Good day and welcome to the GMS Inc. Fiscal Third Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Lynn Ross, Chief Accounting Officer and Corporate Controller. Please go ahead.

Good morning and thank you for joining us this morning for GMS' earnings conference call for the third quarter of fiscal 2018. I'm joined today by Mike Callahan, President and CEO; and Doug Goforth, CFO. In addition to the press release issued this morning, we have posted presentation slides to accompany this call in the Investors section of our web site at www.gms.com. Turning to 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. Examples of forward-looking statements include those related to net sales, gross profit, gross margins, capital expenditures and market share growth, as well as non-GAAP financial measures such as adjusted EBITDA, the ratio of debt to adjusted EBITDA, adjusted net income and base business sales, including any management expectations or outlook for fiscal 2018 and beyond. In addition, statements regarding potential acquisitions and future greenfield locations and statements regarding the expected impact of the recent tax legislation and anticipated adoption of the new lease accounting standards are forward-looking statements, as are statements regarding the markets in which the company operate and the potential for growth in the commercial, residential, repair and remodeling or R&R markets. 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 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 and the definitions and reconciliations of non-GAAP measures. Note that the references on this call to third quarter and fiscal 2018 relate to the quarter ended January 31, 2018 and the fiscal year ended April 30, 2018, respectively. With that, I will turn the call over to Mike Callahan. Mike?

Good morning and thank you for joining us today. We will begin today's call with a review of our operating highlights, and then Doug will cover our third quarter financial results in more detail. We will then open the line for your questions. We had a record third quarter revenue and adjusted EBITDA performance, topping a very tough year-over-year comparison as we discussed last quarter. These results are even more impressive, considering several unique challenges that we faced during the quarter, which is seasonally our slowest quarter, including inclement weather and particularly, in the southern U.S. Importantly, I am pleased to report we captured approximately three points of growth in wallboard price during this third quarter. Now while prices continue to trend higher so far, it's still early, and we don't have a complete picture on price realization and won't until late spring or early summer. Gross profit during the third quarter increased mid-single digits and set another record. As we have talked about previously, we expect that our gross margins would expand in the back half of the year, and I am pleased to report that during the third quarter, our performance met our expectations. Gross margin expanded 40 basis points to 33.4% this quarter from the prior year quarter and 60 basis points sequentially from the second quarter, which keeps us on track to achieve our previously announced guidance of gross margin in excess of 32.5% for the fiscal year 2018. Let's now turn to slide number 3; as we have discussed on prior calls, GMS has been able to establish itself as the largest distributor of wallboard and suspended ceiling systems in the U.S., as we continue to profitably expand our geographic presence. As of this report, our share in wallboard and ceilings is approximately 14.4% and 17.9% respectively. Within wallboard specifically, we had profitably grown our share by 580 basis points since 2010. However, during the quarter, we experienced a slight decline in our wallboard market share from 14.5% to 14.4%, due to aggressive competitive behavior and weather related dynamics in certain of our key markets. But what I can tell you, is that GMS will continue to focus on profitably growing our market share and expanding our margins, both organically and through acquisitions. Now moving on to slide number 4, we are confident that we continue to drive profitable growth across our product categories, by leveraging the scale advantages that come with our growing footprint, by harnessing our talented and dedicated personnel to continue delivering superior execution through our differentiated service model, and by capitalizing on large diverse end markets, through our multi-pronged expansion strategy. So on slide number 5, let's look at an overview of our performance for the quarter. Third quarter net sales increased 4.1% year-over-year to $585.5 million. As I mentioned above, the impact of weather, coupled with a tough year-over-year comparison, resulted in a 1.9% decline in wallboard volume. However, our ability to realize nearly three points of growth from price in wallboard, coupled with a contribution of prior acquisitions, resulted in a modest increase in wallboard net sales versus the same period a year ago. Ceiling net sales rose 10.5% and other product net sales climbed 7.4%, while steel framing net sales increased 3.5% versus the same period a year ago. Moving down the income statement, we were able to expand our gross margin by 40 basis points to 33.4%. This reflects solid volumes and the continued success of our purchasing initiatives undertaken during Q1. And as I mentioned earlier, we are beginning to experience some inflation, which increased our adjusted SG&A expense as a percentage of net sales by 40 basis points during the third quarter. And lastly, adjusted EBITDA increased 3.8% to a record $42.4 million during the quarter, driven by higher net sales and improving gross margins. Our net income was 139% to $19.7 million with earnings per share of $0.47. Now turning to our acquisitions; although our acquisition activity has been relatively quiet over the past few quarters, they absolutely remain core to our story. Last quarter, we discussed southwest building materials, which closed on December the 4th, and we anticipate the announcement of additional bolt-on acquisitions over the next few quarters. Our acquisition pipeline remains robust, and includes many of the hundreds of fragmented local competitors, still representing more than half of the overall market. Many of these smaller peers fit the GMS culture and would greatly benefit from our platform, as we look to expand our penetration into existing markets or enter into new ones. We have the capital resources to continue executing on our acquisition pipeline, while maintaining prudent leverage ratios, and as such, we expect accretive acquisitions to continue to complement our organic growth moving forward. And with that, I will turn the call over to Doug, to further discuss our financial results and capital resources.

