NYSE:AWI Armstrong World Industries Q1 2025 Earnings Report $150.51 +0.58 (+0.39%) As of 03:31 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Armstrong World Industries EPS ResultsActual EPS$1.66Consensus EPS $1.55Beat/MissBeat by +$0.11One Year Ago EPS$1.38Armstrong World Industries Revenue ResultsActual Revenue$382.70 millionExpected Revenue$370.71 millionBeat/MissBeat by +$11.99 millionYoY Revenue Growth+17.30%Armstrong World Industries Announcement DetailsQuarterQ1 2025Date4/29/2025TimeBefore Market OpensConference Call DateTuesday, April 29, 2025Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Armstrong World Industries Q1 2025 Earnings Call TranscriptProvided by QuartrApril 29, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Thank you for standing by. My name is Amy, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Q1 twenty twenty five Armstrong World Industries Incorporated Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:35It is now my pleasure to turn the call over to Theresa Womble, VP of Investor Relations and Corporate Communications. You may begin. Theresa WombleVice President of Investor Relations & Corporate Communications at Armstrong World Industries00:00:46Thank you, Amy, and good morning, everyone. On today's call, Vic Grizzle, our CEO and Chris Calzaretta, our CFO, will discuss Armstrong World Industries' first quarter twenty twenty five results and rest of year outlook. We have provided a presentation to accompany these results that is available on the Investors section of the Armstrong World Industries website. Our discussion of operating and financial performance will include non GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of these measures with the most directly comparable GAAP measure is included in the earnings press release and in the appendix of the presentation, both of which were issued this morning. Theresa WombleVice President of Investor Relations & Corporate Communications at Armstrong World Industries00:01:34During this call, we will be making forward looking statements that represent the view we have of our financial and operational performance as of today's date, 04/29/2025. These statements involve risks and uncertainties that may differ materially from those implied or expected. We provide a detailed discussion of the risks and uncertainties in our SEC filings, including the 10 ks filed earlier this year. We undertake no obligation to update any forward looking statement beyond what is required by applicable securities laws. Now I will turn the call to Vic. Vic GrizzlePresident & CEO at Armstrong World Industries00:02:13Thank you, Theresa, and good morning, everyone, and thank you for joining our call today to discuss our first quarter twenty twenty five results and our expectations for the rest of the year. Our first quarter was another quarter of record setting sales and adjusted EBITDA for Armstrong as we continue to execute our growth strategy well and improve our productivity and expand our capabilities into new market opportunities. In the first quarter, total company net sales increased 17% and adjusted EBITDA increased 16% with meaningful margin expansion in both of our segments. And in fact, it was the best Q1 margin performance in both segments since 2020. These results were a clear demonstration of the strength of our business model, the diversity of our end markets, as well as the strong execution culture we have here at Armstrong. Vic GrizzlePresident & CEO at Armstrong World Industries00:03:06Delivering these financial results in an environment of elevated uncertainty requires focus and agility to adjust to changing operating conditions and customer needs and doing this while continuing to deliver industry leading quality and service levels our customers have come to expect. Again, the agility and commitment to execution by our teams was on full display in the quarter. And as many of you have come to know, this is a hallmark of the organization we have here at Armstrong. So I want to take this opportunity and thank all of our employees for their tremendous efforts and their commitment to execution. Now taking a closer look at the first quarter results in our Mineral Fiber segment, net sales increased 2% while EBITDA increased 7%. Vic GrizzlePresident & CEO at Armstrong World Industries00:03:51Sales growth for the segment was driven by a 7% increase in average unit value or AUV versus the prior year, which included favorability in both like for like pricing and product mix. This increase in AUV more than offset lower sales volumes, primarily driven by weather and lower foot traffic in our home center channel and predominantly in the Southeast where winter weather was particularly severe. In the Mineral Fiber segment, I'm pleased with the EBITDA margin performance, which expanded 180 basis points to 43. This was the strongest first quarter margin performance since 2020 and our ninth consecutive quarter of year over year margin expansion. Again, AUV was a key driver of EBITDA growth and margin expansion in the quarter. Vic GrizzlePresident & CEO at Armstrong World Industries00:04:42Also notably in the quarter and a contributor to margin expansion was our manufacturing productivity despite the softer volumes. This outcome reflects the multiyear long term approach to investing in productivity that we practice here at Armstrong. This not only helps with our direct productivity, but it also enhances our consistency of our service and quality levels that distinguish us in the marketplace. One of the key indicators we track internally is what we call our perfect order measure that you have heard me mention in the past. This measure includes five areas of service and quality that represent a perfect order from order to entry, order entry to customer receipt, and again, representing what a perfect order looks like in the eyes of our customer. Vic GrizzlePresident & CEO at Armstrong World Industries00:05:28This quarter, the measure was solidly ahead of our target and near historic highs. This has been a passion of ours. And in times like these, with high levels of uncertainty and risk for supply chain disruption, this is and will continue to be a critical differentiator for Armstrong. Overall, I'm pleased with the performance of the Mineral Fiber segment in the quarter despite softer volume, delivering EBITDA growth, margin expansion, AUV growth and manufacturing productivity, all while maintaining our high levels of quality and customer service. Now turning to the Architectural Specialties segment, where our results in the quarter were particularly strong and broad based in both the organic and the inorganic sides of the business. Vic GrizzlePresident & CEO at Armstrong World Industries00:06:14This is clearly a demonstration of the advantage of having the broadest portfolio of solutions where we continue to leverage our scale and specification strength to sell more products into more spaces and drive profitable top line growth. For a decade now, we have averaged 20% top line growth in this segment. And with our strong start to the year, we expect to continue this pace of growth in 2025. Organically, the first quarter Architectural Specialties sales grew 11% from prior year's results. And our 2024 acquisitions, 3form and Zayner, contributed another 47 percentage points of sales growth. Vic GrizzlePresident & CEO at Armstrong World Industries00:06:54Additionally, our order intake grew in the first quarter. Notably, both our sales and order intake spanned a wide range of product types and broad based set of market verticals. In addition to the transportation vertical, we saw good project activity in office, retail and education. And because of our industry leading product portfolio, strong service levels and mostly U. S. Vic GrizzlePresident & CEO at Armstrong World Industries00:07:18Manufacturing footprint, we believe we are well positioned to continue to win. Along with strong top line growth in the quarter, I am particularly pleased with the strong adjusted EBITDA growth and margin expansion performance in this segment as well. Architectural Specialties adjusted EBITDA increased 94%, including organic EBITDA growth of 34%. And as important, the EBITDA margin for the segment expanded at both the organic and total segment level as we continue to improve our operating leverage. And in fact, this was the strongest first quarter. Vic GrizzlePresident & CEO at Armstrong World Industries00:07:55Architectural Specialties adjusted EBITDA margin performance since 2020 and marks continued progress toward our goal of 20% EBITDA margin for this segment. It's also worth noting in the quarter solid performance of our 2024 acquisitions. We are very pleased with how both Threeform and Zener are performing and the mutual benefits we are seeing developing as we increase our collaboration and knowledge sharing. And frankly, I'm not surprised at how well this is going given that both these companies come with highly professional and skilled management teams who have the right mindset to collaborate and innovate with Armstrong to accelerate their growth. With three Form, the collaboration across our sales teams has uncovered many opportunities to sell more products into more spaces, given three Form's unique ability to create translucent solutions that use light and texture to enhance design opportunities for architects. Vic GrizzlePresident & CEO at Armstrong World Industries00:08:51And in addition, we have worked together with their teams to increase ThreeForm's operational efficiency and are already seeing benefits from these efforts. And at Zener, as we noted last quarter, we significantly expanded our exterior metal design and fabrication capabilities and further deepened our presence in an attractive adjacency that complements our existing interior metal business. The strong market reputation of Zener gives us early access to large complex projects, and we expect this will enhance our visibility to more selling opportunities for the interior spaces of these large projects, in addition to the new business opportunities on the exterior. And as we have stated, we estimate that this exterior metal adjacency will add another $1,000,000,000 to the addressable market for our Architectural Specialties segment, bringing its total addressable market to more than $2,500,000,000 We're excited to expand our presence in this adjacency and to continue our above market growth rate for years to come. Now before turning the call over to Chris, let me take a moment to share how we're thinking about the market in light of the current and evolving tariff landscape. Vic GrizzlePresident & CEO at Armstrong World Industries00:10:05As we all know, this is a very fluid and uncertain set of dynamics that we will all have to navigate. First, it's worth repeating that our production and supply chain is predominantly U. S.-based, and the majority of our products sold into Canada and Mexico are covered under the USMCA trade agreement. In the limited areas where we see a direct impact on our costs, we expect to mitigate those impacts through negotiations, price actions and through supply chain adjustments within our U. S. Vic GrizzlePresident & CEO at Armstrong World Industries00:10:35Footprint. So for direct impacts of tariffs here at Armstrong, the impact is both minor and manageable. Beyond these minor impacts, we do believe the indirect benefit effects from high levels of uncertainty around these tariffs has the potential to dampen end market activity. This, of course, is much more difficult to call given the varying impacts throughout the value chain. For Armstrong, the market impact is likely to come in the form of holding back and pausing on discretionary renovation work until there is more clarity on on the way forward, much like we have seen in prior periods of market disruption and uncertainty. Vic GrizzlePresident & CEO at Armstrong World Industries00:11:18There may also be some disruptions in the construction supply chain that could impact project time lines. That said, in total, we don't see a meaningful impact from disruption in new construction activity in 2025 given the lag time on new constructions, projects. The ground level bidding activity in the market remains supportive at this time, as do the order rates through April. And the sentiment from our customer survey work remains positive but understandably cautious given the uncertainty. Of course, we will remain vigilant as further disruptions from policy changes could create more project delays than we are seeing at the moment. Vic GrizzlePresident & CEO at Armstrong World Industries00:12:00Given what we know and its expected impacts and with our controllables, namely pricing, productivity and good cost management, we remain confident in our ability to navigate these conditions, and therefore, we are reaffirming our full year guidance for 2025. So with that, let me pause and turn it over to Chris for more on our financials. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:12:22Thanks, Vic, and good morning to everyone on the call. As a reminder, throughout my remarks, I'll be referring to the slides available on our website and Slide three, which details our basis of presentation. Beginning on Slide six, we summarize our first quarter Mineral Fiber segment results. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:12:37Mineral Fiber sales were up 2% in the quarter, driven by favorable AUV of 7%, partially offset by lower sales volumes. The strong AUV result was fairly balanced between like for like price and favorable mix. Lower sales volumes were driven primarily by softer demand from our home center customers who experienced lower store traffic due to a number of factors, including negative weather related impacts in certain markets. We also had one less shipping day compared to the prior year quarter, which represents about a point of volume in the quarter. Overall, the market we experienced was consistent with the choppy conditions that we expected heading into 2025. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:13:17Mineral Fiber segment adjusted EBITDA grew seven percent despite softer volumes, with adjusted EBITDA margin expanding 180 basis points to 43%. Adjusted EBITDA margin expansion was primarily driven by the benefit of AUV growth and manufacturing productivity gains despite lower volumes. In addition, the segment margin benefited from lower SG and A expenses and favorability in input costs as compared to the prior year quarter. The decrease in SG and A was primarily driven by deferred compensation plan gains. Input cost inflation was more than offset by favorable inventory valuation timing impacts. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:13:57Similar to Mineral Fiber, we saw softer grid volume in our WAVE joint venture, driving weaker equity earnings in the quarter. Recall that we are also lapping a strong first quarter of twenty twenty four, which was the highest equity earnings quarter of twenty twenty four. As Vic mentioned, Mineral Fiber's adjusted EBITDA margin of 43% in the quarter was the best Q1 margin performance for this segment since 2020 and was a strong demonstration of our value creation drivers, including consistent AUV growth and manufacturing productivity gains despite uneven market conditions. On slide seven, we discuss our Architectural Specialties or AS segment results, where we highlight robust sales growth of 59%. This growth was driven primarily by contributions from our recent acquisitions, 3Form and Zaner, both of which performed in line with expectations. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:14:52On an organic basis, I'm also pleased to report that we have delivered double digit first quarter sales growth of 11 with strength in many product categories. AS adjusted EBITDA grew 94% with a 17.1% adjusted EBITDA margin. This represents margin expansion of three ten basis points as higher acquisition related operating costs were more than offset by inorganic sales growth. In addition, we benefited from better operational leverage on our cost base. We are encouraged to see this adjusted EBITDA margin improvement and remain focused on delivering our goal of greater than 20% adjusted EBITDA margins for the segment. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:15:34We continue to closely monitor project timelines, particularly against the backdrop of elevated macro uncertainty. Slide eight highlights our first quarter consolidated company metrics. We delivered double digit growth for both sales and earnings with adjusted EBITDA margins that compressed slightly versus the prior year. Notably, adjusted diluted earnings per share grew 20%. Our total company adjusted EBITDA margin of 33.6 marks a solid start to the year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:16:07Incremental volume from recent acquisitions and our growth initiatives coupled with consistent AUV performance drove our adjusted EBITDA growth in the first quarter. These benefits more than offset an increase in SG and A, which as noted earlier was driven by our recent acquisitions of Three Form and Zener. Excluding the impact of these acquisitions, we generated an organic adjusted EBITDA margin of 35.6%, which represents 170 basis points of margin expansion as compared to the first quarter of twenty twenty four. Slide nine shows our year to date adjusted free cash flow performance versus the prior year. The 10% increase in adjusted free cash flow was driven by higher cash earnings and dividends from our Wave joint venture, which was partially offset by higher capital expenditures. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:16:56We remain confident in our ability to deliver strong adjusted free cash flow growth in 2025 to support all of our capital allocation priorities despite elevated macro uncertainty. In the first quarter, we repurchased $22,000,000 of shares and paid $13,000,000 of dividends. As of 03/31/2025, we have $640,000,000 remaining under the existing share repurchase authorization. With a healthy balance sheet that includes low leverage and ample available liquidity, we are well positioned to execute and advance our strategy. As we move to slide 10, we'll see our full year guidance for 2025, which is unchanged for the four key metrics of total company net sales, adjusted EBITDA, adjusted diluted earnings per share and adjusted free cash flow. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:17:47We have made some modest adjustments to some of our assumptions given the current macroeconomic headwinds, and this guidance now reflects the impacts of currently known tariffs. This guidance now reflects softer market conditions in the second half of the year due to elevated uncertainty stemming from tariffs. As such, we are decreasing our Mineral Fiber sales volume expectations to flat to down in the low single digit range, but we expect that this headwind to our net sales growth will be largely offset by greater than 6% Mineral Fiber AUV growth as well as a slightly better outlook for total AS sales growth. It's important to note that while there will be a headwind, we do not believe tariffs as they stand today will have an outsized direct impact on our results. The tariffs as currently announced represent a manageable level of less than 3% impact to our total cost of goods sold. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:18:45For Wave, the tariffs as announced have about a 5% impact on the joint venture's total cost of goods sold. We believe we are well positioned to mitigate most of the impacts from these tariffs, and our guidance is reflective of those actions. Additionally, we have relatively limited exposure to foreign currency fluctuations, which positions us well to weather volatile market environments. We remain confident in our outlook and on our team's ability to drive manufacturing productivity and demonstrate rigorous cost management and drive overall efficiencies while balancing investing for growth. We are well positioned to deliver solid results for the remainder of the year as we continue to demonstrate the resilience of our business model despite challenging market conditions. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:19:32We remain committed to driving margin expansion and continuing to deploy cash to generate growth and create value for our shareholders. And now I'll turn it back to Vic before we take your questions. Vic GrizzlePresident & CEO at Armstrong World Industries00:19:43Thanks, Chris. And one thing that we have been consistent with here at Armstrong is staying with the investments in our growth initiatives even in times of uncertainty. The reason for this is our high level of conviction in our strategy and the confirmation from the traction we are realizing from our growth initiatives. Vic GrizzlePresident & CEO at Armstrong World Industries00:20:02We kept our investments going in twenty twenty during the pandemic and again during the disruption that occurred in 2022, and we will again continue investments in our growth initiatives in this current period of uncertainty. The strength of our business model and our balance sheet allows us to do so. We continue to be pleased with the reach and the contributions of Canopy, our online selling platform. We've shared how it's helping to drive incremental sales volume for Mineral Fiber and Grid products. And we have also been adding many more of our Architectural Specialty products to the platform, including solutions from our recently acquired three form business. Vic GrizzlePresident & CEO at Armstrong World Industries00:20:41Our Project Works platform, our advanced automated design service, had strong results this quarter and added incremental sales volumes. Using Project Works meaningfully increases the productivity of designers, architects and contractors with designing and executing complex projects and achieving more efficient use of materials, resulting in less waste on the job site. We continue to expand the capabilities of Project Works, both in terms of products and design optimization, And more and more customers are using this service to enhance their own productivity in their pursuit of their own cost and quality goals. And our innovation, in particular, around energy saving ceiling tiles is gaining traction in the market and confirming that companies are indeed looking for energy savings for both cost savings benefits and for achieving internal decarbonization goals. Our phase change material innovation, coupled with our acoustical performance, is changing how architects and designers as well as building owners view the ceiling with energy saving attributes that bring enhanced functionality and reduced energy consumption in buildings. Vic GrizzlePresident & CEO at Armstrong World Industries00:21:55Energy and how we conserve it is a key macro trend that will impact construction and industrial markets for years to come. It is driven by the increasing need for resiliency and energy efficiency in buildings, the drive towards clean technology and the growth of artificial intelligence, along with the pressure this puts on our nation's electrical grid systems. These challenges are critical for all industries to address, but particularly important for the construction of buildings as buildings consume nearly 40% of global energy. And in The U. S, the built environment consumes nearly 75% of all electricity used. Vic GrizzlePresident & CEO at Armstrong World Industries00:22:34About half of that energy usage is to heat and cool buildings. Just this month, the leading standard for healthy and sustainable buildings, the LEED certification standards, recognized a heightened need to deepen its focus on decarbonization and energy efficiency and have increased LEED credits for energy savings in the latest version released. We believe that our products can play an important role enabling industry to address this challenge. Innovative products like our TempLoc energy saving ceilings respond to the urgent need for energy efficiency and decarbonization with their ability to achieve up to 15% energy cost savings from heating and cooling buildings. These products can make a meaningful impact for both reducing the cost of operating commercial buildings and increasing decarbonization within these buildings. Vic GrizzlePresident & CEO at Armstrong World Industries00:23:24In addition, Templot can reduce energy usage at peak times of the day, thereby helping to lessen the strain on The US electrical grid system. Now with the explicit inclusion of phase change material as qualifying thermal storage technology for tax credits under the Inflation Reduction Act, Temploc can be even more of a win win for building owners and operators through lower installation costs and lower energy operating costs. Customers of Temploc may be eligible for tax credits of 40% to 50%, dramatically improving the return on their investment. With this tax credit, Temploc is gaining recognition as a viable energy saving solution, and we're seeing increased interest for winning specifications and are currently ramping up production. These are exciting developments for us, and we are continuing our innovation around the Temploc platform with our multigenerational approach to product development. Vic GrizzlePresident & CEO at Armstrong World Industries00:24:24We look forward to providing more updates on our progress in the coming quarters. And as important, beyond our organic growth initiatives, with our high confidence in our cash flow generation and the strength of our balance sheet, we remain active in our pursuit of inorganic growth opportunities as well to sustain the strong and consistent growth of our Architectural Specialties business. So as we navigate these uncertain market conditions and plan for a softer back half of Vic GrizzlePresident & CEO at Armstrong World Industries00:24:55the year, Vic GrizzlePresident & CEO at Armstrong World Industries00:24:56mainly due to pausing of discretionary renovation work, our agility and commitment to execution with the help of a local supply chain structure as well as diversity of our end markets will serve us well. The dependable ability to deliver AUV growth, productivity gains and above market growth rates in our Architectural Specialties business will allow Armstrong to outperform in conditions such as these. And because of our resilient business model, we are well positioned to be both prudent where appropriate and assertive where opportunities present themselves to optimize the value creation outcome for our shareholders. With that, we'll pause now and take your questions. Operator00:25:41Thank you. The floor is now open for questions. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset Your Your first question comes from the line of Susan Maklari with Goldman Sachs. Your line is now open. Charles Perron-PichéAnalyst at Goldman Sachs00:26:29Good morning, everyone. This is Charles Perron in for Susan. Thanks for taking my question and congrats on the strong quarter. Charles Perron-PichéAnalyst at Goldman Sachs00:26:35Thank you. Vic GrizzlePresident & CEO at Armstrong World Industries00:26:36Good morning, Charles. Charles Perron-PichéAnalyst at Goldman Sachs00:26:37Good morning. Charles Perron-PichéAnalyst at Goldman Sachs00:26:38Just maybe first, I Charles Perron-PichéAnalyst at Goldman Sachs00:26:39want to talk about your expectations for volume deceleration in the back half of this year. It sounds from your commentary that orders and activity are holding strong through April. So against that, is the deceleration more signs of conservatism or any other signs of slowdown you're hearing when speaking with customers? And how do you expect those to flow through across segment your two segments over the course of the year? Vic GrizzlePresident & CEO at Armstrong World Industries00:27:05Yeah. It's a good question because we're we're kind of in the middle of this, right, thirty days outside of the announcement of much broader and, larger tariffs. So we're kind of in the middle of this now. So it's a good question. The, the sentiment from the customers, and and the reason why I I mentioned the on the ground bidding activity does remain to be kind of intact and steady and not reflective of what we think the downstream impact of this this uncertainty could have in the in the back half. Vic GrizzlePresident & CEO at Armstrong World Industries00:27:38So, yeah, I I think in the current moment and what we're experiencing today is about what we would have expected before, I think, again, the, the announcement of the size and the breadth of the tariffs that has maybe changed the sentiment. So our our basis of this outlook for the for the back half of the year is really exper experiential. In prior periods where we have, event based disruption in the marketplace, the first thing that goes to the sidelines is that discretionary work. Projects that aren't critical and that can wait and customers or or or owners behind those projects move them to the sidelines and wait for a little bit more visibility and clarity. That's that's what we've experienced, and that's kind of what we're modeling it here. Vic GrizzlePresident & CEO at Armstrong World Industries00:28:28Even though we're not seeing it and feeling it today, we do expect that based on prior experiences, when we have this level of uncertainty for this length of time, the first thing that's gonna show up is, is a softening in the discretionary, project work. So, again, we've modeled our our outlook for the back half based on that experience. Charles Perron-PichéAnalyst at Goldman Sachs00:28:50Okay. That's super helpful, Vic. And maybe second, talking about the mix impact in Mineral Fiber, when you consider the pricing actions that you look to put in place or you have put in place, the benefit from recent product introduction like TenPlot Healthy Spaces against the risks of a slowdown, are you seeing any signs of trade down in mix moving away from those new products? And maybe also it would be helpful if you could provide some context about what you see historically in mix, what happening during prior downturns? Vic GrizzlePresident & CEO at Armstrong World Industries00:29:21Yeah. Again, a good question because under these conditions, you would expect maybe some of that trade down to happen. We have not seen that. As you can see in our results in the first quarter, we had a positive product mix, which means that customers continue to trade up to our highest technology products, our highest aesthetic, product. So that's continued into, the first quarter. Vic GrizzlePresident & CEO at Armstrong World Industries00:29:45Actually, this is a dynamic that transcends downturns. We've seen this for well over a decade now, this natural dynamic to mix up. I don't see that changing in the back half of this year even with the downturn. We we didn't see that in the great financial crisis. We didn't see that during the pandemic, and those were much deeper downturns, of course. Vic GrizzlePresident & CEO at Armstrong World Industries00:30:10So we don't expect, an AUV mixed impact from from that dynamic that you're you're referencing. But let me just add, though, when you look at the new technology that we're talking about with, our Templot product, for example, and some of the other technologies around low embodied carbon, these products come at a higher AUV into the marketplace. And so we believe as those transition and become more of a volume multiplier in our portfolio, that there's upward lift on our AUV performance over time. So, so we believe this has been a trend that's been continuing for a number of years, well over a decade, frankly. And we think that this is a trend that can continue as we innovate into that dynamic that the industry wants to mix up in all parts of the cycle. Vic GrizzlePresident & CEO at Armstrong World Industries00:31:01Again, good question. Thank you. Charles Perron-PichéAnalyst at Goldman Sachs00:31:03Thank you. Good luck. Vic GrizzlePresident & CEO at Armstrong World Industries00:31:06Thank you. Your Operator00:31:09next question comes from the line of Garik Shmois with Loop Capital Markets. Your line is now open. Zack PachecoEquity Research Associate at Loop Capital00:31:17Good morning. This is actually Zach Pacheco on for Gerrick. Thanks for taking my question. Hey, good morning. Maybe to hone in on the Mineral Fiber AUV again. Zack PachecoEquity Research Associate at Loop Capital00:31:27Just curious how much of the implied guidance rate includes maybe a second price increase later this year versus kind of just what you're currently seeing and what you've already secured? Thanks. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:31:39Sure. Hey. Good morning. Yep. So, yes, our guidance does, incorporate kind of as we've stated in the past, getting back to our normal cadence of two price increases a year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:31:50So, yes, it is reflective, of that. And, just to maybe break it down a little bit further, the the guide in terms of the AUV does include positive mix and positive like for like pricing. So kinda given the the backdrop of, you know, tariffs and, you know, higher costs accordingly, That AUV incorporates positive mix and is a little bit tipped to a little more price than than mix. But overall, expect, you know, again, a good solid AUV performance in the year. And for modeling purposes, little bit little bit heavier in the back half than than the front half, getting back to your question on on price increase and pricing. Zack PachecoEquity Research Associate at Loop Capital00:32:33Understood. That makes sense. And then maybe just any more color on current bidding environment across your verticals? Any change to the office end market or what you're expecting to see? Thanks. Vic GrizzlePresident & CEO at Armstrong World Industries00:32:48Sure. Let me let me add a little bit, more than usual on the bidding activity. I think it's something obviously, since we're right in the middle of of of the uncertainty getting underway here. I've talked in the past about bidding activity in terms of the Dodge first time tracker on bidding activity, it's really the earliest phase of project launching, and it's something we watch quarter to quarter. And that particular measure softened in q one as uncertainty was building. Vic GrizzlePresident & CEO at Armstrong World Industries00:33:25And really no surprise. That's exactly what you would expect. First time bids, things that are in the early stages like that could take a pause and a wait and see mode. And we didn't see did see that in in q one. And it softened in both the new and the large renovation. Vic GrizzlePresident & CEO at Armstrong World Industries00:33:44And, again, just as a reminder, this Dodge first time bidding activity has somewhere between a twelve to twenty four month and sometimes even greater than that out before ceilings are needed. So this is something that we look at as a kinda high level, across the horizon type of, indicator of activity that that's out there. Again, in summary, this is kinda what we've been seeing, over the last seven or eight quarters leading up to this quarter has been this choppy kinda quarter to quarter sideways movement, in this in this particular bidding activity metric. But what I mentioned in my prepared remarks is another bidding activity altitude, if you will. It's really the ground level, on the ground, sublevel project bidding type activity. Vic GrizzlePresident & CEO at Armstrong World Industries00:34:39And what what this bidding activity really reflects is more down to ceiling projects and the interior projects bidding, level. And in in q one, this remained active and and steady. And what we we saw was good activity across many verticals like data centers and transportation, schools, hospitals, even office TI. We we saw good activity in the quarter. And I think this is to your question. Vic GrizzlePresident & CEO at Armstrong World Industries00:35:09What we're seeing today is really kind of a consistent sideway sideways motion on our bidding activity at the ground level. We're gonna continue to keep an eye on the flow or the discretionary portion of that ground level business because we think that's what we're gonna see as the first signal that the markets is softening up, based on this uncertainty. So we'll continue to, to track that closely and report out on that. Operator00:35:45Your next question comes from the line of Keith Hughes with Truist. Your line is now open. Keith HughesManaging Director at Truist Securities00:35:52Thank you. The questions are on Wave with the steel tariffs coming in. You talked about the impact, what you're having to do on pricing there. Vic GrizzlePresident & CEO at Armstrong World Industries00:36:04I'm sorry, Keith. Would you say that last part again? Keith HughesManaging Director at Truist Securities00:36:08Yeah. Question is on Wave. Could you talk about the impact there with steel tariffs and what they're having to do on pricing? Vic GrizzlePresident & CEO at Armstrong World Industries00:36:17Yes. Yeah. The wave business, we, obviously, use steel and aluminum for the structure, the the the grid, structure of our ceiling systems. As a reminder, most of what we source in terms of steel aluminum comes from The US and is locally sourced. We do bring a small percentage, from, external markets for, I will say, strategic reasons. Vic GrizzlePresident & CEO at Armstrong World Industries00:36:43We we do that. So we can shift that volume as we need to, to local sourcing here. But what we have seen in, the first round of tariffs that we saw back in 2018 with steel, steel imports is that the local steel companies begin to raise their prices. And so we're seeing actually a kind of an indirect, if you will, a ripple effect impact from the steel tariffs on local steel prices. And so we're having to to raise prices in the marketplace to help pass that on. Vic GrizzlePresident & CEO at Armstrong World Industries00:37:18We have two price increases already in the first quarter on the street to try to help us stay in front of, that, that steel inflation. So a little bit less of an or a direct impact on tariffs in our Wave business and a little more of an indirect because of the market pricing coming up. Keith HughesManaging Director at Truist Securities00:37:37Historically, when Wave raises prices, is there a margin drag until they catch up with the input with the what's what's happened on the inputs? Vic GrizzlePresident & CEO at Armstrong World Industries00:37:49Yeah. In 2018, that happened because the steel tariffs went in. If you remember during the first, first administration, that that was that happened very quickly, and it took us a quarter or two to catch up. In '22, that did not happen. We stayed ahead of of the the prices or the inflation, and, we didn't see the drag on our margins. Vic GrizzlePresident & CEO at Armstrong World Industries00:38:14So, our plan here is we're we're staying ahead of the inflation with our prices and trying to, well, trying to stay ahead of those those steel tariff price increases. So and I expect that we'll continue to expand margins in that business, throughout the year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:38:33And Keith, maybe just one additional point on WAVE is that we still expect equity earnings to grow mid single digits for the year. Keith HughesManaging Director at Truist Securities00:38:41Final question on the Specialty business. How much did price play a role in the reported numbers? And what are you expecting on that for the rest of the year? Vic GrizzlePresident & CEO at Armstrong World Industries00:38:52Yeah. I'd say minimal. That's really, the number of projects that we're winning and the size of the projects. I think it's more on the volume side than a meaningful price. We are raising price in various substrates, to stay ahead of any impact from tariffs. Vic GrizzlePresident & CEO at Armstrong World Industries00:39:10But, for the most part, the goodness and the strong performance of that business has really been projects and win rates and projects, driving that business. Operator00:39:22Alright. Thank you. The next call comes from the line of Phil Ng with Jefferies. Your line is now open. Philip NgManaging Director at Jefferies Financial Group00:39:31Hey, guys. Congrats on another strong quarter. Quick question on the home center side of things. You called out weather impacting the quarter in 1Q. Have you started seeing that normalize out? Philip NgManaging Director at Jefferies Financial Group00:39:42I think weather has cleared out a bit in March and April. So just curious to see, what you're seeing on the home center side of things and then how they've kinda managed inventory. I mean, it's lumpy from time to time. Vic GrizzlePresident & CEO at Armstrong World Industries00:39:53Yeah. That could be lumpy as as you acknowledge. Yes. We have seen, orders normalize, especially in those locations that were hardest hit by, the severe weather. So, yeah, that's getting back to its normal run rate. Philip NgManaging Director at Jefferies Financial Group00:40:08Okay. So we should expect the drag you saw in 1Q from the home center to kinda flush out kind of a non event for 2Q? Vic GrizzlePresident & CEO at Armstrong World Industries00:40:16Yeah. I think for the for the rest of the year, I would just I wouldn't call it 2Q just because, you know, they they can they can flex their inventories over a quarter as we've reported on numerous times. So I would say for the year. We don't expect this to be anything different than what we see in the rest of the marketplace for the year. So this timing related impact should work its way through. Philip NgManaging Director at Jefferies Financial Group00:40:42Okay. That's helpful. And then, Vic, I think, you kind of pointed out, if I heard you correctly, maybe it was AS or maybe it was a broader comment for new construction. But I think based on the backlogs you have right now, it sounds like you're pretty confident it could carry through '25 and appreciating that AS business new construction, there's a longer lag. Do you have enough line of sight to give us some color on what you're seeing on 2026, if you've seen bidding activity, quoting activity for that channel, AS particularly, going out to '26? Philip NgManaging Director at Jefferies Financial Group00:41:14You know, what's the early look right now? Vic GrizzlePresident & CEO at Armstrong World Industries00:41:17Yeah. You know, the the new construction side of the business in the equation is from the back half of '23 and '24 positive new construction starts. Right? So those when you lag those out for when a ceiling is required for those new construction jobs, we think that that's really gonna hold for for 2025. And if you spent all that money on those projects, by the time you get to ceilings, you're likely to finish that work. Vic GrizzlePresident & CEO at Armstrong World Industries00:41:47And so that's kind of our assumptions going into that. We don't see a big disruption on new construction coming through, as we lag it into to '25. We have better line of sight, Phil, to your question around project and the project nature business of the architectural specialties. I can tell you, that we're closing good work for the back half of this, of this year in '25 and, of course, into '25 or '26 and even into '27. Some of these projects are larger and longer term, so we're starting to close work out into those. Vic GrizzlePresident & CEO at Armstrong World Industries00:42:23But it'd be really premature for me to to talk about the the, the magnitude of that and what that could mean for us for '26. But, again, I I would just point you back to the momentum this business has created started in the back half of twenty four. It's continued into the first quarter of twenty five. The team is doing really well and, closing work. I think we're closing more work, and I expect that momentum to continue. Operator00:42:54Thank you. Your next question comes from the line of Adam Bumgarner with Zelman. Your line is now open. Adam BaumgartenManaging Director at Zelman & Associates00:43:02Hey, good morning guys. Just on the incremental price increase, I know it's typically been in February and August each year. Is that another way to think about it this year as well and perhaps maybe a higher price increase than maybe what you put through in February or kind of similar? Just curious how to think about that. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:43:20Yes. I would say it's, at this point, on our normal twice a year pricing cadence. I think the amount and the extent of that will really be dependent upon, you know, kind of how the the overall tariff and and cost landscape, unfold. So we're gonna continue to to keep, to keep an eye on that, as always. But for purposes of, you know, at this point in time and and what we have, you know, somewhat of a of a line of sight to, that that's that's how we're how we're thinking about it. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:43:50Again, as I commented on on AUV and our AUV growth for the year, again, tipped more towards price with positive mix. Again, that's largely on us continuing to stay close and monitoring the cost side of our business and then adjusting the price side accordingly. Adam BaumgartenManaging Director at Zelman & Associates00:44:09Okay. Got it. Thanks. And then just maybe on the education market, not sure if you guys touched on that, but curious what you're seeing there. I know the ESSER funding kind of rolled off to some degree. Adam BaumgartenManaging Director at Zelman & Associates00:44:19Are are you seeing any change in the trends you've been seeing over the last year or two? Vic GrizzlePresident & CEO at Armstrong World Industries00:44:24Yeah. Not materially. We've been watching that very closely as well. There was a lot of bonds that were approved for education at the state level in November. We were hopeful that that might fill in some of the gap from the ESSER funds. Vic GrizzlePresident & CEO at Armstrong World Industries00:44:39But what I can tell you, what we saw in the first quarter is still good activity in the education sector. So, we'll see how the the summer season plays out. That's that's really where you see the bulk of the education, k three twelve action anyway. So we'll be very watchful of that. But so far, we've not seen a falloff in education activity. Operator00:45:03Alright. Thank you. The next question comes from the line of Rafe Jadrozhik with Bank of America. Your line is now open. Rafe JadrosichManaging Director & Senior Equity Analyst at Bank of America00:45:15Hi, good morning. Thanks for taking my questions. Think last quarter you said you were expecting I think inflation or cost inflation for the year in the low single digit range. Can you just give an update of what you're expecting now and then the difference between energy and freight and raw materials? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:45:33Sure. Sure. Good morning, Ray. Yes. So just to size our inflation assumptions for the year, we expect freight to be relatively flat for the year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:45:45Raw materials, expect to be inflationary in that mid single digit percentage range versus prior year. And then energy, between 10% to 15% inflationary, and that's really kind of driven by, volatility in the natural gas market. So what that puts you at is from a total input cost perspective, in that mid single digit range of inflation for, full year, versus prior year. So again, just a reminder within that energy bucket, it's about pretty evenly split between, electricity and natural gas. But from a raw material perspective, this does kind of dial in a little bit of an uptick in some of our raws that will be slightly impacted by tariff impacts. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:46:39So mid single digit inflation, for the year, as a percentage versus prior year. Rafe JadrosichManaging Director & Senior Equity Analyst at Bank of America00:46:45Got it. That's helpful. Then the higher price realization in your guide is what's offsetting that? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:46:52Yeah. I mean, we think about this more broadly than just the pricing component, which certainly is, and as Vic mentioned in his prepared remarks, a mitigation and way to continue to offset. But we also are focused on continuing to drive productivity. We've had a really strong track record of being able to demonstrate manufacturing productivity in our plants. We expect that to continue, as well as the focus disciplined and rigorous cost control and cost management. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:47:25So I think all three of those components, coupled together, is really what gives us the levers, if you will, to continue to grow and expand margins here. That's how we're thinking about operating the business given these dynamic times. Rafe JadrosichManaging Director & Senior Equity Analyst at Bank of America00:47:42Okay. That's helpful. Just on the AS side, the organic growth, obviously, you had M and A contribution, but the organic growth is really strong in the first quarter here. How do you think about sort of what the implied organic growth is for the remainder of the year? And how does that compare to the market? Rafe JadrosichManaging Director & Senior Equity Analyst at Bank of America00:48:01What's the market share that you're seeing or your growth relative to the market that you're anticipating? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:48:11Yes. So for kind of implied in the guide for the year on the organic side of AS, it's a softer back half than the front half of the year. But really, what's at play there is lapping a really strong back half of 2024. So as Vic mentioned and I mentioned in our remarks about keeping a watchful eye on, you know, overall projects, project project delays, etcetera, you know, that could certainly be be at play. But, again, we we we have a little bit of a of a timing dynamic given just the strength of the back half last year relative to the expected strength in in the back half of of this year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:48:51And I'd say we're we're continuing to to to do well, in win, in the AS in the AS business and, are very pleased with, you know, the double digit, top line growth that we saw organically here in the quarter. So really pleased with that business and its performance. Theresa WombleVice President of Investor Relations & Corporate Communications at Armstrong World Industries00:49:12Thank you. Operator00:49:19Your next question comes from the line of John Lovallo. Your line is now open. John LovalloAnalyst at UBS Group00:49:26Good morning, guys. Thanks for taking my questions. The first one is on Mineral Fiber AUV incrementals The increase the percent, which it's consistent with last quarter, but it's below historical levels. I was under the impression that this may have been driven by a little bit more mix versus price in AUV, but that doesn't seem like it's the case. So curious what's driving that? John LovalloAnalyst at UBS Group00:49:48And would you expect this to kind of normalize higher as we move through the year? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:49:52Yes. So yes, that's largely, you're talking about the impact, the EBITDA impact on AUV in the quarter. It's really timing, in nature. We can see this from time to time and can get some some quarterly noise, if you will, around how projects ship, which can influence the overall basket of products and and how that that falls to the to the bottom line. So when I when I take a look at, you know, our overall expectation for the year, we do believe that our our, incremental there on EBITDA, will return to and and kind of be in line with our, historical fall through rate there. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:50:29But from time to time, you get a little bit of quarterly noise, that's what we saw here in Q1. John LovalloAnalyst at UBS Group00:50:37Okay. Got you. And then manufacturing costs have been John LovalloAnalyst at UBS Group00:50:41a headwind to AS adjusted EBITDA for a few quarters now. Curious what's kind of driving that headwind and do you expect that to subside as we move through the year? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:50:53Yes, I'd say largely when you look at the AS segments again, with the inorganic growth that we've seen, you know, the, the manufacturing costs, are are stepped up in connection with, you know, the the acquisition of of two businesses that we saw in 2024. That's largely call it, the manufacturing cost increase that we've seen in that segment. John LovalloAnalyst at UBS Group00:51:17Okay. Thank you, guys. Vic GrizzlePresident & CEO at Armstrong World Industries00:51:19Thanks. Operator00:51:23Your next question comes from the line of Brian Bureaus with Thompson Research Group. Your line is now open. Brian BirosEquity Analyst at Thompson Research Group00:51:32Hey, good morning. Thank you for taking my questions. I guess on the sales guidance for Architectural Specialties, looks like it's a slight raise there. Guess, kind of goes against the general uncertainty in the market. And I know you talked about a few trends there throughout the call, but just curious if you could expand on what is behind the raise there for the guidance, if that's project timing or better acquisition cross selling or something else? Brian BirosEquity Analyst at Thompson Research Group00:51:56Just what's driving that? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:52:00Yeah. I'd say, you know, there's a little bit of what what Vic had mentioned earlier around, you know, project, the overall visibility to to projects there in in that side of the business, you know, more clear line of sight due to, you know, our our our backlogs. And you you also have a a bit of that project, call it, time line, which is, you know, once a project kinda gets gets gets started, it's from the time of breaking ground to to ceiling shipment. It can be in that twelve to twenty four month range. So we we feel, that that line of sight gives us, confidence around our, ability to, to to call, that top line growth, increase slight increase in in AS. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:52:45But tempered with that too is a little bit of the uncertainty and cloudiness around what potential project delays could look like. So overall, it's the backlog and the line of sight that we have that gives us confidence in the uptick in the top line growth expectation for for AS, albeit balanced with, you know, that potential uncertainty that's out there. Vic GrizzlePresident & CEO at Armstrong World Industries00:53:07And and, Brian, let me add. What Chris has said is exactly right. If you don't mind, I'll just add that the other component that's a little different in architectural specialties is the market penetration growth dimension of that business. Vic GrizzlePresident & CEO at Armstrong World Industries00:53:21Remember, this is doing much better than the overall market is doing, and that's something that we can continue to do even if the market softens in the back half. So that's the other, I think, growth dimension that we have here, growth driver that we have here that's different than, say, in our Mineral Fiber business. Brian BirosEquity Analyst at Thompson Research Group00:53:41Understood. And then on guess, on the updated Mineral Fiber volume guidance, are there any specific verticals that you would expect to see maybe a quicker or more severe pullback based on your historical reference? Or is that more of a broad based view that everything would discretionary type spend would pull back kind of in line with everything? Thank you. Vic GrizzlePresident & CEO at Armstrong World Industries00:54:02Yeah. Yeah. I I understand the question. You know, going back to, an answer I'm I I gave earlier around, the discretionary portion of the the renovation work is where we're gonna see the softness in the back half. Our experience here has been it's really vertical agnostic. Vic GrizzlePresident & CEO at Armstrong World Industries00:54:22If it's a discretionary project, whether it's an education, health care, or office, it is subject to a wait and see when there's a high degree of uncertainty. So I wouldn't say one one particular vertical is gonna stand out over the other. I think we're gonna see across the verticals the discretionary work. Again, I think that's where we're gonna see the the softness in the back half. Operator00:54:49Thank you. And our final question comes from the line of Kim with Evercore ISI. Your line is now open. Stephen KimSenior Managing Director at Evercore ISI00:54:57Yes. Thanks a lot. Vic, I just wanted to follow-up on that last point there. Discretionary projects, do we see any kind of would we expect to see any kind of AUV or margin impact if you do see a decline in discretionary first? I'm also kind of wondering whether or not you might see or anticipate you might see maybe smaller customers having more of a sort of disproportionate impact from the sentiment impacts you were referring to earlier? Stephen KimSenior Managing Director at Evercore ISI00:55:30And similarly, like, could that have an AUV or margin impact worth calling out? Vic GrizzlePresident & CEO at Armstrong World Industries00:55:35Yeah. Vic GrizzlePresident & CEO at Armstrong World Industries00:55:38This discretionary business flow business, as we we refer to it, Steven, as you know, is is where we have the least amount of visibility. It is concentrated more with the installed base, and it kinda mirrors more of the installed base, which still is a lot of older, more, I would say, lower AUV type products. So if there's any AUV impact, it would be a lift on AUV or a help to AUV because of the mix improvement by not having some of the lower AUV in it. Mhmm. Whether it's material or not, I think that's that's another question. Vic GrizzlePresident & CEO at Armstrong World Industries00:56:16But, directionally, to to get at your question, I think if there is an AUV impact from that discretionary spend or the lack of the discretionary spend, I think, it might show up there. I think these are smaller projects, not smaller customers. I would think about it that way because even larger customers might, forego or put on hold smaller projects. And, again, I would say it's the same dynamic. I think, if anything, there there might be less lower AV products in the mix and would be an upward, help to the overall mix. Vic GrizzlePresident & CEO at Armstrong World Industries00:56:50Does that help? Stephen KimSenior Managing Director at Evercore ISI00:56:52Yep. Absolutely. That was exactly my question. Appreciate that. Okay. Stephen KimSenior Managing Director at Evercore ISI00:56:56Then second question relates to the again, staying on AUV impacts. The home center softness, I'm wondering, does that also have some sort of an AUV effect? In other words, was AUV maybe a little benefited by the home center softness this quarter as well? Vic GrizzlePresident & CEO at Armstrong World Industries00:57:14Yes. Yes, definitely. As we've talked about, that's our lower AUV channel. We have a very low or a small group of products that we sell through that channel, and they tend to be at the lower AUV. So, there was a little bit of a help in the quarter on the mix side from the lack of volume in that retail channel. Stephen KimSenior Managing Director at Evercore ISI00:57:36Okay. Great. Thanks very much. Vic GrizzlePresident & CEO at Armstrong World Industries00:57:39You bet. Operator00:57:42There are no further questions at this time. So I would like to turn the call back over to Mr. Vic Grizzle. Vic GrizzlePresident & CEO at Armstrong World Industries00:57:49Well, thank you all for joining our call today and for your questions. I think as you can hear in our discussion today, we, we have a resilient business model, and we have a proven ability to execute on our controllables that give us confidence to navigate these choppy and uncertain market conditions. So we're ready to and poised to execute, even in softer market conditions that, we're forecasting for the back half of this year. Thank you again for joining our call today. Operator00:58:21This concludes today's conference call. You may now disconnect.Read moreParticipantsExecutivesTheresa WombleVice President of Investor Relations & Corporate CommunicationsVic GrizzlePresident & CEOChris CalzarettaSenior VP & CFOAnalystsCharles Perron-PichéAnalyst at Goldman SachsZack PachecoEquity Research Associate at Loop CapitalKeith HughesManaging Director at Truist SecuritiesPhilip NgManaging Director at Jefferies Financial GroupAdam BaumgartenManaging Director at Zelman & AssociatesRafe JadrosichManaging Director & Senior Equity Analyst at Bank of AmericaJohn LovalloAnalyst at UBS GroupBrian BirosEquity Analyst at Thompson Research GroupStephen KimSenior Managing Director at Evercore ISIPowered by Conference Call Audio Live Call not available Earnings Conference CallArmstrong World Industries Q1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Armstrong World Industries Earnings HeadlinesArmstrong World Industries Inc (AWI) Q1 2025 Earnings Call Highlights: Record Sales and ...April 30, 2025 | finance.yahoo.comArmstrong World Industries, Inc. (NYSE:AWI) Q1 2025 Earnings Call TranscriptApril 30, 2025 | msn.comThe Trump Dump is starting; Get out of stocks now?The first 365 days of the Trump presidency… Will be the best time to get rich in American history.May 5, 2025 | Paradigm Press (Ad)Armstrong World Industries (AWI) Sees Target Price Cut by Loop Capital | AWI Stock NewsApril 30, 2025 | gurufocus.comArmstrong World Industries: No Change In Opinion, Even After A Great QuarterApril 30, 2025 | seekingalpha.comArmstrong World Industries, Inc. (NYSE:AWI) Receives $153.33 Consensus PT from AnalystsApril 30, 2025 | americanbankingnews.comSee More Armstrong World Industries Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Armstrong World Industries? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Armstrong World Industries and other key companies, straight to your email. Email Address About Armstrong World IndustriesArmstrong World Industries (NYSE:AWI), together with its subsidiaries, engages in the design, manufacture, and sale of ceiling and wall solutions in the Americas. It operates through Mineral Fiber and Architectural Specialties segments. The company offers mineral fiber, fiberglass wool, metal, wood, felt, wood fiber, and glass-reinforced-gypsum; ceiling component products, such as ceiling perimeters and trims, as well as grid products that support drywall ceiling systems; ceilings, walls, and facades for use in commercial settings; and manufactures ceiling suspension system (grid) products. It serves commercial and residential construction markets, as well as renovation of existing buildings sectors. The company sells its products to resale distributors, ceiling system contractors, wholesalers, and retailers comprising large home centers. Armstrong World Industries, Inc. was founded in 1860 and is headquartered in Lancaster, Pennsylvania.View Armstrong World Industries ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback Plan Upcoming Earnings American Electric Power (5/6/2025)Advanced Micro Devices (5/6/2025)Marriott International (5/6/2025)Constellation Energy (5/6/2025)Arista Networks (5/6/2025)Brookfield Asset Management (5/6/2025)Duke Energy (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Ferrari (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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PresentationSkip to Participants Operator00:00:00Thank you for standing by. My name is Amy, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Q1 twenty twenty five Armstrong World Industries Incorporated Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:35It is now my pleasure to turn the call over to Theresa Womble, VP of Investor Relations and Corporate Communications. You may begin. Theresa WombleVice President of Investor Relations & Corporate Communications at Armstrong World Industries00:00:46Thank you, Amy, and good morning, everyone. On today's call, Vic Grizzle, our CEO and Chris Calzaretta, our CFO, will discuss Armstrong World Industries' first quarter twenty twenty five results and rest of year outlook. We have provided a presentation to accompany these results that is available on the Investors section of the Armstrong World Industries website. Our discussion of operating and financial performance will include non GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of these measures with the most directly comparable GAAP measure is included in the earnings press release and in the appendix of the presentation, both of which were issued this morning. Theresa WombleVice President of Investor Relations & Corporate Communications at Armstrong World Industries00:01:34During this call, we will be making forward looking statements that represent the view we have of our financial and operational performance as of today's date, 04/29/2025. These statements involve risks and uncertainties that may differ materially from those implied or expected. We provide a detailed discussion of the risks and uncertainties in our SEC filings, including the 10 ks filed earlier this year. We undertake no obligation to update any forward looking statement beyond what is required by applicable securities laws. Now I will turn the call to Vic. Vic GrizzlePresident & CEO at Armstrong World Industries00:02:13Thank you, Theresa, and good morning, everyone, and thank you for joining our call today to discuss our first quarter twenty twenty five results and our expectations for the rest of the year. Our first quarter was another quarter of record setting sales and adjusted EBITDA for Armstrong as we continue to execute our growth strategy well and improve our productivity and expand our capabilities into new market opportunities. In the first quarter, total company net sales increased 17% and adjusted EBITDA increased 16% with meaningful margin expansion in both of our segments. And in fact, it was the best Q1 margin performance in both segments since 2020. These results were a clear demonstration of the strength of our business model, the diversity of our end markets, as well as the strong execution culture we have here at Armstrong. Vic GrizzlePresident & CEO at Armstrong World Industries00:03:06Delivering these financial results in an environment of elevated uncertainty requires focus and agility to adjust to changing operating conditions and customer needs and doing this while continuing to deliver industry leading quality and service levels our customers have come to expect. Again, the agility and commitment to execution by our teams was on full display in the quarter. And as many of you have come to know, this is a hallmark of the organization we have here at Armstrong. So I want to take this opportunity and thank all of our employees for their tremendous efforts and their commitment to execution. Now taking a closer look at the first quarter results in our Mineral Fiber segment, net sales increased 2% while EBITDA increased 7%. Vic GrizzlePresident & CEO at Armstrong World Industries00:03:51Sales growth for the segment was driven by a 7% increase in average unit value or AUV versus the prior year, which included favorability in both like for like pricing and product mix. This increase in AUV more than offset lower sales volumes, primarily driven by weather and lower foot traffic in our home center channel and predominantly in the Southeast where winter weather was particularly severe. In the Mineral Fiber segment, I'm pleased with the EBITDA margin performance, which expanded 180 basis points to 43. This was the strongest first quarter margin performance since 2020 and our ninth consecutive quarter of year over year margin expansion. Again, AUV was a key driver of EBITDA growth and margin expansion in the quarter. Vic GrizzlePresident & CEO at Armstrong World Industries00:04:42Also notably in the quarter and a contributor to margin expansion was our manufacturing productivity despite the softer volumes. This outcome reflects the multiyear long term approach to investing in productivity that we practice here at Armstrong. This not only helps with our direct productivity, but it also enhances our consistency of our service and quality levels that distinguish us in the marketplace. One of the key indicators we track internally is what we call our perfect order measure that you have heard me mention in the past. This measure includes five areas of service and quality that represent a perfect order from order to entry, order entry to customer receipt, and again, representing what a perfect order looks like in the eyes of our customer. Vic GrizzlePresident & CEO at Armstrong World Industries00:05:28This quarter, the measure was solidly ahead of our target and near historic highs. This has been a passion of ours. And in times like these, with high levels of uncertainty and risk for supply chain disruption, this is and will continue to be a critical differentiator for Armstrong. Overall, I'm pleased with the performance of the Mineral Fiber segment in the quarter despite softer volume, delivering EBITDA growth, margin expansion, AUV growth and manufacturing productivity, all while maintaining our high levels of quality and customer service. Now turning to the Architectural Specialties segment, where our results in the quarter were particularly strong and broad based in both the organic and the inorganic sides of the business. Vic GrizzlePresident & CEO at Armstrong World Industries00:06:14This is clearly a demonstration of the advantage of having the broadest portfolio of solutions where we continue to leverage our scale and specification strength to sell more products into more spaces and drive profitable top line growth. For a decade now, we have averaged 20% top line growth in this segment. And with our strong start to the year, we expect to continue this pace of growth in 2025. Organically, the first quarter Architectural Specialties sales grew 11% from prior year's results. And our 2024 acquisitions, 3form and Zayner, contributed another 47 percentage points of sales growth. Vic GrizzlePresident & CEO at Armstrong World Industries00:06:54Additionally, our order intake grew in the first quarter. Notably, both our sales and order intake spanned a wide range of product types and broad based set of market verticals. In addition to the transportation vertical, we saw good project activity in office, retail and education. And because of our industry leading product portfolio, strong service levels and mostly U. S. Vic GrizzlePresident & CEO at Armstrong World Industries00:07:18Manufacturing footprint, we believe we are well positioned to continue to win. Along with strong top line growth in the quarter, I am particularly pleased with the strong adjusted EBITDA growth and margin expansion performance in this segment as well. Architectural Specialties adjusted EBITDA increased 94%, including organic EBITDA growth of 34%. And as important, the EBITDA margin for the segment expanded at both the organic and total segment level as we continue to improve our operating leverage. And in fact, this was the strongest first quarter. Vic GrizzlePresident & CEO at Armstrong World Industries00:07:55Architectural Specialties adjusted EBITDA margin performance since 2020 and marks continued progress toward our goal of 20% EBITDA margin for this segment. It's also worth noting in the quarter solid performance of our 2024 acquisitions. We are very pleased with how both Threeform and Zener are performing and the mutual benefits we are seeing developing as we increase our collaboration and knowledge sharing. And frankly, I'm not surprised at how well this is going given that both these companies come with highly professional and skilled management teams who have the right mindset to collaborate and innovate with Armstrong to accelerate their growth. With three Form, the collaboration across our sales teams has uncovered many opportunities to sell more products into more spaces, given three Form's unique ability to create translucent solutions that use light and texture to enhance design opportunities for architects. Vic GrizzlePresident & CEO at Armstrong World Industries00:08:51And in addition, we have worked together with their teams to increase ThreeForm's operational efficiency and are already seeing benefits from these efforts. And at Zener, as we noted last quarter, we significantly expanded our exterior metal design and fabrication capabilities and further deepened our presence in an attractive adjacency that complements our existing interior metal business. The strong market reputation of Zener gives us early access to large complex projects, and we expect this will enhance our visibility to more selling opportunities for the interior spaces of these large projects, in addition to the new business opportunities on the exterior. And as we have stated, we estimate that this exterior metal adjacency will add another $1,000,000,000 to the addressable market for our Architectural Specialties segment, bringing its total addressable market to more than $2,500,000,000 We're excited to expand our presence in this adjacency and to continue our above market growth rate for years to come. Now before turning the call over to Chris, let me take a moment to share how we're thinking about the market in light of the current and evolving tariff landscape. Vic GrizzlePresident & CEO at Armstrong World Industries00:10:05As we all know, this is a very fluid and uncertain set of dynamics that we will all have to navigate. First, it's worth repeating that our production and supply chain is predominantly U. S.-based, and the majority of our products sold into Canada and Mexico are covered under the USMCA trade agreement. In the limited areas where we see a direct impact on our costs, we expect to mitigate those impacts through negotiations, price actions and through supply chain adjustments within our U. S. Vic GrizzlePresident & CEO at Armstrong World Industries00:10:35Footprint. So for direct impacts of tariffs here at Armstrong, the impact is both minor and manageable. Beyond these minor impacts, we do believe the indirect benefit effects from high levels of uncertainty around these tariffs has the potential to dampen end market activity. This, of course, is much more difficult to call given the varying impacts throughout the value chain. For Armstrong, the market impact is likely to come in the form of holding back and pausing on discretionary renovation work until there is more clarity on on the way forward, much like we have seen in prior periods of market disruption and uncertainty. Vic GrizzlePresident & CEO at Armstrong World Industries00:11:18There may also be some disruptions in the construction supply chain that could impact project time lines. That said, in total, we don't see a meaningful impact from disruption in new construction activity in 2025 given the lag time on new constructions, projects. The ground level bidding activity in the market remains supportive at this time, as do the order rates through April. And the sentiment from our customer survey work remains positive but understandably cautious given the uncertainty. Of course, we will remain vigilant as further disruptions from policy changes could create more project delays than we are seeing at the moment. Vic GrizzlePresident & CEO at Armstrong World Industries00:12:00Given what we know and its expected impacts and with our controllables, namely pricing, productivity and good cost management, we remain confident in our ability to navigate these conditions, and therefore, we are reaffirming our full year guidance for 2025. So with that, let me pause and turn it over to Chris for more on our financials. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:12:22Thanks, Vic, and good morning to everyone on the call. As a reminder, throughout my remarks, I'll be referring to the slides available on our website and Slide three, which details our basis of presentation. Beginning on Slide six, we summarize our first quarter Mineral Fiber segment results. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:12:37Mineral Fiber sales were up 2% in the quarter, driven by favorable AUV of 7%, partially offset by lower sales volumes. The strong AUV result was fairly balanced between like for like price and favorable mix. Lower sales volumes were driven primarily by softer demand from our home center customers who experienced lower store traffic due to a number of factors, including negative weather related impacts in certain markets. We also had one less shipping day compared to the prior year quarter, which represents about a point of volume in the quarter. Overall, the market we experienced was consistent with the choppy conditions that we expected heading into 2025. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:13:17Mineral Fiber segment adjusted EBITDA grew seven percent despite softer volumes, with adjusted EBITDA margin expanding 180 basis points to 43%. Adjusted EBITDA margin expansion was primarily driven by the benefit of AUV growth and manufacturing productivity gains despite lower volumes. In addition, the segment margin benefited from lower SG and A expenses and favorability in input costs as compared to the prior year quarter. The decrease in SG and A was primarily driven by deferred compensation plan gains. Input cost inflation was more than offset by favorable inventory valuation timing impacts. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:13:57Similar to Mineral Fiber, we saw softer grid volume in our WAVE joint venture, driving weaker equity earnings in the quarter. Recall that we are also lapping a strong first quarter of twenty twenty four, which was the highest equity earnings quarter of twenty twenty four. As Vic mentioned, Mineral Fiber's adjusted EBITDA margin of 43% in the quarter was the best Q1 margin performance for this segment since 2020 and was a strong demonstration of our value creation drivers, including consistent AUV growth and manufacturing productivity gains despite uneven market conditions. On slide seven, we discuss our Architectural Specialties or AS segment results, where we highlight robust sales growth of 59%. This growth was driven primarily by contributions from our recent acquisitions, 3Form and Zaner, both of which performed in line with expectations. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:14:52On an organic basis, I'm also pleased to report that we have delivered double digit first quarter sales growth of 11 with strength in many product categories. AS adjusted EBITDA grew 94% with a 17.1% adjusted EBITDA margin. This represents margin expansion of three ten basis points as higher acquisition related operating costs were more than offset by inorganic sales growth. In addition, we benefited from better operational leverage on our cost base. We are encouraged to see this adjusted EBITDA margin improvement and remain focused on delivering our goal of greater than 20% adjusted EBITDA margins for the segment. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:15:34We continue to closely monitor project timelines, particularly against the backdrop of elevated macro uncertainty. Slide eight highlights our first quarter consolidated company metrics. We delivered double digit growth for both sales and earnings with adjusted EBITDA margins that compressed slightly versus the prior year. Notably, adjusted diluted earnings per share grew 20%. Our total company adjusted EBITDA margin of 33.6 marks a solid start to the year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:16:07Incremental volume from recent acquisitions and our growth initiatives coupled with consistent AUV performance drove our adjusted EBITDA growth in the first quarter. These benefits more than offset an increase in SG and A, which as noted earlier was driven by our recent acquisitions of Three Form and Zener. Excluding the impact of these acquisitions, we generated an organic adjusted EBITDA margin of 35.6%, which represents 170 basis points of margin expansion as compared to the first quarter of twenty twenty four. Slide nine shows our year to date adjusted free cash flow performance versus the prior year. The 10% increase in adjusted free cash flow was driven by higher cash earnings and dividends from our Wave joint venture, which was partially offset by higher capital expenditures. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:16:56We remain confident in our ability to deliver strong adjusted free cash flow growth in 2025 to support all of our capital allocation priorities despite elevated macro uncertainty. In the first quarter, we repurchased $22,000,000 of shares and paid $13,000,000 of dividends. As of 03/31/2025, we have $640,000,000 remaining under the existing share repurchase authorization. With a healthy balance sheet that includes low leverage and ample available liquidity, we are well positioned to execute and advance our strategy. As we move to slide 10, we'll see our full year guidance for 2025, which is unchanged for the four key metrics of total company net sales, adjusted EBITDA, adjusted diluted earnings per share and adjusted free cash flow. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:17:47We have made some modest adjustments to some of our assumptions given the current macroeconomic headwinds, and this guidance now reflects the impacts of currently known tariffs. This guidance now reflects softer market conditions in the second half of the year due to elevated uncertainty stemming from tariffs. As such, we are decreasing our Mineral Fiber sales volume expectations to flat to down in the low single digit range, but we expect that this headwind to our net sales growth will be largely offset by greater than 6% Mineral Fiber AUV growth as well as a slightly better outlook for total AS sales growth. It's important to note that while there will be a headwind, we do not believe tariffs as they stand today will have an outsized direct impact on our results. The tariffs as currently announced represent a manageable level of less than 3% impact to our total cost of goods sold. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:18:45For Wave, the tariffs as announced have about a 5% impact on the joint venture's total cost of goods sold. We believe we are well positioned to mitigate most of the impacts from these tariffs, and our guidance is reflective of those actions. Additionally, we have relatively limited exposure to foreign currency fluctuations, which positions us well to weather volatile market environments. We remain confident in our outlook and on our team's ability to drive manufacturing productivity and demonstrate rigorous cost management and drive overall efficiencies while balancing investing for growth. We are well positioned to deliver solid results for the remainder of the year as we continue to demonstrate the resilience of our business model despite challenging market conditions. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:19:32We remain committed to driving margin expansion and continuing to deploy cash to generate growth and create value for our shareholders. And now I'll turn it back to Vic before we take your questions. Vic GrizzlePresident & CEO at Armstrong World Industries00:19:43Thanks, Chris. And one thing that we have been consistent with here at Armstrong is staying with the investments in our growth initiatives even in times of uncertainty. The reason for this is our high level of conviction in our strategy and the confirmation from the traction we are realizing from our growth initiatives. Vic GrizzlePresident & CEO at Armstrong World Industries00:20:02We kept our investments going in twenty twenty during the pandemic and again during the disruption that occurred in 2022, and we will again continue investments in our growth initiatives in this current period of uncertainty. The strength of our business model and our balance sheet allows us to do so. We continue to be pleased with the reach and the contributions of Canopy, our online selling platform. We've shared how it's helping to drive incremental sales volume for Mineral Fiber and Grid products. And we have also been adding many more of our Architectural Specialty products to the platform, including solutions from our recently acquired three form business. Vic GrizzlePresident & CEO at Armstrong World Industries00:20:41Our Project Works platform, our advanced automated design service, had strong results this quarter and added incremental sales volumes. Using Project Works meaningfully increases the productivity of designers, architects and contractors with designing and executing complex projects and achieving more efficient use of materials, resulting in less waste on the job site. We continue to expand the capabilities of Project Works, both in terms of products and design optimization, And more and more customers are using this service to enhance their own productivity in their pursuit of their own cost and quality goals. And our innovation, in particular, around energy saving ceiling tiles is gaining traction in the market and confirming that companies are indeed looking for energy savings for both cost savings benefits and for achieving internal decarbonization goals. Our phase change material innovation, coupled with our acoustical performance, is changing how architects and designers as well as building owners view the ceiling with energy saving attributes that bring enhanced functionality and reduced energy consumption in buildings. Vic GrizzlePresident & CEO at Armstrong World Industries00:21:55Energy and how we conserve it is a key macro trend that will impact construction and industrial markets for years to come. It is driven by the increasing need for resiliency and energy efficiency in buildings, the drive towards clean technology and the growth of artificial intelligence, along with the pressure this puts on our nation's electrical grid systems. These challenges are critical for all industries to address, but particularly important for the construction of buildings as buildings consume nearly 40% of global energy. And in The U. S, the built environment consumes nearly 75% of all electricity used. Vic GrizzlePresident & CEO at Armstrong World Industries00:22:34About half of that energy usage is to heat and cool buildings. Just this month, the leading standard for healthy and sustainable buildings, the LEED certification standards, recognized a heightened need to deepen its focus on decarbonization and energy efficiency and have increased LEED credits for energy savings in the latest version released. We believe that our products can play an important role enabling industry to address this challenge. Innovative products like our TempLoc energy saving ceilings respond to the urgent need for energy efficiency and decarbonization with their ability to achieve up to 15% energy cost savings from heating and cooling buildings. These products can make a meaningful impact for both reducing the cost of operating commercial buildings and increasing decarbonization within these buildings. Vic GrizzlePresident & CEO at Armstrong World Industries00:23:24In addition, Templot can reduce energy usage at peak times of the day, thereby helping to lessen the strain on The US electrical grid system. Now with the explicit inclusion of phase change material as qualifying thermal storage technology for tax credits under the Inflation Reduction Act, Temploc can be even more of a win win for building owners and operators through lower installation costs and lower energy operating costs. Customers of Temploc may be eligible for tax credits of 40% to 50%, dramatically improving the return on their investment. With this tax credit, Temploc is gaining recognition as a viable energy saving solution, and we're seeing increased interest for winning specifications and are currently ramping up production. These are exciting developments for us, and we are continuing our innovation around the Temploc platform with our multigenerational approach to product development. Vic GrizzlePresident & CEO at Armstrong World Industries00:24:24We look forward to providing more updates on our progress in the coming quarters. And as important, beyond our organic growth initiatives, with our high confidence in our cash flow generation and the strength of our balance sheet, we remain active in our pursuit of inorganic growth opportunities as well to sustain the strong and consistent growth of our Architectural Specialties business. So as we navigate these uncertain market conditions and plan for a softer back half of Vic GrizzlePresident & CEO at Armstrong World Industries00:24:55the year, Vic GrizzlePresident & CEO at Armstrong World Industries00:24:56mainly due to pausing of discretionary renovation work, our agility and commitment to execution with the help of a local supply chain structure as well as diversity of our end markets will serve us well. The dependable ability to deliver AUV growth, productivity gains and above market growth rates in our Architectural Specialties business will allow Armstrong to outperform in conditions such as these. And because of our resilient business model, we are well positioned to be both prudent where appropriate and assertive where opportunities present themselves to optimize the value creation outcome for our shareholders. With that, we'll pause now and take your questions. Operator00:25:41Thank you. The floor is now open for questions. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset Your Your first question comes from the line of Susan Maklari with Goldman Sachs. Your line is now open. Charles Perron-PichéAnalyst at Goldman Sachs00:26:29Good morning, everyone. This is Charles Perron in for Susan. Thanks for taking my question and congrats on the strong quarter. Charles Perron-PichéAnalyst at Goldman Sachs00:26:35Thank you. Vic GrizzlePresident & CEO at Armstrong World Industries00:26:36Good morning, Charles. Charles Perron-PichéAnalyst at Goldman Sachs00:26:37Good morning. Charles Perron-PichéAnalyst at Goldman Sachs00:26:38Just maybe first, I Charles Perron-PichéAnalyst at Goldman Sachs00:26:39want to talk about your expectations for volume deceleration in the back half of this year. It sounds from your commentary that orders and activity are holding strong through April. So against that, is the deceleration more signs of conservatism or any other signs of slowdown you're hearing when speaking with customers? And how do you expect those to flow through across segment your two segments over the course of the year? Vic GrizzlePresident & CEO at Armstrong World Industries00:27:05Yeah. It's a good question because we're we're kind of in the middle of this, right, thirty days outside of the announcement of much broader and, larger tariffs. So we're kind of in the middle of this now. So it's a good question. The, the sentiment from the customers, and and the reason why I I mentioned the on the ground bidding activity does remain to be kind of intact and steady and not reflective of what we think the downstream impact of this this uncertainty could have in the in the back half. Vic GrizzlePresident & CEO at Armstrong World Industries00:27:38So, yeah, I I think in the current moment and what we're experiencing today is about what we would have expected before, I think, again, the, the announcement of the size and the breadth of the tariffs that has maybe changed the sentiment. So our our basis of this outlook for the for the back half of the year is really exper experiential. In prior periods where we have, event based disruption in the marketplace, the first thing that goes to the sidelines is that discretionary work. Projects that aren't critical and that can wait and customers or or or owners behind those projects move them to the sidelines and wait for a little bit more visibility and clarity. That's that's what we've experienced, and that's kind of what we're modeling it here. Vic GrizzlePresident & CEO at Armstrong World Industries00:28:28Even though we're not seeing it and feeling it today, we do expect that based on prior experiences, when we have this level of uncertainty for this length of time, the first thing that's gonna show up is, is a softening in the discretionary, project work. So, again, we've modeled our our outlook for the back half based on that experience. Charles Perron-PichéAnalyst at Goldman Sachs00:28:50Okay. That's super helpful, Vic. And maybe second, talking about the mix impact in Mineral Fiber, when you consider the pricing actions that you look to put in place or you have put in place, the benefit from recent product introduction like TenPlot Healthy Spaces against the risks of a slowdown, are you seeing any signs of trade down in mix moving away from those new products? And maybe also it would be helpful if you could provide some context