multi-family and commercial volumes of 12.7% and 7.9%, respectively. Single-family volumes were down only 2.3% year over year and based on our current run rates, given this increasing sequential growth. We expect this comparison to turn positive for our fiscal fourth quarter organically.
Third quarter wallboard sales were up 3.5% compared with the prior year period comprised of a 3.6% increase in volume with a nearly flat price and mix component. For the third quarter, the average realized wallboard price was $473 per thousand square feet, flat with a year ago and down slightly from our fiscal second quarter.
Overall, wallboard pricing continues to be resilient despite year-over-year declines in single-family wallboard volumes for now five consecutive quarters with continued improvement anticipated in the single-family space and the developing renewal of price increase negotiations, we expect for wallboard pricing to improve at least slightly both sequentially and year over year.
For fiscal Q4 ceiling sales of $155.7 million in the quarter were up 6.1%, all from the benefit of increased volumes as any price benefits were offset by mix. Organic sales in ceilings grew 4.2% with a 4.3% increase in volumes, slightly offset by a 0.1% decrease from price and mix.
Third quarter steel framing sales of $203.4 million were down 13.3% versus the prior year quarter as deflationary pricing drove a 24.3% decline in price and mix, while volumes increased 11% organically, steel framing sales were down 14% with a 24.2% decline in price and mix, partially offset by a 10.2% increase in volume. While prices for steel framing products were down 21.9% year over year and 4% on a sequential basis. Multiple framing manufacturers have issued notices of upcoming price increases.
As a result, we expect for the year-over-year declines in pricing to continue to moderate as we finish out fiscal 2024 with some sequential improvement expected for our fourth quarter Complementary product sales of $378.6 million for the quarter grew 7.3% year over year in total and 1.8% on an organic basis, representing the 15th consecutive quarter of through-the-cycle growth for this category, expansion of complementary products, particularly for tools and fasteners.
In stucco, insulation continues to be a key element of our strategic priorities. We are sharing commercial and purchasing best practices across the organization to promote the advancement of these product lines, building on our desire to expand this margin-accretive category through both organic and inorganic means.
Now turning to Slide 7. Which highlights our profitability for the quarter. Gross profit of $414.7 million increased 3.1% compared to the prior year quarter, reflecting improved volumes and the associated attainment of calendar year end volume incentive targets, partially offset by deflationary dynamics in steel pricing. Gross margin of 33% was up 40 basis points as compared to 32.6% a year ago, despite the steel deflation incrementally benefited mostly from a realization of the purchasing incentives.
Selling, general and administrative expenses were $295.7 million for the quarter, an increase of $28.3 million over the prior year quarter. Nearly $10 million of that increase related to recent acquisitions and newly opened greenfield locations. The remaining organic increase was primarily driven by labor and other expenses, particularly those elevated by the higher cost to serve mix and high volume of commercial and multifamily end market demand.
SG&A as a percentage of net sales was 23.5%, an increase of 180 basis points from the third quarter of fiscal 2023, along with the items I just noted for SG&A expenses, reduced revenue from steel price deflation negatively impacted SG&A leverage by 100 basis points and the weather related revenue delays and associated operational inefficiencies had an estimated 30 basis points of additional unfavorable impact for adjusted SG&A expense as a percentage of net sales of 22.9% increased 150 basis points from 21.4% in the prior year quarter, following was 10.9% higher interest expense.