Thanks Mike. Good morning everyone. Beginning with the financial results on slide 7, we delivered strong sales and adjusted EBITDA in the third quarter, despite challenges in January associated with adverse weather conditions, particularly in Southern U.S. As Mike mentioned, we also faced very difficult year-over-year comparisons to our record third quarter 2017 results, which had organic sales growth of 15.5% with double digit growth across all categories. Starting on the top line, we grew net sales 4.1% to $585.5 million with increases in each product category compared to the third quarter of fiscal 2017. We increased base business sales during the quarter by 2.9% year-over-year. Wallboard net sales increased slightly to $256.4 million in the third quarter, compared to the same period last fiscal year. Wallboard volume decreased by 1.9%, primarily due to adverse weather conditions and aggressive competitive behavior. Wallboard price was up 2.9% year-over-year and up slightly on a sequential basis. Our ceiling sales increased during the quarter by 10.5% year-over-year to $90.4 million, further expanding our ceilings market share to 17.9%. This includes the 7.4% increase in the base business, driven by continued strength in ceiling volumes, price gains, the benefit from acquisitions and share gains. Steel framing increased during the quarter by 3.5% year-over-year to $96.7 million, including a 3.6% increase in base business, mainly driven by pricing improvement. Our other products' net sales increased 7.4% during the quarter to $142 million, driven by base business sales of 7.2%, highlighting the success of our continued efforts to drive above market growth in our complementary products. This product category demonstrates the breadth of our portfolio and highlights the strength of our customer relationships and pull-through effects of wallboard, ceilings and steel framing. Gross margin improved 40 basis points to 33.4% for the quarter compared to the third quarter of 2017 and 60 basis points on a sequential basis. During the quarter, we saw further expansion of our gross margin, partially driven by price increases for 2018. We remain confident in our ability to deliver on our previously announced guidance of gross margin in excess of 32.5% for fiscal year 2018, which we continue to view as a near term expectation, rather than a long term ceiling on our margin profile. We also remain committed to invest in our talent, capital equipments and technology across our business. Adjusted SG&A as a percent of net sales of 26.3% was up approximately 30 basis points versus the third quarter of fiscal 2017, reflecting higher delivery cost. During the third quarter of fiscal 2018, adjusted EBITDA increased 3.8% to a record $42.2 million during the quarter, driven by higher net sales. Our adjusted EBITDA margin of 7.2% was flat compared to the prior year period, with a slight improvement in gross margin offset by a slight increase in SG&A. Turning to slide 8; as of January 31, our net debt-to-LTM pro forma adjusted EBITDA stood at 2.8 times, down slightly from 2.9 times the prior quarter, and down from 3.1 last year. Our balance sheet remains healthy, with $28.9 million of cash on hand and $333.6 million available under our AVL facility. Regarding cash flow; during the third quarter of 2018, we generated $34.4 million in operating cash flow, which was largely influenced by higher earnings and improved working capital terms. CapEx in the third quarter increased to $5 million, primarily related to fleet and equipment purchases, as we shift to purchasing certain commercial vehicles versus utilizing operating leases for our fleet needs, due to the new U.S. tax legislation that took effect in December. We now expect our fiscal 2018 CapEx to be $18 million to $20 million, which includes $8 million to $9 million of fleet purchases. Turning to page 9; we expect our effective tax rate in fiscal 2018 to be 34% to 35% and 23% to 25% in fiscal 2019. Had tax reform been in place for all of fiscal 2017, we would have paid approximately $23 million less in income taxes. In addition, in order to take advantage of the tax act, accelerated depreciation provisions, facilitate the implementation of new lease accounting standards, which we will adopt in fiscal 2020, and improve the comparability of our financial statements with our publicly traded peers, who we believe, purchase a greater percentage of their equipment than we do, beginning in fiscal 2019, we intend to finance the purchase of new commercial vehicles under capital leases, and to convert the majority of our legacy equipment operating leases into capital leases or purchase the equipment outright. As we stated in the earnings release, we anticipate that this change will reduce our SG&A expense and increase our adjusted EBITDA by approximately $21 million to $24 million per year, beginning in fiscal 2019. The change is also expected to increase the property and equipment and debt accounts by approximately $75 million as of the first quarter of fiscal 2019. Now with that, let me turn the call back over to Mike for closing comments.