about what you see historically in mix, what happening during prior downturns? Vic GrizzlePresident & CEO at Armstrong World Industries00:29:21Yeah. Again, a good question because under these conditions, you would expect maybe some of that trade down to happen. We have not seen that. As you can see in our results in the first quarter, we had a positive product mix, which means that customers continue to trade up to our highest technology products, our highest aesthetic, product. So that's continued into, the first quarter. Vic GrizzlePresident & CEO at Armstrong World Industries00:29:45Actually, this is a dynamic that transcends downturns. We've seen this for well over a decade now, this natural dynamic to mix up. I don't see that changing in the back half of this year even with the downturn. We we didn't see that in the great financial crisis. We didn't see that during the pandemic, and those were much deeper downturns, of course. Vic GrizzlePresident & CEO at Armstrong World Industries00:30:10So we don't expect, an AUV mixed impact from from that dynamic that you're you're referencing. But let me just add, though, when you look at the new technology that we're talking about with, our Templot product, for example, and some of the other technologies around low embodied carbon, these products come at a higher AUV into the marketplace. And so we believe as those transition and become more of a volume multiplier in our portfolio, that there's upward lift on our AUV performance over time. So, so we believe this has been a trend that's been continuing for a number of years, well over a decade, frankly. And we think that this is a trend that can continue as we innovate into that dynamic that the industry wants to mix up in all parts of the cycle. Vic GrizzlePresident & CEO at Armstrong World Industries00:31:01Again, good question. Thank you. Charles Perron-PichéAnalyst at Goldman Sachs00:31:03Thank you. Good luck. Vic GrizzlePresident & CEO at Armstrong World Industries00:31:06Thank you. Your Operator00:31:09next question comes from the line of Garik Shmois with Loop Capital Markets. Your line is now open. Zack PachecoEquity Research Associate at Loop Capital00:31:17Good morning. This is actually Zach Pacheco on for Gerrick. Thanks for taking my question. Hey, good morning. Maybe to hone in on the Mineral Fiber AUV again. Zack PachecoEquity Research Associate at Loop Capital00:31:27Just curious how much of the implied guidance rate includes maybe a second price increase later this year versus kind of just what you're currently seeing and what you've already secured? Thanks. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:31:39Sure. Hey. Good morning. Yep. So, yes, our guidance does, incorporate kind of as we've stated in the past, getting back to our normal cadence of two price increases a year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:31:50So, yes, it is reflective, of that. And, just to maybe break it down a little bit further, the the guide in terms of the AUV does include positive mix and positive like for like pricing. So kinda given the the backdrop of, you know, tariffs and, you know, higher costs accordingly, That AUV incorporates positive mix and is a little bit tipped to a little more price than than mix. But overall, expect, you know, again, a good solid AUV performance in the year. And for modeling purposes, little bit little bit heavier in the back half than than the front half, getting back to your question on on price increase and pricing. Zack PachecoEquity Research Associate at Loop Capital00:32:33Understood. That makes sense. And then maybe just any more color on current bidding environment across your verticals? Any change to the office end market or what you're expecting to see? Thanks. Vic GrizzlePresident & CEO at Armstrong World Industries00:32:48Sure. Let me let me add a little bit, more than usual on the bidding activity. I think it's something obviously, since we're right in the middle of of of the uncertainty getting underway here. I've talked in the past about bidding activity in terms of the Dodge first time tracker on bidding activity, it's really the earliest phase of project launching, and it's something we watch quarter to quarter. And that particular measure softened in q one as uncertainty was building. Vic GrizzlePresident & CEO at Armstrong World Industries00:33:25And really no surprise. That's exactly what you would expect. First time bids, things that are in the early stages like that could take a pause and a wait and see mode. And we didn't see did see that in in q one. And it softened in both the new and the large renovation. Vic GrizzlePresident & CEO at Armstrong World Industries00:33:44And, again, just as a reminder, this Dodge first time bidding activity has somewhere between a twelve to twenty four month and sometimes even greater than that out before ceilings are needed. So this is something that we look at as a kinda high level, across the horizon type of, indicator of activity that that's out there. Again, in summary, this is kinda what we've been seeing, over the last seven or eight quarters leading up to this quarter has been this choppy kinda quarter to quarter sideways movement, in this in this particular bidding activity metric. But what I mentioned in my prepared remarks is another bidding activity altitude, if you will. It's really the ground level, on the ground, sublevel project bidding type activity. Vic GrizzlePresident & CEO at Armstrong World Industries00:34:39And what what this bidding activity really reflects is more down to ceiling projects and the interior projects bidding, level. And in in q one, this remained active and and steady. And what we we saw was good activity across many verticals like data centers and transportation, schools, hospitals, even office TI. We we saw good activity in the quarter. And I think this is to your question. Vic GrizzlePresident & CEO at Armstrong World Industries00:35:09What we're seeing today is really kind of a consistent sideway sideways motion on our bidding activity at the ground level. We're gonna continue to keep an eye on the flow or the discretionary portion of that ground level business because we think that's what we're gonna see as the first signal that the markets is softening up, based on this uncertainty. So we'll continue to, to track that closely and report out on that. Operator00:35:45Your next question comes from the line of Keith Hughes with Truist. Your line is now open. Keith HughesManaging Director at Truist Securities00:35:52Thank you. The questions are on Wave with the steel tariffs coming in. You talked about the impact, what you're having to do on pricing there. Vic GrizzlePresident & CEO at Armstrong World Industries00:36:04I'm sorry, Keith. Would you say that last part again? Keith HughesManaging Director at Truist Securities00:36:08Yeah. Question is on Wave. Could you talk about the impact there with steel tariffs and what they're having to do on pricing? Vic GrizzlePresident & CEO at Armstrong World Industries00:36:17Yes. Yeah. The wave business, we, obviously, use steel and aluminum for the structure, the the the grid, structure of our ceiling systems. As a reminder, most of what we source in terms of steel aluminum comes from The US and is locally sourced. We do bring a small percentage, from, external markets for, I will say, strategic reasons. Vic GrizzlePresident & CEO at Armstrong World Industries00:36:43We we do that. So we can shift that volume as we need to, to local sourcing here. But what we have seen in, the first round of tariffs that we saw back in 2018 with steel, steel imports is that the local steel companies begin to raise their prices. And so we're seeing actually a kind of an indirect, if you will, a ripple effect impact from the steel tariffs on local steel prices. And so we're having to to raise prices in the marketplace to help pass that on. Vic GrizzlePresident & CEO at Armstrong World Industries00:37:18We have two price increases already in the first quarter on the street to try to help us stay in front of, that, that steel inflation. So a little bit less of an or a direct impact on tariffs in our Wave business and a little more of an indirect because of the market pricing coming up. Keith HughesManaging Director at Truist Securities00:37:37Historically, when Wave raises prices, is there a margin drag until they catch up with the input with the what's what's happened on the inputs? Vic GrizzlePresident & CEO at Armstrong World Industries00:37:49Yeah. In 2018, that happened because the steel tariffs went in. If you remember during the first, first administration, that that was that happened very quickly, and it took us a quarter or two to catch up. In '22, that did not happen. We stayed ahead of of the the prices or the inflation, and, we didn't see the drag on our margins. Vic GrizzlePresident & CEO at Armstrong World Industries00:38:14So, our plan here is we're we're staying ahead of the inflation with our prices and trying to, well, trying to stay ahead of those those steel tariff price increases. So and I expect that we'll continue to expand margins in that business, throughout the year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:38:33And Keith, maybe just one additional point on WAVE is that we still expect equity earnings to grow mid single digits for the year. Keith HughesManaging Director at Truist Securities00:38:41Final question on the Specialty business. How much did price play a role in the reported numbers? And what are you expecting on that for the rest of the year? Vic GrizzlePresident & CEO at Armstrong World Industries00:38:52Yeah. I'd say minimal. That's really, the number of projects that we're winning and the size of the projects. I think it's more on the volume side than a meaningful price. We are raising price in various substrates, to stay ahead of any impact from tariffs. Vic GrizzlePresident & CEO at Armstrong World Industries00:39:10But, for the most part, the goodness and the strong performance of that business has really been projects and win rates and projects, driving that business. Operator00:39:22Alright. Thank you. The next call comes from the line of Phil Ng with Jefferies. Your line is now open. Philip NgManaging Director at Jefferies Financial Group00:39:31Hey, guys. Congrats on another strong quarter. Quick question on the home center side of things. You called out weather impacting the quarter in 1Q. Have you started seeing that normalize out? Philip NgManaging Director at Jefferies Financial Group00:39:42I think weather has cleared out a bit in March and April. So just curious to see, what you're seeing on the home center side of things and then how they've kinda managed inventory. I mean, it's lumpy from time to time. Vic GrizzlePresident & CEO at Armstrong World Industries00:39:53Yeah. That could be lumpy as as you acknowledge. Yes. We have seen, orders normalize, especially in those locations that were hardest hit by, the severe weather. So, yeah, that's getting back to its normal run rate. Philip NgManaging Director at Jefferies Financial Group00:40:08Okay. So we should expect the drag you saw in 1Q from the home center to kinda flush out kind of a non event for 2Q? Vic GrizzlePresident & CEO at Armstrong World Industries00:40:16Yeah. I think for the for the rest of the year, I would just I wouldn't call it 2Q just because, you know, they they can they can flex their inventories over a quarter as we've reported on numerous times. So I would say for the year. We don't expect this to be anything different than what we see in the rest of the marketplace for the year. So this timing related impact should work its way through. Philip NgManaging Director at Jefferies Financial Group00:40:42Okay. That's helpful. And then, Vic, I think, you kind of pointed out, if I heard you correctly, maybe it was AS or maybe it was a broader comment for new construction. But I think based on the backlogs you have right now, it sounds like you're pretty confident it could carry through '25 and appreciating that AS business new construction, there's a longer lag. Do you have enough line of sight to give us some color on what you're seeing on 2026, if you've seen bidding activity, quoting activity for that channel, AS particularly, going out to '26? Philip NgManaging Director at Jefferies Financial Group00:41:14You know, what's the early look right now? Vic GrizzlePresident & CEO at Armstrong World Industries00:41:17Yeah. You know, the the new construction side of the business in the equation is from the back half of '23 and '24 positive new construction starts. Right? So those when you lag those out for when a ceiling is required for those new construction jobs, we think that that's really gonna hold for for 2025. And if you spent all that money on those projects, by the time you get to ceilings, you're likely to finish that work. Vic GrizzlePresident & CEO at Armstrong World Industries00:41:47And so that's kind of our assumptions going into that. We don't see a big disruption on new construction coming through, as we lag it into to '25. We have better line of sight, Phil, to your question around project and the project nature business of the architectural specialties. I can tell you, that we're closing good work for the back half of this, of this year in '25 and, of course, into '25 or '26 and even into '27. Some of these projects are larger and longer term, so we're starting to close work out into those. Vic GrizzlePresident & CEO at Armstrong World Industries00:42:23But it'd be really premature for me to to talk about the the, the magnitude of that and what that could mean for us for '26. But, again, I I would just point you back to the momentum this business has created started in the back half of twenty four. It's continued into the first quarter of twenty five. The team is doing really well and, closing work. I think we're closing more work, and I expect that momentum to continue. Operator00:42:54Thank you. Your next question comes from the line of Adam Bumgarner with Zelman. Your line is now open. Adam BaumgartenManaging Director at Zelman & Associates00:43:02Hey, good morning guys. Just on the incremental price increase, I know it's typically been in February and August each year. Is that another way to think about it this year as well and perhaps maybe a higher price increase than maybe what you put through in February or kind of similar? Just curious how to think about that. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:43:20Yes. I would say it's, at this point, on our normal twice a year pricing cadence. I think the amount and the extent of that will really be dependent upon, you know, kind of how the the overall tariff and and cost landscape, unfold. So we're gonna continue to to keep, to keep an eye on that, as always. But for purposes of, you know, at this point in time and and what we have, you know, somewhat of a of a line of sight to, that that's that's how we're how we're thinking about it. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:43:50Again, as I commented on on AUV and our AUV growth for the year, again, tipped more towards price with positive mix. Again, that's largely on us continuing to stay close and monitoring the cost side of our business and then adjusting the price side accordingly. Adam BaumgartenManaging Director at Zelman & Associates00:44:09Okay. Got it. Thanks. And then just maybe on the education market, not sure if you guys touched on that, but curious what you're seeing there. I know the ESSER funding kind of rolled off to some degree. Adam BaumgartenManaging Director at Zelman & Associates00:44:19Are are you seeing any change in the trends you've been seeing over the last year or two? Vic GrizzlePresident & CEO at Armstrong World Industries00:44:24Yeah. Not materially. We've been watching that very closely as well. There was a lot of bonds that were approved for education at the state level in November. We were hopeful that that might fill in some of the gap from the ESSER funds. Vic GrizzlePresident & CEO at Armstrong World Industries00:44:39But what I can tell you, what we saw in the first quarter is still good activity in the education sector. So, we'll see how the the summer season plays out. That's that's really where you see the bulk of the education, k three twelve action anyway. So we'll be very watchful of that. But so far, we've not seen a falloff in education activity. Operator00:45:03Alright. Thank you. The next question comes from the line of Rafe Jadrozhik with Bank of America. Your line is now open. Rafe JadrosichManaging Director & Senior Equity Analyst at Bank of America00:45:15Hi, good morning. Thanks for taking my questions. Think last quarter you said you were expecting I think inflation or cost inflation for the year in the low single digit range. Can you just give an update of what you're expecting now and then the difference between energy and freight and raw materials? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:45:33Sure. Sure. Good morning, Ray. Yes. So just to size our inflation assumptions for the year, we expect freight to be relatively flat for the year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:45:45Raw materials, expect to be inflationary in that mid single digit percentage range versus prior year. And then energy, between 10% to 15% inflationary, and that's really kind of driven by, volatility in the natural gas market. So what that puts you at is from a total input cost perspective, in that mid single digit range of inflation for, full year, versus prior year. So again, just a reminder within that energy bucket, it's about pretty evenly split between, electricity and natural gas. But from a raw material perspective, this does kind of dial in a little bit of an uptick in some of our raws that will be slightly impacted by tariff impacts. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:46:39So mid single digit inflation, for the year, as a percentage versus prior year. Rafe JadrosichManaging Director & Senior Equity Analyst at Bank of America00:46:45Got it. That's helpful. Then the higher price realization in your guide is what's offsetting that? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:46:52Yeah. I mean, we think about this more broadly than just the pricing component, which certainly is, and as Vic mentioned in his prepared remarks, a mitigation and way to continue to offset. But we also are focused on continuing to drive productivity. We've had a really strong track record of being able to demonstrate manufacturing productivity in our plants. We expect that to continue, as well as the focus disciplined and rigorous cost control and cost management. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:47:25So I think all three of those components, coupled together, is really what gives us the levers, if you will, to continue to grow and expand margins here. That's how we're thinking about operating the business given these dynamic times. Rafe JadrosichManaging Director & Senior Equity Analyst at Bank of America00:47:42Okay. That's helpful. Just on the AS side, the organic growth, obviously, you had M and A contribution, but the organic growth is really strong in the first quarter here. How do you think about sort of what the implied organic growth is for the remainder of the year? And how does that compare to the market? Rafe JadrosichManaging Director & Senior Equity Analyst at Bank of America00:48:01What's the market share that you're seeing or your growth relative to the market that you're anticipating? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:48:11Yes. So for kind of implied in the guide for the year on the organic side of AS, it's a softer back half than the front half of the year. But really, what's at play there is lapping a really strong back half of 2024. So as Vic mentioned and I mentioned in our remarks about keeping a watchful eye on, you know, overall projects, project project delays, etcetera, you know, that could certainly be be at play. But, again, we we we have a little bit of a of a timing dynamic given just the strength of the back half last year relative to the expected strength in in the back half of of this year. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:48:51And I'd say we're we're continuing to to to do well, in win, in the AS in the AS business and, are very pleased with, you know, the double digit, top line growth that we saw organically here in the quarter. So really pleased with that business and its performance. Theresa WombleVice President of Investor Relations & Corporate Communications at Armstrong World Industries00:49:12Thank you. Operator00:49:19Your next question comes from the line of John Lovallo. Your line is now open. John LovalloAnalyst at UBS Group00:49:26Good morning, guys. Thanks for taking my questions. The first one is on Mineral Fiber AUV incrementals The increase the percent, which it's consistent with last quarter, but it's below historical levels. I was under the impression that this may have been driven by a little bit more mix versus price in AUV, but that doesn't seem like it's the case. So curious what's driving that? John LovalloAnalyst at UBS Group00:49:48And would you expect this to kind of normalize higher as we move through the year? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:49:52Yes. So yes, that's largely, you're talking about the impact, the EBITDA impact on AUV in the quarter. It's really timing, in nature. We can see this from time to time and can get some some quarterly noise, if you will, around how projects ship, which can influence the overall basket of products and and how that that falls to the to the bottom line. So when I when I take a look at, you know, our overall expectation for the year, we do believe that our our, incremental there on EBITDA, will return to and and kind of be in line with our, historical fall through rate there. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:50:29But from time to time, you get a little bit of quarterly noise, that's what we saw here in Q1. John LovalloAnalyst at UBS Group00:50:37Okay. Got you. And then manufacturing costs have been John LovalloAnalyst at UBS Group00:50:41a headwind to AS adjusted EBITDA for a few quarters now. Curious what's kind of driving that headwind and do you expect that to subside as we move through the year? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:50:53Yes, I'd say largely when you look at the AS segments again, with the inorganic growth that we've seen, you know, the, the manufacturing costs, are are stepped up in connection with, you know, the the acquisition of of two businesses that we saw in 2024. That's largely call it, the manufacturing cost increase that we've seen in that segment. John LovalloAnalyst at UBS Group00:51:17Okay. Thank you, guys. Vic GrizzlePresident & CEO at Armstrong World Industries00:51:19Thanks. Operator00:51:23Your next question comes from the line of Brian Bureaus with Thompson Research Group. Your line is now open. Brian BirosEquity Analyst at Thompson Research Group00:51:32Hey, good morning. Thank you for taking my questions. I guess on the sales guidance for Architectural Specialties, looks like it's a slight raise there. Guess, kind of goes against the general uncertainty in the market. And I know you talked about a few trends there throughout the call, but just curious if you could expand on what is behind the raise there for the guidance, if that's project timing or better acquisition cross selling or something else? Brian BirosEquity Analyst at Thompson Research Group00:51:56Just what's driving that? Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:52:00Yeah. I'd say, you know, there's a little bit of what what Vic had mentioned earlier around, you know, project, the overall visibility to to projects there in in that side of the business, you know, more clear line of sight due to, you know, our our our backlogs. And you you also have a a bit of that project, call it, time line, which is, you know, once a project kinda gets gets gets started, it's from the time of breaking ground to to ceiling shipment. It can be in that twelve to twenty four month range. So we we feel, that that line of sight gives us, confidence around our, ability to, to to call, that top line growth, increase slight increase in in AS. Chris CalzarettaSenior VP & CFO at Armstrong World Industries00:52:45But tempered with that too is a little bit of the uncertainty and cloudiness around what potential project delays could look like. So overall, it's the backlog and the line of sight that we have that gives us confidence in the uptick in the top line growth expectation for for AS, albeit balanced with, you know, that potential uncertainty that's out there. Vic GrizzlePresident & CEO at Armstrong World Industries00:53:07And and, Brian, let me add. What Chris has said is exactly right. If you don't mind, I'll just add that the other component that's a little different in architectural specialties is the market penetration growth dimension of that business. Vic GrizzlePresident & CEO at Armstrong World Industries00:53:21Remember, this is doing much better than the overall market is doing, and that's something that we can continue to do even if the market softens in the back half. So that's the other, I think, growth dimension that we have here, growth driver that we have here that's different than, say, in our Mineral Fiber business. Brian BirosEquity Analyst at Thompson Research Group00:53:41Understood. And then on guess, on the updated Mineral Fiber volume guidance, are there any specific verticals that you would expect to see maybe a quicker or more severe pullback based on your historical reference? Or is that more of a broad based view that everything would discretionary type spend would pull back kind of in line with everything? Thank you. Vic GrizzlePresident & CEO at Armstrong World Industries00:54:02Yeah. Yeah. I I understand the question. You know, going back to, an answer I'm I I gave earlier around, the discretionary portion of the the renovation work is where we're gonna see the softness in the back half. Our experience here has been it's really vertical agnostic. Vic GrizzlePresident & CEO at Armstrong World Industries00:54:22If it's a discretionary project, whether it's an education, health care, or office, it is subject to a wait and see when there's a high degree of uncertainty. So I wouldn't say one one particular vertical is gonna stand out over the other. I think we're gonna see across the verticals the discretionary work. Again, I think that's where we're gonna see the the softness in the back half. Operator00:54:49Thank you. And our final question comes from the line of Kim with Evercore ISI. Your line is now open. Stephen KimSenior Managing Director at Evercore ISI00:54:57Yes. Thanks a lot. Vic, I just wanted to follow-up on that last point there. Discretionary projects, do we see any kind of would we expect to see any kind of AUV or margin impact if you do see a decline in discretionary first? I'm also kind of wondering whether or not you might see or anticipate you might see maybe smaller customers having more of a sort of disproportionate impact from the sentiment impacts you were referring to earlier? Stephen KimSenior Managing Director at Evercore ISI00:55:30And similarly, like, could that have an AUV or margin impact worth calling out? Vic GrizzlePresident & CEO at Armstrong World Industries00:55:35Yeah. Vic GrizzlePresident & CEO at Armstrong World Industries00:55:38This discretionary business flow business, as we we refer to it, Steven, as you know, is is where we have the least amount of visibility. It is concentrated more with the installed base, and it kinda mirrors more of the installed base, which still is a lot of older, more, I would say, lower AUV type products. So if there's any AUV impact, it would be a lift on AUV or a help to AUV because of the mix improvement by not having some of the lower AUV in it. Mhmm. Whether it's material or not, I think that's that's another question. Vic GrizzlePresident & CEO at Armstrong World Industries00:56:16But, directionally, to to get at your question, I think if there is an AUV impact from that discretionary spend or the lack of the discretionary spend, I think, it might show up there. I think these are smaller projects, not smaller customers. I would think about it that way because even larger customers might, forego or put on hold smaller projects. And, again, I would say it's the same dynamic. I think, if anything, there there might be less lower AV products in the mix and would be an upward, help to the overall mix. Vic GrizzlePresident & CEO at Armstrong World Industries00:56:50Does that help? Stephen KimSenior Managing Director at Evercore ISI00:56:52Yep. Absolutely. That was exactly my question. Appreciate that. Okay. Stephen KimSenior Managing Director at Evercore ISI00:56:56Then second question relates to the again, staying on AUV impacts. The home center softness, I'm wondering, does that also have some sort of an AUV effect? In other words, was AUV maybe a little benefited by the home center softness this quarter as well? Vic GrizzlePresident & CEO at Armstrong World Industries00:57:14Yes. Yes, definitely. As we've talked about, that's our lower AUV channel. We have a very low or a small group of products that we sell through that channel, and they tend to be at the lower AUV. So, there was a little bit of a help in the quarter on the mix side from the lack of volume in that retail channel. Stephen KimSenior Managing Director at Evercore ISI00:57:36Okay. Great. Thanks very much. Vic GrizzlePresident & CEO at Armstrong World Industries00:57:39You bet. Operator00:57:42There are no further questions at this time. So I would like to turn the call back over to Mr. Vic Grizzle. Vic GrizzlePresident & CEO at Armstrong World Industries00:57:49Well, thank you all for joining our call today and for your questions. I think as you can hear in our discussion today, we, we have a resilient business model, and we have a proven ability to execute on our controllables that give us confidence to navigate these choppy and uncertain market conditions. So we're ready to and poised to execute, even in softer market conditions that, we're forecasting for the back half of this year. Thank you again for joining our call today. Operator00:58:21This concludes today's conference call. You may now disconnect.Read moreParticipantsExecutivesTheresa WombleVice President of Investor Relations & Corporate CommunicationsVic GrizzlePresident & CEOChris CalzarettaSenior VP & CFOAnalystsCharles Perron-PichéAnalyst at Goldman SachsZack PachecoEquity Research Associate at Loop CapitalKeith HughesManaging Director at Truist SecuritiesPhilip NgManaging Director at Jefferies Financial GroupAdam BaumgartenManaging Director at Zelman & AssociatesRafe JadrosichManaging Director & Senior Equity Analyst at Bank of AmericaJohn LovalloAnalyst at UBS GroupBrian BirosEquity Analyst at Thompson Research GroupStephen KimSenior Managing Director at Evercore ISIPowered by