Net income decreased 19.9% to $51.9 million for the quarter or $1.28 per diluted share compared to net income of $64.8 million or $1.53 per diluted share a year ago. Adjusted EBITDA of $128 million decreased 9.1% or $12.8 million as compared with a year ago. And adjusted EBITDA margin decreased to 10.2% compared to last year's third quarter level of 11.4%.
Now shifting to our balance sheet, which as highlighted on Slide 8. At January 31st, we had cash on hand of $88.3 million and $866.3 million of available liquidity under our revolving credit facility. We have no near-term debt maturities and our net adjusted EBITDA debt leverage at the end of the quarter was 1.5 times improved from 1.6 times a year ago.
Given the approaching Camco transaction closure, we expect to end the fourth quarter with net debt leverage of approximately 1.8 times before moderating back to towards our current level over the next 12 months or so, just after the end of our third quarter, we opportunistically repriced our Term Loan B, so for plus to 25 successfully achieving a 75 basis point improvement, which represents a $3.7 million of annualized interest expense savings as compared to the prior terms or a $2.6 million annual benefit to net income.
Our loan agreement will expire in May of 2030, consistent with the prior term. For the quarter, cash provided by operating activities was $104.3 million compared to $134.1 million a year ago. Free cash flow was $94.1 million compared to $122.5 million for the same period last year. For the full year, we expect free cash flow generation of approximately 55% to 60% of adjusted EBITDA capital expenditures of $10.2 million for the quarter compared to $11.6 million a year ago.
We continue to expect that for the full year fiscal 2024 capital expenditures will be approximately $56 million to $58 million. We repurchased another 370,000 shares of stock during the quarter for $24.8 million and had $216.5 million of share purchase authorization remaining at January 31st.
We have a solid balance sheet with no near-term maturities and an attractive capital structure, providing an effective foundation for the execution of our strategic priorities. Of note from the strength of our business and the health of our balance sheet, GM.s was upgraded earlier this month by Moody's Investor Service to BA one, putting us now only one notch below investment grade.
Looking forward, we expect to maintain our balanced approach to capital allocation as we intend to continue to invest in the business, seek additional M&A opportunities and opportunistically leverage favorable market conditions to repurchase shares.
On a thank our team for their remarkable efforts to flex our operations as demand has shifted over time and for their commitment to drive improved profitability, all while maintaining exceptional levels of service.
Before turning the call over to Jay to provide a review of our outlook and fourth quarter projections. Let me highlight two housekeeping items. First, please note that there were 64 selling days during the fourth quarter of fiscal 2024 as compared with 63 in the prior year period.
And second, the projections that JT. will provide exclude any potential benefits from the Camco transaction. However, once the transaction closes. Likely in the next few days, we would expect Kimco to add approximately $20 million in net sales, approximately $2 million to $2.5 million of adjusted EBITDA for each full month as part of GMS during our fiscal fourth quarter.
With that, I'll now turn the call over to JT. He will start on slide 9.