In closing, we delivered solid organic revenue growth during the third quarter, despite a very tough year-over-year comparison, while expanding our gross margins as we said we would. Our fourth quarter is off to a good start, as underlying demand remained strong, pricing is holding and we continue to execute well against our growth and margin strategies, all of which should drive another year of record net sales and adjusted EBITDA. Our fiscal year 2018 expectation fits within the context of our longer term objectives for our company. We remain focused on growing our base business above market rate, which will be driven by organic share gains and the addition of roughly three to five greenfields per year. We recently opened two new branches in Florida and Connecticut, and anticipate opening a total of five new branches this fiscal year. In terms of pricing, it is too early to predict how the pricing environment will unfold this calendar year, but we would expect that any price realization and the previously announced wallboard manufacturer's price increases for 2018, will positively affect our 2019 results. We also plan to continue to supplement base business growth with acquisitions by executing on our strong deal pipeline at attractive multiples. Our cash flow dynamics remain favorable, and we plan to generate additional cash by growing adjusted EBITDA, while maintaining appropriate CapEx levels and working capital ratios. And finally, we are well positioned to continue to pursue our growth initiatives, including $333 million available under our AVL facility as of January 31, 2018. With these objectives in place, we are confident in the strength of our company, and our ability to continue delivering profitable growth over time. And operator with that, we are now ready to open the line up for question.

[Operator Instructions]. We will take our first question from Michael Eisen with RBC Capital Markets.

Good morning everyone. Just had a quick question. You guys talked a lot about the weather constraints going on in the quarter. What we are seeing here, and in the past, you have talked to the idea of 2% above market growth. Can you help us understand the amount of selling days that were at loss in the Southeast, and what you guys think the underlying market grew, and how that compares to where you are today?

Hey Michael, good morning. I don't have the exact number of sell days [ph] for the southeast, but in terms of revenue, it was approximately $4 million for that portion of it. I will let Mike kind of talk about the growth expectations. Obviously, we had slowed somewhat, particularly compared to wallboard shipments.

Yeah. I mean, we still have the same goal of exceeding market rates of growth, in terms of the weather setbacks we experienced. I mean, we really had adverse weather conditions, and while shipping days stretched all the way from Texas to the panhandle of Florida. So it was very significant interruptions of service during the quarter. But we still remain focused on growing above market rates of growth, and that remains a target goal of ours.

Michael, it was 60 days in the southeast. It was actually over 100 for the whole company, but I am not really counting other parts of the country, we had a lot of debate about that, particularly up in specific northwest and the northeast. To me, those markets, you have weather every year there, while sometimes it could be a little more severe than others. But what we saw particularly in the Southern U.S. was pretty unique.

Got it. That's really helpful color. And then just thinking of that $4 million and the loss of the 60 days down south, when we are looking into next quarter and kind of going into fiscal year 2019, should we be thinking about that as more so deferred work, and you could see a nice rebound in volumes if weather trends permit? If what you guys are seeing year-to-date versus the quarter ended, is it safe to assume that volumes should rebound and you get back to a pace of both organic growth and market growth moving forward?

Well it's definitely deferred work. But what you see in a lot of markets, Atlanta is a really good example, is they are not necessarily able to get right back out there right away, because it causes delays further down the chain. I mean, we haven't lost that business, it will come. But it's pushed out. I mean, some of this weather, particularly, we had a lot of wet weather in February that has further delayed the start of some work. So it's kind of pushing into spring, which I would say, is more normal than what we have experienced over the last few years.

