Greetings, and welcome to the GMS Fiscal First Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Rodney Noseia [ph], Investor Relations. Thank you, Mr. Noseia [ph], you may begin.

Good morning, and thank you for joining us today for GMS' earnings conference call for the first quarter ended July 31, 2016. I'm joined by Mike Callahan, President and CEO; and Doug Goforth, CFO. In addition to the Q1 press release issued this morning, we have posted presentation slides to accompany this call in the Investors Section of our website at www.gms.com. Turning to Slide 2. On today's call, management's prepared remarks and answers to your questions may contain certain 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 that may cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to net sales, gross profit and capital expenditures as well as non-GAAP financial measures such as adjusted EBITDA, adjusted net income and base business sales. In addition, statements regarding potential acquisitions and future greenfield locations are forward-looking statements as well as statements regarding the markets in which the company operates and the potential growth in commercial, residential and repair and remodeling, or R&R, markets. As a reminder, forward-looking statements represent management's current estimates. The company assumes no obligation to update any forward-looking statement 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 definitions and reconciliations of non-GAAP measures. Note that references to this call to fiscal 2017 relate to the year ended April 30, 2017, and references to the first quarter, or Q1, relate to the quarter ended July 31, 2016. With that, I'll turn the call over to Mike. G. Callahan: Thank you for joining us today. I will begin with a quick overview of our company, highlights from the first quarter and an update on our recent acquisitions. Doug will then provide details on our growth strategy, our financial results and capital resources. After our prepared remarks, we will open up the call for your questions. If you would turn to Slide 3. We had a very strong quarter to start the current fiscal year. We produced our 20th straight quarter of double-digit growth in net sales, with strong results across all of our product categories during our first quarter. We accomplished this while also completing our IPO in June, which builds on more than 45 years of successfully growing our company into the largest North American specialty distributor of wallboard, ceilings and complementary interior construction products. Looking at our company overall, we expect this success to continue based on our multifaceted growth strategy and the positive momentum we are experiencing in our business. As the largest player in our industry, we serve as a critical link between our suppliers and a highly fragmented customer base. Our national footprint and local market expertise make us a preferred distributor to this extensive customer base. And furthermore, we serve our growing customer base with an extensive product offering featuring over 20,000 SKUs that allows us to serve as a one-stop shop for customers, which means that we're able to supply nearly everything that our typical specialty contractor customer needs on a job site. This produces a significant pull-through factor across each of our product categories, which Doug will elaborate on shortly. Our national scale combined with our wide product offering provides us with a balanced mix of business across all of our end markets, which were approximately 60% commercial and 40% residential. This has given us a more resilient demand profile across multiple points in the cycle. With the continued dedication of our talented and highly motivated team, we believe that we are firmly positioned to continue to expand our footprint and be among the best specialty distributors in the business. Now moving on to our first quarter highlights on Slide #4. Our first quarter results continued to outpace the market with net sales up 21.5% over the same quarter last fiscal year to nearly $550 million. While acquisitions certainly augmented our growth strategy, our base business net sales in Q1 were up 9.2% compared to the first quarter of fiscal 2016, despite having 1 fewer shipping day during the quarter, representing continued strong organic growth as well. Our net income tripled to $9.2 million during the first quarter over the same quarter last fiscal year as our margins continue to expand. Gross margin