John Turner

Thank you, Scott.
Looking forward, we are encouraged by what we believe lies ahead for GMS on our call. In December, we spoke about the likelihood of a potential air pocket in commercial activity starting sometime during calendar 2024, while still a likely eventuality at some point, it appears to be further down the road than we would have expected and likely less pronounced in both duration and severity strength in the US economy, the myriad large-scale infrastructure stimulus programs and the expectation of reduced interest rates and loosening lending's conditions in the back half of 2024 provide more optimism than previously anticipated, assuming that the still present risk of a broad contagion of commercial loan defaults is avoided.
And in the very near term, our backlog would indicate similar levels of commercial activity in Q4. As in our previous quarter, our commercial volumes remain solid, with particularly high demand for steel products. Also, February has proven to be a strong month, not only for commercial but across our other end markets, albeit in part due to the work that was weather delayed at the end of our third quarter, single-family demand is improving, and we expect it to show year-over-year improvement for the full calendar year of 2024.
For multifamily, despite a reduction in starts, its current backlog continues to drive construction activity, and we expect it to do so for at least the next couple of quarters. Given this backdrop and starting with wallboard volumes, we anticipate commercial to be up mid to high single digits for our fiscal fourth quarter.
On a per-day basis, multifamily wallboard volumes are expected to grow low single digits as compared with the prior year period. As we are progressively facing much tougher year-ago comparison in single-family wallboard volumes are expected to be up low single digits, which if realized will represent the first positive year-over-year comparison for single-family wallboard volume in a year and a half in total wallboard volumes are expected to be up low single digits per day as compared with the fourth quarter of last year.
Pricing for wallboard is expected to remain resilient with price increase negotiations currently underway. As such, for our fiscal fourth quarter, we expect wallboard prices to be up slightly in the low single digits, both sequentially and as compared to a year ago in ceilings.
Given our expectation of continued solid demand in our commercial end market, we expect low to mid-single digit per day increases year-over-year for volume and a mid-digit increase for price and mix for steel framing, as I stated earlier, demand is expected to remain solid with per day volumes up in the mid 10s for the fourth quarter. While our prices appear to have stabilized in steel framing for now, they still lag last year's level with a year-over-year decline in the low 10s expected on a per day basis.
Finally, net sales for our complementary products are expected to grow high single digits on a per day basis as compared with the fourth quarter a year ago, all in, as shown on slide 10, including the additional sales that were pushed into Q4 due to weather delays and factoring in an expectation for approximately $25 million of year-over-year deflation in steel pricing, we anticipate net sales per day to increase mid-single digits as compared with a year ago.
We also expect that the steel price deflation will negatively impact SG&A as a percentage of sales by an estimated 40 basis points for gross margin without the benefits we saw in Q3 when we achieved new volume tiers associated with yearend incentives. And as single-family begins to increase as a component of our mix, we expect our gross margin to be approximately 32.2% for the fourth quarter. Altogether, adjusted EBITDA is expected to be in the range of $145 million to $150 million for the fourth quarter.
Looking ahead to fiscal 2025. We believe that we will again see the dynamics of our end market shift with strength building for single-family, while construction will likely reach completion by calendar Q3.
On a substantial portion of what remains of the multifamily backlog. We are currently expecting commercial to continue with activity levels that are similar to what we just reported for at least the next couple of quarters. Given that with a balanced mix of end markets, our team is ready for these expected shifts and has been and has demonstrated our ability to flex as needed to best serve our customers.
Thank you for joining us today. Operator, we are ready to open the line for questions.

Question and Answer Session

Operator

(Operator Instructions) David Manthey with Baird.

David Manthey

Thank you. Good morning, everyone. I JT. I think you just said that wallboard you expected in the fourth quarter to be up low single digits year over year and quarter over quarter. I want to check if I have that. Right. And also I have for $81,000 in number last fourth quarter. Just wanted to check those facts. Is that correct? Are you talking volume and price or just price their de-stocking price we have from So sequentially, we expect it to improve year over year. We expect it to be up slightly.

Scott Deakin

I'm looking to see if that order number was right or anyone in just so, you know, we ended the third quarter at a roughly [$480] in February is tracking higher, closer to $4 million.

David Manthey

Okay. Yes, that was the just the question is the customer reaction to those February increases must be fairly good given that you're already seeing an effect here just four weeks, right?

John Turner

Yes. I mean, the customer reactions are never good price increases, but the reality is there are parts of the market where we are. We are able to get slightly better prices at the moment guided.

David Manthey

Okay. And then the second question, and although it's negative for revenues and operating margins, does lower steel pricing have a positive mix effect on your gross margin? If you just remind us in staggering terms where where the steel ranks relative to your other segments on your product segment?

John Turner

It's third, but its gross margins are pretty good. So complementary products, wallboard steel very close to wallboard actually at this at this point in gross margin percent. And then ceilings is the lowest of the gross margin percentages from.

David Manthey

Okay. So with steel being down in the mix that actually might be slightly gross margin accretive when you think about the effect of that?

John Turner

I mean, it's a dynamic slightly, right. I mean, it depends on the growth and the other categories. But yes, with all that volume growth, though, the sales dollars will still be pretty significant. So it's 10 basis points, maybe at the max right kind of deal, not a lot.

Operator

Noah Merkousko, Stephen Inc.

Noah Merkousko

Good morning, thanks for taking my questions. I know I am so first I wanted to touch on that. The wallboard price again, again, I'm really encouraging to see some some improvement here. Finally, seems to be corresponding with single-family. But I guess as we think longer term throughout calendar year 24, I think we should continue to see strong single-family volumes. Is that kind of low single digit growth, a good kind of ballpark to think about just in terms of holding onto that price and that you've got here in the fiscal 4Q as we look to maybe the next three quarters?

