Armstrong World Industries Q1 Earnings Call Highlights

Key Points

• Total company sales rose about 7% in Q1, consolidated adjusted EBITDA grew ~1% and adjusted diluted EPS was up 2% (helped by a lower share count); Mineral Fiber sales increased 5% with a 42.4% adjusted EBITDA margin while Architectural Specialties saw sales +11% but segment EBITDA fell roughly 12% due to tariffs, acquisition costs and targeted investments.
• Armstrong reaffirmed full-year guidance for sales, adjusted EBITDA and adjusted free cash flow while modestly raising its adjusted EPS outlook to +10%–14% driven by an accelerated buyback program — the company repurchased $60 million in the quarter and has $473 million remaining on its authorization.
• New CEO Mark Hershey emphasized strategy continuity and growth via innovation and M&A, highlighting TEMPLOK energy‑saving ceilings, expanded data‑center solutions and digital platforms ProjectWorks/Kanopi, with management saying the data‑center project pipeline is already more than 50% ahead of 2025 levels and second‑half margin improvement is expected.

Armstrong World Industries NYSE: AWI reported first-quarter 2026 results that management said reflected solid execution in both operating segments despite “a few discrete headwinds,” while the company reaffirmed its full-year outlook and slightly raised adjusted EPS guidance on an accelerated pace of share repurchases.

CEO transition and strategic priorities

Mark Hershey, who led his first earnings call as president and CEO, emphasized continuity in Armstrong’s strategy and “winning formula,” centered on driving earnings power through “consistent Mineral Fiber growth based on both AUV and volume” and maintaining “healthy margins” in the Architectural Specialties (AS) segment.

Hershey highlighted innovation and growth initiatives including the company’s digital platforms ProjectWorks and Kanopi, TEMPLOK energy-saving ceiling products, and “recently launched data center solutions.” He also reiterated the role of M&A in expanding AS, pointing to the acquisitions of Zahner and, more recently, Eventscape as additions that deepen design and engineering capabilities and enable Armstrong to engage earlier in complex projects.

First-quarter results: sales up 7% with mixed margin drivers

In the quarter, total company sales increased 7%, with growth in both segments. Chris Calzaretta, senior vice president and CFO, said consolidated adjusted EBITDA increased 1% as “solid AUV performance, incremental volume from both segments, and positive WAVE contributions were largely offset by higher manufacturing and input costs and higher SG&A expenses.”

Adjusted diluted EPS increased 2%, which Calzaretta attributed “primarily due to a lower share count in the quarter,” reflecting increased buybacks.

Mineral Fiber segment net sales rose 5%, driven by 4% favorable average unit value (AUV) and a modest volume increase. Calzaretta said AUV growth was “primarily due to favorable like-for-like pricing,” while volumes improved on “solid commercial execution and growth initiatives” in what management characterized as “flattish” market conditions.

Mineral Fiber adjusted EBITDA increased 4% and margin was 42.4%. Calzaretta credited AUV “fall through,” WAVE joint venture contributions, and slightly higher volumes, partially offset by raw materials and energy inflation, inventory valuation impacts, and higher SG&A. Hershey noted the segment delivered an adjusted EBITDA margin above 42% and said Mineral Fiber volumes have grown year over year “three of the last four quarters,” with some recovery in sales to federal government customers.

Architectural Specialties net sales increased 11%, including 7% organic growth plus acquisition contributions. However, segment adjusted EBITDA declined by about $3 million, or 12%, driven by higher manufacturing costs and targeted investments. Calzaretta said the quarter included a “$2 million non-recurring tariff adjustment,” $2 million of incremental costs from recent acquisitions, and roughly $1 million related to plant investments to support growth. SG&A rose on $2 million of selling investments and $1 million of incremental expense from acquisitions.

On an organic basis, AS adjusted EBITDA declined 9% year over year, which Calzaretta said was primarily due to the tariff-related adjustment and $3 million of higher selling expenses and manufacturing investments that pressured operating leverage. Inorganic results added $5 million of sales but were “slightly dilutive to adjusted EBITDA,” which Calzaretta said reflected an integration ramp as acquisitions are scaled onto the Armstrong platform.

Operational metrics and project activity

Hershey highlighted operational execution, including a “strong safety quarter” with a total recordable incident rate “well below one” and below the industry average. He also said Mineral Fiber plants maintained service levels through winter storms, and the company’s “perfect order” metric reached a record for February.