rose 140 basis points to 32.5%, helping to drive Q1 adjusted EBITDA to $45.9 million, up 34.7% compared to the first quarter of fiscal 2016. Acquisitions accounted for 59% of Q1 net sales growth, mainly reflecting deals completed over the past 2 years. We expect acquisitions to continue to drive a considerable amount of our growth, building on robust deal activity since the start of fiscal 2017. So far, we have completed 4 acquisitions in fiscal '17, which have added 8 locations to our footprint, and I will expand on these recent deals in just a moment. Finally, I'd like to highlight the fact that following our recent IPO that we completed in June of '16, we benefit from a very attractive capital structure and we're very pleased to have our corporate debt recently upgraded by both Moody's and S&P. Turning to our acquisitions on Slide #5. We believe that we are the acquirer of choice in a highly fragmented market, given our employee-centric culture and our strong reputation in the industry. We have a finely tuned strategy to source, purchase and onboard tuck-in deals in order to quickly realize the benefits of our national scale. We have a dedicated M&A team, tasked with ensuring that each acquisition brings the right cultural fit and is completed within our target range of purchase price multiples. When sourcing acquisitions, we believe that the large highly fragmented industry works to our advantage as we seek to acquire leading local distributors as footholds in targeted new markets to deepen our presence in existing markets or to expand our service capabilities through strategic bolt-on acquisitions. To date, in fiscal 2017, we have completed 4 acquisitions of distributors representing combined trailing 12-month net sales of almost $135 million. For context, during the first 4 months of fiscal 2017, we have completed transactions representing nearly 2/3 of the acquired revenue during all of fiscal 2016. While several of these acquisitions were quite significant and materially increased revenue on a comparable basis, we would envision maintaining our historical pace of 6 to 8 acquisitions going forward. These transactions include deals in both new and existing markets, further augmenting our balanced mix of business across our end markets, which exemplifies our acquisition framework and our deal track record. During the first quarter, we purchased Wall & Ceiling Supply and RockWise, each located in the Western U.S., with strong reputations for quality service, resulting from a deep-rooted, customer-driven approach, making them an excellent fit for the GMS family. More recently, in August, we acquired Steven F. Kempf Building Material Company, a leading supplier to professional contractors in the greater Philadelphia metro area with a very similar product offering as GMS. Steven Kempf was a very unique addition, operating out of one branch, which is roughly 3x the size of our average distribution yard in terms of square feet and revenue. The entire Steven Kempf Building Materials team joined GMS. And together, we expect to continue to grow our presence in the Philly and the Mid-Atlantic region. And earlier this month, we made a very strategic entry into the South Florida market with the addition of Olympia Building Supplies, a leading regional supplier of wallboard and related construction products. Olympia scaled up its loyal customer base rapidly during the past decade, and its seasoned operating team was prepared to partner with GMS for the next step of their evolution. This deal serves as a very natural extension of our existing strongholds in Central and Northern Florida to now give us coverage of the entire state, which we believe includes some of the most attractive markets in the nation. And frankly, beyond these transactions, our targets remain the smaller competitors, which represent the majority of the $11 billion market that we serve. We have the capital resources to access this robust pipeline that will continue to supplement our strong organic growth. So in summary, we believe our solid financial results and recent acquisitions reflect GMS' very unique culture, our strategy and the favorable operating environment in our industry. We are confident that we will continue to be successful in years ahead given our growing scale, our expanding capabilities and promising opportunities ahead. Now I'll turn the call over to Doug to further discuss our growth strategy, our first quarter financial results and our capital resources. Doug?