John Turner

I would say yes, and you're right, it's fully dependent on the strength in the single-family market.

Noah Merkousko

And just to follow up on that point, though, is that even consider some maybe mix impact as you see a negative mix impact as you see more single-family?

John Turner

That's right.

Noah Merkousko

All right, great. And then one last one for me. It sounds like your commentary around commercial has really improved. I'm just hoping to get a little bit more detail there on what specific kind of end markets within commercial you're seeing that strength in the leading indicators still kind of point a not so rosy picture as we look forward. So maybe kind of help us understand what's driving your slightly differentiated view here. I think that if you look at just purely the ABI.

John Turner

And you look at the impact of multifamily on the ABI, it's a huge drag so what you're seeing is you're seeing a much bigger headline decline and we've already kind of accounted for that and expected multi-family decline multifamily in our business, 15% to 17% so we've kind of accounted for that and expect that in the back half.
So it's not a huge drag for us as that headline ABI would indicate underneath that you're seeing a lot of strength in those categories I talked about earlier, you're seeing a lot of mega project activity, chip plants and car plants and all of the supporting infrastructure around all of that out there. You're seeing strength in medical. You're seeing strength in data centers, no slowing down in data centers, right, particularly with the AI revolution going on. So a lot of the categories that have been driving the strength today continue to drive the strength tomorrow. And I think the mega projects probably offset a lot of the smaller commercial that's having a really hard time being funded.
All that being said, the expectation is and you guys are probably watching the PC this morning because I don't have my phone with me at the moment, but that's probably out already. So I do think that the interest rate environment with the most of the expectations being a June start for the Fed funds rates come back down again, I think that that would create this loosening of this tight funding situation that small commercial and medium commercial is facing. And that's important to happen.
And I do think it's going to happen. But I think that's part of the the positivity that I'm conveying is that large commercial already funded already in the pipeline is going to continue and hopefully what we see as we see those interest rates moderate into the back half of this year.
And really more importantly, the lending environment improves or commercially active those things all come together and I believe we'll be finding. I think that like we said, it's probably going to decline or be an air pocket, but it will be later in the year and it will probably be not as severe as I would have possibly thought at the end of last end of last quarter.

Operator

Kurt Yinger, D.A. Davidson.

Kurt Yinger

Thank you, and good morning, everyone. If we look at, I guess the 80 basis point decline in gross margin that's expected in Q4. Is that primarily the purchase incentives falling off and maybe a little bit of single single-family mix dynamic there with wallboard. Are there any other kind of big factors within that expectation?

John Turner

No, it's basically then the expectation we had a pleasant surprise last year in the the in the achievement of some of these goals that that happened in the fourth quarter, we probably don't expect to see that again. So that's really one of the biggest reversals from quarter to quarter and year over year.

Kurt Yinger

Okay. Makes sense. And I'm Cameco's a bit of a bigger deal, talked about net leverage going up to just under 1.8 times. I guess as you think about deleveraging from that, does that impact the appetite for M&A over the next couple of quarters as you integrate and we are down that net leverage a bit? Or or do you still feel pretty comfortable with where that stands? And if the right opportunity comes up on there wouldn't be a very much hesitancy.

Scott Deakin

First, to clarify, I wouldn't say it's just under 1.0 and probably 1.8 is probably a better number. I don't want to oversell sort of what we'll be able to do there but it doesn't lower our appetite at all. As we said, we'll be able to get over the year's time based on combined cash flows of the business back to our current levels.
And on all of the strategic initiatives and deployment things that we're doing, it's still settled down. So we are really comfortable with our debt leverage. As we noted, we just got an upgrade from Moody's just banks based on the strength of our balance sheet. So we're and we're content with where it's positioned, and I think it gives us a lot of platform to continue to do what we're doing strategically.

Operator

Keith Hughes, Truist Securities.

Keith Hughes

Greg, you just become a question, but one quick one. The guidance for fiscal Q4, I assume that does not include Cameco network?

John Turner

Yes, that's correct.