Got it. And last one for me, just thinking about the strategy and where you guys are and what we have seen as growth drivers in the past. It has been very much driven by volume strength, can you guys talk a little bit about changing competitive dynamics in the industry, as we are moving forward, is there -- should we be thinking about this as a price driven story for the coming months to be able to maintain that margin growth expectation?

Well from our vantage point, I mean, as we have said before, we are continuing to push gross margin growth -- 32.5% is not a ceiling. And frankly, we have always dealt with strong competition. That's just a reality, but we will continue to push to grow price, to grow margin, and to grow the business going forward. So that's naturally not changed, regardless of changing competitive dynamics.

And Michael, I would also add to that, we have talked about this before. We have a number of initiatives going on in the SG&A side to gain more efficiencies and reduce our costs there and improve our leverage. And I believe, that I said that I expected the bulk of those to really start hitting towards the latter part of the second half of the year. Some of those projects have been a little bit delayed, but we still feel pretty good about them, particularly going into 2019. In the end, it really comes down to what we have always said is, in terms of incremental revenue growth, it's our expectation that we are going to put up low double digit incremental EBITDA for that incremental revenue, and we are going to get there one way or another. So it's a combination of both, sales and gross margin improvement as well as SG&A leverage. So that's really our goal to get to that number. We are a little bit short of that this year. I think we will make up some ground in the fourth quarter. I am not going to give a target on that, but we will definitely make up some ground as to where we are at now. But if you think about that too, I mean, with the fourth quarter, with the gross margin compression that we saw, had we not experienced that, we'd be over at that low double digit target.

Got it. Really helpful information and to reiterate kind of the gross margin guidance in the long term, double digit incrementals is encouraging, especially input cost inflation, that is -- we are seeing across the industry, and not just you guys. Appreciate it. Good luck with everything.

Thanks Michael.

Thanks Michael.

[Operator Instructions]. We will take our next question from Michael Dahl with Barclays.

Hi. Thanks for taking my questions. Mike on one hand you are talking about how you always deal with strong competition in your markets, but on the other hand, both you and Doug are calling out particularly aggressive competitor behavior as a contributing factor to the weakness in volume this quarter. Can you just give us more color on what you are seeing that was different competitively throughout the quarter, and has that changed, as you look at how February has progressed?

Well I mean, I guess generally speaking, we saw some pretty aggressive job quotes from some of our competitors, particularly in the face of the announced price increases. But frankly, some of that is already kind of normalizing. You know, you talked a little about the pre-buy in the fourth quarter and how much that was, I think that had a bit of an impact, on perhaps some of the competitive behavior that we saw. But you know finally, this is a service business, and I think the reality is, that you have to be able to not just quote the work, but you have to be able to deliver effectively, and get it there on time, and go to order [ph] and I think, we are beginning to see some stabilization relative to that. But again, these competitors are out there looking for their business just like we are looking for ours, and I consider it to be kind of a normal change of events. There is not anything really dramatically different and I think, we will see, as the year goes forward, that we will see continued share gains as we talked about before. It's kind of a standard procedure, frankly.

Got it. And if I think about those kind of the dynamics around the pre-buy and then the quotes, and I tie that into the inventory picture in the channel, it looks like your inventory per branch was up about 7% year-on-year. Presumably, some of that is just due to price inflation, but what can you tell us about inventory positions, both for yourselves and in the channel, relative to where your expectations would be?

Yeah Michael, our inventory was up. We did do a little bit of a pre-buy. I mean, we are still turning wallboard, we are at about 13 times. So it's difficult for us to get too much, so we would say that we are a full participating in the pre-buy, but we did get some and even some other product categories too, steel is a good example that we were also buying ahead of anticipated price increases there as well, as the other product categories, there are some products there that we also did a little bit of buying ahead of expected price increases going into January, because prices have been going up for all of our products.

I guess just to put a finer point on that though, is this, I guess, the level of pre-buy, seem to be a bit higher on the wallboard side for the industry this year versus last year. What is your sense of how long it takes to clear through that inventory?