Thanks, Mike, and good morning, everyone. Beginning with our top line performance on Slide 6. Our strong track record of executing profitable growth continued in the first quarter. We increased net sales 21.5% year-over-year to $549.8 million, reflecting our multifaceted approach to outpacing the market growth rate. We expanded our market share organically in the first quarter through our service capabilities, product offering, commitment to safety and entrepreneurial culture. Additionally, our low-risk approach to opening new branch locations in familiar markets or markets adjacent to our existing operations also contributed to our progress. These combined factors helped drive our first quarter base business sales up 9.2% year-over-year, despite 1 fewer shipping day. Acquisitions, as Mike has outlined, remained core to our strategy and continued to drive further top and bottom line improvement as we source, purchase and integrate deals. Our diverse end-market exposure continues to provide us with a wider access to project activity to help us balance our long-term upside. In the first quarter, residential demand continued to outpace commercial activity in many markets, which particularly benefited our wallboard and other products categories. Still on Slide 6, we provide a detailed breakdown of our base business and total sales growth by product, which shows positive performance across our entire product offering for the first quarter. Our wallboard volumes increased a robust 20% in the first quarter compared to the first quarter of fiscal 2016, including 8.8% base business improvement. This drove wallboard revenues up 19.1% year-over-year. We had modest improvement in wallboard price compared to fourth quarter of last fiscal year, which was in line with expectations following 3 quarters of essentially stable price. Price was softer compared to prior year quarterly, partly tied to lower prices in the second half of calendar 2015 before modest increases taking effect this past spring. We expect a stable price environment through the end of calendar 2016 and remain optimistic for additional price gains in calendar 2017. Our ceilings sales increased by $7.4 million or 9.3% year-over-year, including 3.4% on a base business basis. And steel framing increased $17 million or 25.3% year-over-year, including 6% on a base business basis. Ceilings and steel framing sales are primarily driven by commercial construction activity, both of these product categories benefited from improved year-over-year prices. Our product net sales, which -- other product net sales, which include joint compound, tools and fasteners, insulation and various other construction products, showed strong growth in the first quarter, improving 34.2% year-over-year or 22.9% on a base business basis. I'll expand on this impressive growth on the next slide. Overall, we are pleased with our results across each product category, which is driving margin expansion in our business. On Slide 7, we provide some context on the importance of our one-stop shop strategy. GMS is one of the few national specialty distributors offering a complete package of complementary product offerings to interior contractors. As such, we provide a one-stop-shop solution for customers, which means we are able to supply nearly everything that our typical specialty contractor customer needs on the job site. Our sales of ceilings, wallboard and steel framing created significant pull-through force for each other and many of our other complementary products. This favorable dynamic combined with certain pricing improvements, retail showrooms, acquisitions and other initiatives such as expanding our residential insulation sales drove our product net sales up 34.2% in the first quarter of fiscal 2017 versus the year ago period. Looking at our margin expansion on Slide 8. Our investments in the Yard Support Center, technology and branch talent to support expanded activity is favorably impacting margins. Gross margins expanded 140 basis points to 32.5%. This improvement was primarily driven by ongoing price optimization efforts and streamlined purchasing initiatives to fully leverage our national purchasing power. All product categories had more favorable margins, and we also benefited somewhat from favorable product mix. Higher gross profit dollars more than offset operating expenses at the branch level to grow adjusted EBITDA by 34.7% to $45.9 million, benefiting from improved gross margins on stronger sales. Our adjusted EBITDA margin of 8.4% was up approximately 80 basis points from the year -- prior period and up slightly from 8.3% in the fourth quarter of fiscal 2016. We expect to grow our business based on our investments and leverage our SG&A over time to drive additional EBITDA gains. I'll note, our adjusted EBITDA in the first quarter and moving forward no longer includes the pro forma contributions from acquisitions for the period prior to the date of acquisition. First quarter adjusted EBITDA margin of 8.4% is based on $45.9 million of adjusted EBITDA, which purely reflects base business plus earnings from acquired entities beginning from the date of acquisitions. However, we will continue to share our LTM adjusted EBITDA on a pro forma basis for a better view of our run rate adjusted EBITDA. Turning now to our capital structure on Slide 9. Our leverage at July 31 stood at 3.4x following the use of IPO proceeds along with cash on hand to fully pay off our former $160 million second lien term loan, which eliminated approximately $12.4 million of annual interest expense. The 3.4x represents a significant improvement from 6x leverage ratio as of April 2014. Liquidity remains strong, with $9.8 million of cash on hand and $132 million available on our credit facility as of July 31. As mentioned previously, both Moody's and S&P recently upgraded our corporate debt based on their view of growing U.S. construction activity and our improved credit metrics. We remain committed to improving and preserving our financial flexibility. Operating cash flow is seasonal, with the first quarter typically having the highest cash outflow followed by stronger cash generation during the balance of the year. We had an operating cash outflow of $30.6 million in the first quarter compared to $18.4 million in the prior year quarter, with roughly $34.8 million of additional working capital to support growth in sales. First quarter CapEx remained below 1% of sales, and we continue to expect to range from $8 million to $10 million going forward, consistent with approximately $8 million of CapEx in fiscal 2016. In summary, we're excited by our strong momentum to start the year and well positioned to continue to delivering on our growth objectives, integrating successful acquisitions and leveraging our platform to drive expanded margins and returns. And now I'll turn the call back over to Mike for his closing remarks before we take questions. G. Callahan: Thanks, Doug. Again, thank you all for joining us today. We're in the early stages of our life as a public company, but we have a very long history as a private company, and we believe that we have the right strategy, products and industry position all held together by a very talented team that has helped us get to where we are today. Our organic growth rates continue to exceed the market pace, and we're confident in our ability to continue that trend. Looking to the remainder of fiscal 2017, we expect our effective operating strategy and our expanding footprint, combined with the better macro fundamentals, should continue to drive significant improvement in sales. We plan to accomplish this while further expanding our margins to grow adjusted EBITDA. We are pleased with our progress and the dedication of the entire GMS family, which is driving this continued success. We sincerely appreciate your interest in our company and being with us today. Thank you very much. Operator, we are now ready to open the call up for questions.