Keith Hughes

And when do you have any day we expected to close within the coming days, I guess, shorten again.

John Turner

Yes.

Keith Hughes

And then on your commentary on on the new backup, the commentary and certainly than others, some mix of stuff going on here that's compressing the AUV. Is that something that's going to run long-term as it's happened in past quarters? And is there something specific going on there? Or is this something that should change for you in coming periods?

John Turner

It's just end market related, right. I mean, it just depends on the activity for that individual quarter we end up with more education or more of the low end than the mix is down. If we get more office or we get more medical, then the mix will increase I think we're talking about having a more normalized mix this coming quarter when we when we gave the guidance there, which is pricing up and volume up. So we're not expecting to see a continuation, let's say, of a decline in mix over the long haul. It's really just project dependent.

Keith Hughes

I've got the next question. We view the short-term view of commercial as you may have thought, well, just generally constructive view on commercial in general on, are you seeing enough office remodel activity that that could be a actual growth sector for you in the next year or so? Is it is it big enough for this whole move in office that's cheaper and price and all that stuff is going on? Is that big enough to offset whatever continued pressure bill and new office contract.

John Turner

It's not realizing itself in activity yet, but it's certainly a lot of chatter right out there. And I wouldn't say that we have in our forecast considered a huge rebound in 24 in office. I do think that in 25 or maybe even into late 24, there will be some resolution in some of these larger markets with some of this empty space as well as some of the lending situations around some of that those properties.
If those properties move and or change hands regardless of what the price is. Those new owners will do something with those buildings. And when that happens, that's good for us, but we're not we're not in my in my my optimism, I'm not considering that in the 2024 calendar year, if that would be positive upside, but they weren't us.

Operator

Steven Ramsey, Thompson Research Group.

Steven Ramsey

Hi, good morning. Wanted to get a little more color on the Camco deal. Good to hear that the margin profile is similar to yours. I'm curious, is there is there some margin enhancement opportunity there or if it's more volume growth or if it's shifting their mix to maybe look a little bit more like TMS with complementary products. Is there any way you want to elaborate on that? As all the above is?

John Turner

I would say that there's opportunity in all those areas. I think there's purchasing synergy here a little bit of G&A, not a lot of G&A opportunity because of the unique geography here. We don't have much overlap at all right, but we don't have any overlap at all in our businesses today.
So from that perspective, the G&A savings comes in things like insurance and smaller areas. But we also have the ability, we believe to enhance the mix, but also drive some more volume in wallboard, which we called that out. Specifically, we think we might be able to help on the wallboard side.

Scott Deakin

So just said to Stephen, we've got the overhead of the Bronx location in those margins as well. So that's an exciting new opportunity to serve that barrel of the city. And as those revenues grow, we'll get a lot of air cover for revenues over those overhead costs that will help on the overall profitability of the business. As well.

John Turner

Yes, I would call out anybody on the call listening from Cameco's well visits. We've had up there that is an exceptional Greenfield facility. One of the best I've ever seen being open in a very, very short period of time.

Steven Ramsey

Okay, great. And then zooming out on slide 8, you see the three year cash usage of over 50% to acquisition, 18% repurchases, 15% to CapEx. I'm curious if you foresee over the next three years that the capital usage could be something similar to that or if you think of that mix morphs a bit over time?

John Turner

Well, I would guess it's probably I mean, if it's going to change is going to lean more towards M&A than anything else. And we've got a strong backlog. We've got a good M&A engine. It's a core competency for us. And I think with rates moderating and coming down, I'd expect to see the M&A market also accelerate a little bit. So probably more towards M&A wouldn't be a significant shift, maybe 5 to 10 points of percentage. But directionally, that's it's spot on.

Operator

Mike Dahl, RBC Capital Markets.

Mike Dahl

Thanks for taking my questions. Tom, I also wanted to ask about Cameco and my line just cut out for a minute. So apologies if I can just ask this, but I'm thinking just in terms of their current mix of business, can you help us understand what the current mixes from a product category and market standpoint.
And then on the recent trends, the 23 revenues are slightly down versus the prior kind of trailing 12 month numbers you had provided. And so a little more color on their organic trends and currently and what you would expect organically for them in the upcoming quarters, they are more weighted towards.

