GMS Inc. (NYSE: GMS), a leading specialty building products distributor, reported a 12.07% year-over-year decline in its fiscal third-quarter 2025 profits on Thursday, as the company grappled with softening demand across its end markets and unfavorable steel pricing dynamics.

The Tucker, Georgia-based company posted adjusted net income of $36.2 million, or $0.92 per diluted share, for the quarter ended January 31, 2025. This marked a significant decrease from the adjusted net income of $68.8 million, or $1.70 per diluted share, in the same period last year. Adjusted EBITDA fell 27.3% to $93 million, with the margin contracting by 280 basis points to 7.4%.

Revenue for the quarter remained flat at $1.26 billion, missing analysts' consensus estimate of $1.29 billion. The company attributed the sluggish top-line performance to demand contraction across multi-family, commercial, and single-family markets amid broader economic uncertainty and unfavorable winter weather conditions.

"Our results in the quarter reflect the impact of soft end market demand and steel pricing, both of which deteriorated meaningfully during the last half of the quarter, ultimately driving both lower than expected sales and gross margin compression," said John C. Turner, Jr., President and CEO of GMS.

GMS also recorded a $42.5 million non-cash impairment charge to write off goodwill related to its Ames business, primarily due to lower expected future cash flows and a higher discount rate stemming from challenging market conditions.

Despite the headwinds, GMS generated solid operating cash flow of $94.1 million and free cash flow of $83.1 million during the quarter. The company also announced additional annualized cost reductions of $20 million to align its operations with the lower expected volumes in its end markets.