[Operator Instructions] Our first question comes from the line of Bob Wetenhall with RBC Capital Markets.

I was hoping you could explain -- I'm a little confused, and just be gentle with me, it seems like you kind of had a weather headwind and you also had 1 less day this quarter and you still put up really good sales numbers, which would suggest that, on an organic basis, you have a lot of momentum. And I was hoping you could step me through how that's unfolding. And also, what's going on quarter-to-date since the end of the quarter? Has that momentum continued? I might be off thinking there's momentum, but given the lack of 1 less day and the weather headwind, it really suggests that organic demand is pretty robust.

Bob, this is Doug. Absolutely. I mean, just in association numbers, which came out for the second quarter, which is something we kind of compare ourselves to, we were about 600 basis points higher than their numbers. So roughly 2x the growth that they showed for the second quarter. So while -- we don't -- I mean, certainly, there was some weather, particularly in Texas, but that comes every year. I mean, it's kind of been a little unusual in Texas for the last couple of years, but it's really going to have to be really, I think, severe, particularly winter weather up in the Northeast for us to really kind of talk about that on any quarters moving forward. So we feel good about our momentum. We did have 1 less shipping day. So we actually had 1 less day not only of sales, but actually to cover our fixed cost as well. So that's somewhat impactful on the SG&A side as well, but we feel good about that momentum. We're looking forward to reporting our second quarter numbers when we release that for the earnings. So it's -- volume is robust. The manufacturers are out there with expectations talking about volumes of 8%, which we believe are quite reasonable, and we expect to continue to grow faster than that on the wallboard side.

So that's very encouraging. Could you touch on what's going on in price-volume activity in ceilings? G. Callahan: Well, as we've talked about in the past, I mean, the volume obviously in terms of ceilings has been relatively flat, but we continue to get price appreciation, as we've talked about before. I mean, there was a price increase announced in August, and that's rolled out. And we, frankly, would anticipate another price increase in calendar '17. But the volumes are up, but obviously they don't grow anywhere near as quickly as the wallboard bodies. But fundamentally, we would anticipate continuing improvement in that arena, predominately with price.