John Turner

And again, we haven't closed so thinking and I don't have all the details that are in front of me, but they are more heavily weighted towards ceilings there and they are an excellent ceilings distributor, probably the best from an independent perspective out there in an exceptionally strong market for ceilings.
So they're a little more weighted toward ceilings the balance there and a little underweighted and complementary versus versus US and underweighted in wallboard versus US. And while we'll close in the next couple of days and get a lot more information on their sales. It would be a guess to tell you, but I believe it's the same steel conditions that we're facing primarily.

Mike Dahl

That makes sense. And then looking at the numbers. So again, this is kind of back of the envelope, but it seems like you're suggesting their legacy EBITDA might have been around kind of mid $20 million and if I look at your post synergy multiple, it suggests you expect to get that up to around $40 million, and that's not insignificant in terms of the magnitude of synergies when you when you don't have current geographic overlap. So I know you articulated where they're coming from at a high level.
Can you give us a little more color on the relative contribution of cost synergies, it sales synergies. And then if the greenfield location is included in that number and should we expect the greenfield to be about that as it ramps to be about the same size as their legacy branches?

Scott Deakin

Yes, yes. Is the answer to the last question. It's a very large facility. Actually, it's an outstanding facility, a beautiful building well, stocked, great operational capability. And yes, we've given them credit for that. And the growth expectation there is included in our synergy number. And so a lot of effort you can imagine trying to get a facility up and running in the Bronx, the years of effort that it takes through permitting and investments, et cetera.
So we feel really fortunate about that opportunity so wallboard opportunity is another significant synergy, both on the selling side, but also on the cost side there as well as several other product cost opportunities. So if you were to look at purchasing synergy in the Bronx. That's the large majority of the synergy that we've got in there as well as a little bit overall growth in the market and the least contributive is the G&A piece, which again, is things more like benefits and scale advantages we have in leases and interest expenses and things like that.
It's aligned to the third because of, say, an asset transaction, we also get a significant tax amortization benefit from us, which is essentially locked in for the next 15 years. And so you think about that as more almost a reduction in price versus an EBITDA enhancement.

Mike Dahl

Okay. That all makes sense. And if I could just sneak one last one. In terms of timing, obviously to your point, the tax savings is an ongoing one, but timing of realization for the other synergies, how should we think about that ramp?
Will I mean purchasing synergies are fairly quick frame they'll happen, you know, in the very near term over the course of the next quarter, plus we'll be doing that. And growth in the bronze is growth in the Bronx startup operation. So that's that's kind of at the tail end of the 24 to 36 months we talked about.

Scott Deakin

So you have the tax benefit on a kind of immediate basis, you've got purchasing synergies more on immediate basis, small G&A savings on an immediate basis. And then the ramp up in the Bronx is the one that's going to take the longer period of time. And those cross-selling ramp-up of wallboard and complementary will take a little bit of time to get that foothold in place as well.

Operator

Zack Pacheco, Loop Capital.

Zack Pacheco

I was wondering what are your current expectations on how long the multi-family backlog will last before any slowdown in multi-family begins to show up in our wallboard demand by calendar third quarter.

John Turner

I'd expect to see things starting to soften.

Zack Pacheco

Okay. Understood. And then I know you said closing in a couple of days here, but just wanted to ask on the M&A pipeline, if you could provide any more color on maybe improvement in seller expectations or kind of just your guys' sentiment are moving forward? Thanks.

John Turner

I mean, you know, sellers' expectations vary depending on the market and the strategic nature of it to us, et cetera. But our pipeline is solid with our normal kind of range of multiples. You know, this one is unique because of that branch, the branch location really strong in Canada, where we're spending a lot of time and energy up there, really building our leadership position, but also very strong here in the in the in the US as well. So we have no shortage of opportunity when it comes to that.

Operator

Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.