I actually think the pre-buy inventory has already cleared this juncture, and if you talk to the manufacturers based on current leadtimes and current shipment levels, I think that inventory has been cycled through. So that was -- it was a little bit higher. The number I heard was like 500 million feet as kind of an estimate in total pre-buy, but given the manner in which that turns, I think it's hard to cycle through.

Yeah, and in terms of wallboard, the price increase this year was the first week of the year was, last year. It really started in mid-January kind of cycle through the back half of the month. So a little later in the calendar year cycle.

Okay, great. That's helpful. Thanks guys.

Thanks Michael.

We will take our next question from Truman Patterson with Wells Fargo.

Good morning guys.

Hi Truman. Good morning.

Just wanted to continue touching on the wallboard aspect. Your wallboard pricing was up about 3% year-over-year, I was hoping you could talk about the manufacturer's pricing trends throughout the quarter and so far into February? And then, last quarter, you all discussed that there had been some controlled distribution from the manufacturers or inventory allocations in several of the markets. What have you been seeing more recently, particularly kind of margin in late February?

Well, the manufacturers right now are remaining pretty firm on their price. I will say from our perspective, our price, we went up in January -- our January price went up close to 4% our average selling price, and in February, it's up again. So as Mike said, we are probably -- you are talking early summer, before you really know how things are going to settle out. But there is real cost inflation pressures that those guys are getting. Last year, the story was around paper, this year the story is more around freight costs, particularly as it comes to getting in to synthetic gypsum. So there is real pressure there. So we expect them to be firm, and we expect their prices and our prices to be up for the year.

Okay. Thanks for that. Jumping over to the M&A environment, you all stated that it was likely going to be accelerating. Could you give us an update on the purchase price multiples? Has there been any change since tax reform occurred? And you know, I was just hoping, you have seen it slow down a bit, the activity, over the past 12 months or at least your own deal flow, what gives you the confidence of this accelerating again, and can we kind of think of this as a six to eight deals per year going forward?

Well, the fact is, when you are working in the M&A environment that we are working in, the transactions really can come in waves. If I look at the number of active discussions we are currently having versus a year ago and the year prior, there really hasn't been any change there. We still have a very active number of opportunities that our team is working with day-to-day. Just so happens, as Doug says, sometimes they get a little lumpy, as they come in clusters. But as I look at the business and the consolidation of the industry the last couple of years, and then looking forward to where we believe the industry is going to head, these opportunities are going to continue to be there. We have got some great dialog with some wonderful companies, and I am very-very optimistic, that we will be announcing some significant acquisitions in the coming months. It's just you can't predict quarter-by-quarter whether you are going to do two, or three or one, there are varying amounts of dialog and time that it takes to get these things close. But I am still very optimistic on the M&A pipeline.

In terms of the multiple, we still haven't seen any movement there. We are still running it, call it, 6.5, a little lower than that times, post synergies. There are some opportunities out there, that could -- some people that maybe, were a little reluctant to do something, before the tax reform act, who may be looking to transact something now, that they are going to have a little bit more favorable impact on their side of the transaction. So we think that could accelerate some opportunities.

Okay, thanks guys.

Thank you, Truman.

We will take our next question from David Manthey with Baird.

Hi. Good morning guys.

Hey Dave. Good to hear from you.

Yeah, thank you. First off, you outlined wallboard pricing in the slide, and I think you said steel framing was about 3%. Could you give us an idea roughly, what level of price increases you are seeing in ceilings, as well as other products?

The ceilings growth was about half and half, half volume half price. Steel was -- volume was up about 1% and the rest of that was price. Other products, there are so many items in there that we can't -- we don't really have a good number to share on that. Although I will say that a lot of the products in there, insulation, joint compound, etcetera, are all experiencing price increases with what's going on in steel, we would expect to see that in products like tools and fasteners as well.

And as it relates to steel framing, maybe thinking about your supply chain and the tariffs, any expectation on what that might mean in the coming couple of years?

Yes, near term, we expect prices to go up. They are already going up. All of our major suppliers have already announced price increases to take effect April 1. Some of them have price increases after the April 1, going up May 1. So I mean, we could spend an hour talking about steel. The good thing is, first of all our procurement teams here in Atlanta and throughout all of our markets, they work very closely with the suppliers, ahead of these increases. So we had a pretty good feel for what's going on in the market. So we weren't surprised by what happened, and the guys made sure that they covered work, either through inventory buys, as we talked about previously, fixed pricing or price escalators in the work that they are quoting. The good news is, that we have got our people that help us navigate this, but also the handful of suppliers we work with, who provide about 80% of our product, that's really important. We worked with those guys for decades. One thing that we think is going to happen, if this still does take effect. I mean, we have already seen it, that a lot of regional and smaller local competitors have already cancelled their imports, and they are looking to try to switch to domestic sources for their raw material. That's going to create product shortages.