That's encouraging. And if I could just sneak one in before I hand it over. I've noticed a pretty notable step-up in deal size in your M&A activity. And I was trying to understand, do you expect the M&A targets you're looking at to continue increasing in size that's having a notable in effect -- notable effect on your top line? Is this something that you're going to continue to pursue larger acquisitions? And maybe, Doug, if you could just talk for a second, too, about what's going on with -- if you're growing your M&A program, how are you managing your debt and capital structure? I noted there were some rating actions recently pertaining to your credit rating. So kind of a two-part question. G. Callahan: Yes, thanks, Bob. I'll address the acquisition size. The 2 recent deals, Steven Kempf and Olympia, definitely in terms of the average transaction size in the past were significantly larger. I can't really say that our strategy is to gravitate towards larger deals. We were just very fortunate to be able to have the opportunities to partner with these 2 companies and the market fit. And frankly, the cultural chemistry fit was just ideal. But we're still going to run anywhere from 6 to 8 transactions a year. Some are going to be larger than others, some are going to be kind of smaller tuck-in or bolt-ons, but we haven't really adjusted our strategy as to targeting larger deals. I mean, the main thing's to find gaps in our market offering and our footprint and what companies that are out there that are leading distributors that would consider partnering with GMS. So we were just very fortunate in these 2 instances, but frankly with all the acquisitions to have these folks come into the fold. But there's no real shift in strategy there.

Yes, I would actually add to that, the 2 most recent ones, Kempf and Olympia, were actually our fourth and fifth largest acquisitions that we've done. So it's not necessarily recent, it's just kind of a timing of them. G. Callahan: Yes, I'll agree.

In terms of our capital structure, obviously, that's something that we're looking at all the time and developing strategy on and discussing it closely with our board. The debt markets, particularly the term loan markets, are pretty robust right now. So we believe there's an opportunity for us to go out there and raise some additional term loan debt near term. And so we're looking at that. And we would -- what we would expect to do is take those proceeds and use 100% of the net proceeds to pay down our ABL borrowings to give us some more dry powder to continue to go with the acquisitions using operating cash and ABL.

Our next question comes from the line of Keith Hughes with SunTrust Robinson Humphrey.

I guess, first, to follow-up on Bob's question. You're talking specifically on the commercial markets to your customer base. As I look at their project pipeline going out 6, 9 months, I only got a little bit of a look, are they seeing accelerating, decelerating type of booking, quoting activity? With -- any sort of feel there would be great. G. Callahan: Okay. Well, essentially, Keith, we just had a call yesterday with our VPs and kind of a divisional -- kind of a division-by-division breakdown. And I would say, generally speaking, the backlog in quote activity is still pretty robust. I mean, we've got a couple of pockets here and there that may be -- we made to see some business coming off the table. I would say there are a little bit of softness in spots in Texas, for example. But generally speaking, as I look at our backlog, the quote activity and kind of the outlook going into '17, we're still very optimistic and have got a lot of quotes that are out there. And frankly, we're quoting escalators on those quotes, too. So that's kind of my answer to that. We'd -- I think generally speaking to this, if you look at the markets, I would say the Pacific Northwest is still very strong. The Southeastern market has got a lot of activity across the board. And then the Mid-Atlantic area still is very robust as well. So yes, I think activity levels in our outlook is still very upbeat.

Okay, that's very helpful. And then GMS on the SG&A question. As you know, the SG&A results, you had some elevated spending there. We saw that in the fourth quarter as well. Can you just remind everyone on the call what's your spending on? And as you exert anniversary-ing the higher spend, will that come down to under revenue growth at some point in the future?

This is Doug, Keith. Definitely, we expect that to come down longer term. What we've been investing in, and we talked about it on the fourth quarter as well and we've also seen some headwinds is, first of all, starting with logistics labor, particularly our delivery crews with CDL drivers, there's been some definite inflation there. We have to hire and fight to retain the best people in that market. So there's a lot of people trying to poach from different companies, so we have to address that. We've also had -- because of the shortage of -- ongoing shortage of drivers, there's a lot of overtime involved to meet demand as well. So that's also driving higher labor costs within the logistics area. We've also been investing in our fleet, although this is a lesser headwind than the labor is. But we're -- we've been upgrading our fleet through operating leases of the ABLs on that, and that's something that we're pretty much getting to an inflection point where we're in a steady state. We've been doing that over the last couple of years. So it's been rising over the last couple of years, and we think we're almost at a stable state on that. So I would expect over -- within 12 months, you're going to start to see us generating some meaningful leverage on the operating side.