In AS, Hershey said quoting activity remained strong and order intake increased in the “low double-digit range” both in the quarter and over the past 12 months. He added that the company’s transportation project momentum has accelerated, saying year-to-date order intake has already surpassed the full-year 2025 total. He cited new airport project wins at San Antonio, San Francisco, and Dallas Fort Worth, in addition to wins previously discussed at JFK and LAX.

TEMPLOK, data centers, and digital initiatives

Management framed TEMPLOK and data center solutions as multi-year opportunities tied to energy efficiency and AI-driven infrastructure growth. Hershey said TEMPLOK products are now part of Armstrong’s Sustain portfolio and meet high sustainability standards, which he said can help building owners pursue LEED v5 credits. He cited growing awareness of tax credit incentives and expanding case studies as drivers of increased interest and adoption, and he provided examples of recent project wins spanning a healthcare facility in the Southwest, a Pennsylvania school district, and a Pittsburgh office renovation.

On data centers, Hershey described the portfolio as anchored by systems including DynaMax, DynaMax LT structural grid, DataZone ceiling panels, and containment. He said customers are focused on airflow management, higher power densities, and energy efficiency. Hershey reported the company’s year-to-date pipeline for projects expected to ship in 2026 is “more than 50% ahead of 2025 levels.” In the Q&A, he added that speed, labor efficiency, and delivering a “complete system” are key differentiators, and said it is “too early to tell” whether there is a faster replacement cycle for data center ceiling tiles.

Hershey also updated progress on digital growth initiatives. He said ProjectWorks continues to scale and the specification win rate increases “almost 20% when projects go through” the automated design service. He said Kanopi “more than” tripled its EBITDA contribution in the first quarter and is seeing return customer growth and AUV above the Mineral Fiber average.

Guidance reaffirmed; EPS outlook raised on buybacks

Calzaretta said the company is reaffirming full-year guidance for net sales, adjusted EBITDA, and adjusted free cash flow, while “modestly raising” adjusted diluted EPS guidance to 10% to 14% growth versus the prior year, driven by the first-quarter repurchase pace. He also said the company “slightly revised” adjusted EBITDA margin assumptions based on first-quarter results, while still expecting full-year margin expansion in both segments.

• Mineral Fiber adjusted EBITDA margin: approximately 44%
• AS adjusted EBITDA margin: approximately 19% (organic basis expected between 19% and 20%)

On capital allocation, Calzaretta said Armstrong paid $15 million in dividends and repurchased $60 million of shares in the quarter. As of March 31, the company had $473 million remaining under its share repurchase authorization. Hershey said the company intends to remain “opportunistic” on buybacks, citing confidence in free cash flow.

Calzaretta said adjusted free cash flow decreased 1% in the quarter due to timing in working capital and cash taxes, partially offset by higher dividends from the WAVE joint venture, and he reiterated confidence in “strong adjusted free cash flow growth in 2026.”

On costs, Calzaretta maintained the company’s mid-single-digit total input cost inflation outlook for the year, while noting shifts within components. He said raw materials are expected to be in the mid-single-digit inflation range, freight is also in the mid-single digits amid higher fuel, and energy inflation is expected to be around 10% for the full year. He added the company implemented a fuel surcharge in late March in response to rising carrier fuel costs.

Addressing questions about tariffs, Hershey said the $2 million tariff adjustment tied to duties on aluminum-containing finished goods imports was a “one-time event” and not expected to recur, adding the company has mitigation measures in place.

Looking ahead, Calzaretta said Armstrong expects improved net sales and adjusted EBITDA growth in the second half compared with the first half, with improved margin performance. For Mineral Fiber, he cited expectations for accelerating AUV, productivity gains, and WAVE contributions. For AS, he pointed to accelerating organic growth supported by order intake and backlogs, and higher contributions from recent acquisitions. Hershey said bidding activity has been “fairly stable” despite geopolitical uncertainty, with project values up even as project counts remain down—an environment he said plays to Armstrong’s strengths.

About Armstrong World Industries NYSE: AWI

Armstrong World Industries, Inc is a leading global manufacturer of commercial ceiling and wall solutions. The company offers a diverse portfolio of acoustical, decorative and specialty ceiling systems designed to enhance interior environments in offices, healthcare facilities, schools, retail outlets and other non-residential settings. Through its focus on performance, aesthetics and sustainability, Armstrong World Industries addresses both functional and design requirements for architects, contractors and building owners.

Armstrong's product range includes mineral fiber, fiberglass, wood wool, metal and stone wool ceiling panels, as well as suspension and grid systems.

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