And we have already seen leadtimes. Leadtimes are already going to stretch out --

Yeah. Leadtimes are pushing out. And so the good thing, again with our relationship, relatively small base of suppliers that handle the bulk of our needs, that we are going to be in the front of the line. That doesn't mean, we are not going to experience leadtime issues as well, but no one is going to be getting in front of us. So that's really helpful. But again, that plays into how our people and our national scale really helps us in times like these.

Okay, thank you. Those are great answers to an obvious question. Sorry about that. And then, the final question, just broadly, when you think about residential and non-residential market growth in the coming year, anything you can give us just in general thoughts?

The one theme, I guess I have heard more frequently in a couple of meetings that I have been to recently that, there appears to be more of a focus and frankly, more activity on the entry level house, which has been kind of, I guess a shortfall in the market the last couple of years. So I think on the residential front, that's a positive. Certainly it’s a positive for us, given our residential business. So generally speaking, I think the residential side is very positive, and I actually told our VPs yesterday, just in terms of general backlog, and I don't say the commercial backlog, as we sit today, is still very-very strong. I mean, we are optimistic on that. Multifamily, obviously has slowed up some. But frankly, it's still strong in a lot of our markets. It's not as active as it was, maybe two years ago. But there is still a fair amount of multifamily work out there. But I would say resi and commercial, single family res and commercial is definitely two bright spots for us going forward.

Great. Thank you very much.

Thanks Dave. Appreciate it.

[Operator Instructions]. And we will go to our next question from Kevin Hocevar with Northcoast Research.

Hey, good morning everybody.

Hi Kevin.

Wondering if you could comment on, you know, incremental margins, it sounds like this year might be a little bit below the numbers you look for in the past, that low double digit. But as we look to 2019, you talked about the $21 million to $24 million of savings from the change in leases and then, also it sounds like some of those other SG&A initiatives that you have, are really very, sounds like very backend loaded, in terms of this year, starting to get realized. So as we go into 2019, I am wondering if you can give us some type of thoughts around how we should think about that incremental margin next year? Because it sounds like it should be all else equal above that low double digit type rate?

Well that's a good question Kevin, and when I was talking about double digits, I wasn't suggesting for the change in our lease accounting, which if you look at that on a LTM basis, that would have expanded our EBITDA by about 90 basis points. So it would be at around 9% or so in that regards. So that's a pretty good -- that dollar amount range, $21 million to $24 million reduction last year, next year in SG&A, that's a pretty good range to use. So you are right, so you would add that, that would be on top of the, call it the 10% expectation that we have for ourselves.

Got you. Okay, that's really helpful. And then, not to beat a dead horse on the wallboard competition, but wondering -- obviously, there has been two of the big four distributors had different owners over the past year and a half or so. And so, I guess I just wanted to understand, it sounded like, you believe that the competition was more around pre-buy and some distributors were sitting on more inventory that they needed to unload, and maybe that caused the competition or are you seeing any difference in behavior from some of these other players, as they have new owners? And also, just curious if the competition was broad based or did you see more on the residential, the half-inch side or on the commercial side?

No. I would say -- I mean, certainly there have been changing dynamics in terms of ownership. But I would say, the competition has been broader than that certainly. I mean, I think there is just broad competition within the market. You had some shift in demand relative to multifamily versus some of other segments, and if we just -- you throw the pre-buy mix into that, and there were perhaps some folks out there that were a little more skeptical about the price increase holding for wallboard, and therefore, they might have been a little bit more aggressive on some of the work, that as we sit here today, everybody is having a cold war [ph] based on replacement costs, which is higher. And so, I really consider it to be normal competitive dynamics, and you throw the pre-buy into the mix, it might have confused it a little bit. But from where we sit today, I think it's -- like I said, it has got a standard operating procedure around a price increase, frankly.

Okay, got you. Very helpful. Thank you very much.

We will take our next question from Matt McCall with Seaport Global Securities.