Okay, final question. On the 3 acquisitions that were done post close in the quarter, can you give us any idea of what the price paid for those were?

For the...

For the acquisitions. This is the last 3.

Right. The last 3?

The ones that I've posted.

Yes, the -- I mean what we've -- so we provided the last 2 acquisitions. I think we've disclosed that. I think we get all 4 of them disclosed in the actual earnings release there, Keith. Just let me check it real fast. So we had for -- about $26 million for RockWise and Wall & Ceiling and about $76 million for Kempf and Olympia.

[Operator Instructions] Our next question comes from the line of David Manthey with Robert W. Baird.

First, do you expect any change in your relationship with USG following the sale of L&W? And if you could just talk about how you see channel dynamics playing out over the next several years here, including any implication for the pricing environment. G. Callahan: Well, I mean, as Jim Metcalf alluded to on their call, there obviously was a little channel conflict. And I think the way I'd look at it is it’s kind of a win-win for us and for USG, candidly. I mean, our hope is that we would continue to expand our business base. I mean, USG has always been a very valuable partner of GMS even with L&W. And going forward, we would expect that relationship to continue to grow. In fact, we've had a number of opportunities recently that we're talking about potential expansion. So we're -- the future is bright relative to USG as far as the dynamics in the marketplace with the acquisition of L&W by ABC, I mean, ABC is a fabulous company, and we would anticipate, just like they've grown, to run a very, very good business there. They will continue to run L&W the way they've always run their business, which is very prudently and very successfully. So what the impact on the market and pricing and the like, I mean, I can't really speak to that. I can tell you what our strategy and our approach is going to be, which is try to enhance and improve price where we can. But I actually think we're sitting in a pretty good position, frankly, with the recent changes.

Okay. And second, could you discuss where you think the mix of other products could ultimately go? For example, if you look at the typical job, I know there's no typical job, but if you looked on average, what percentage of other products would be included in an average job? And then if you could talk about what percentage of your locations currently carry a full complement of products and maybe for how long they have carried those. G. Callahan: Well, I would say the other product revenue, I mean, if you look at our product mix, and we talk a lot about the fact that it's a balanced product mix, the other product revenues really kind of go almost in lockstep with wallboard sales and other products. So I mean, I think that relationship and what you're looking at in terms of net area, the business will continue to grow as we expand our wallboard sales and related products. It's in our -- and as far as our existing operations, the bulk of our yards carry the full complement of products. Now what you may have at a given market is perhaps a concentration center, so to speak, where some of those products are redistributed out of a primary hub to maybe some of the satellite operations so that they can carry less every full line perhaps. So you kind of concentrate that inventory to the main base. And probably a good example of that would be EIFS, the Exterior Finishing Systems. But fundamentally, I mean all of our operations. So you can have regional differences, little nuances perhaps in a -- maybe a Western market might have a different mix perhaps than one in the East. But fundamentally, our yards are all focused on selling the full complement of the product offering.

We did have some tailwinds, particularly in other product sales. So as we mentioned in the prepared remarks, we had significant base business growth there, and that was a result of some initiatives that have been going on at a number of our subsidiaries. But over time, I would expect that, again, as Mike mentioned, to track closer to wallboard revenue growth as opposed to continuing that same type of pace.

There are no further questions at this time. I'd like to turn the call back over to Mr. Mike Callahan for closing comments. G. Callahan: Well, I just want to thank everybody for participating on the call today, and we look forward to talking to you again next quarter. Thanks very much.

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

Thank you.