Thanks. Good morning guys.

Good morning Matt.

So maybe one clarification. I think a second ago, you said January price was up about 4%, February up more than that. So is that sequential from December? I am just making sure I am using the right comp period, when I am thinking about the trajectory of pricing?

The January, about 4%, that was year-over-year versus January of last year. And I didn't -- now last year, as we talked about the price increases from the manufacturers came in at the latter part of January, so our sales prices last year, didn't really start to ramp up until February. So our year-over-year price for February is up. I don't want to give specific to this time, because we haven't reported those numbers. But year-over-year, it is up. It's a little bit compressed from what we saw in January, but it's up.

Got it. Okay. That's helpful. Perfect. You talked about SG&A inflation, can you talk a little bit more about the component to that pressure, maybe the magnitude of some of the buckets, and then how do you expect that to progress, specifically on the inflation side, and some of that pressure in Q4, and as you move out into 2019?

It's really in two areas. Wages, particularly with our drivers. It's extremely competitive out there. I actually heard some other public companies saying that, they hadn't really experienced that much wage inflation, which was very surprising to me, because we have, I don't want to share specifics particularly around our drivers, because everybody, all the competitors, everybody looking for drivers, are coming to us. And maybe we are experiencing more of it, because our crews are at the top of the list of who people want to go after, if they are in the interior business. I guess, they are going after drivers. They are not going to go to UPS, they are going to go to GMS. So that's an item. Equipment is another item, particularly our rolling stock. We have always invested in our equipment, we are going to do that, because that differentiates us, it allows us to provide, what we believe is the best service in the industry. So that we are not going to miss delivery. So not going [ph] to be able to fulfill things, because our trucks are -- we have enough trucks or our trucks are broken down, and it also allows our delivery crews to be efficient, enjoy the equipment they are using. So that was up actually more than wages for us.

Any -- yeah, go ahead.

And I was going to say, and that's partly because of running through operating leases. So that will -- a big chunk of that will go away next year, will shift to interest and depreciation.

Okay. So that will go away, the wages -- but wage pressure won't -- any quantification of what the total pressure was there on the SG&A line, from those inflationary buckets?

Nothing specific that I want to share there, other than to again go back to -- we are doing other things to offset those costs.

Does fall in place.

Fuel was another item that we -- we saw an increase in fuel, but when it comes to like delivery labor, as well as fuel, that's one of the reasons that we have to be so disciplined on pricing; because I mean, at the end of the day, what are you going to pay and how much margin are you generating to cover your cost to serve. So it's those variable costs with higher delivery wages, if fuel goes up, we have to cover that. We have to have higher sales prices. We have to -- and the guys build in fuel, into how they price and quote jobs, and also, if it gets really bad, and they put on stop charges, surcharges, etcetera, to help cover that costs. Our guys are keenly aware of what fuel is costing them, and how that's impacting their bottom line.

Okay. Very helpful. Thanks. And one more, Mike, I think this seems to be normal operating procedure around price increases. At least, what you have experienced in the past. How do we look at -- is that to say that the volume outlook is improved as you move forward, but you talked about the impact on your volume, as you held price -- do you expect that to stabilize, I guess is my point. I think you are positive on price to the year, but do you expect the volume trend to kind of improve sequentially?

Yeah I would anticipate volume trends to improve, and fundamentally, it gets lost sometime in the translation, but we aren't a service business, and our ability, the crews that Doug was referencing, the product mix that we have talked about, this is a service business, and we will continue to win, because we feel very-very strongly, that we have the best service offering of the industry, and given the tenure of our people, given the knowledge of the product and the like, and ultimately, as a wise man who founded the company once told me, we have delivered drywall, but we sell service. And that ultimately is what gives us the edge. And so, I am very optimistic, we will continue to grow the volumes, and frankly, give us some of the opportunities on the greenfield and M&A side, that's going to help [indiscernible] growth as well.

Okay. Thank you guys

That concludes today's question-and-answer session. At this time, I would like to turn the conference back to Mr. Mike Callahan, for any additional or closing remarks.

Well I just want to thank everybody for joining us on the call today. As you can tell, we are very excited about where we are today, and we are looking forward to updating you on our progress in the coming quarters. Take care and thank you.

This concludes today's conference. We appreciate your participation. You may now disconnect.