AFI - Earnings call transcript Q1 2021 | Armstrong Flooring, Inc.

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Operator

Greetings. Welcome to the Armstrong Flooring First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. the to turn Amy host, now Trojanowski. will call your over CFO, I go Please ahead.

Amy Trojanowski

joining for this at this us quarter for seen our Vermette. you Thank today website you that the conference President CEO, have I Investors We our of trust XXXX press Armstrong call. am on by www.armstrongflooring.com. joined release morning our and Michel morning earnings first Flooring’s section

making materially During Actual forward-looking those we this be statements uncertainties. differ will risks implied. outcomes involve or may from that expected and call,

a detail that please SEC For more risks discussion and may review of uncertainties filings. the Flooring, affect Armstrong our

security statements we of undertake Forward-looking forward-looking the and to obligation are applicable update any made is as law. only no what statement date speak beyond they by required

discussion measures include within will the our included addition, these non-GAAP Reg A performance GAAP operating meaning press the I’ll over to turn reconciliation of comparable is measures measures directly G. the Michel. of SEC call of now to in release. most financial the In

Michel Vermette

our each the business thereafter, Thank global of share our strategic soon financial introduced good the the XX positive our QX I roadmap continued a pandemic. modernize to ongoing call, achieve our transform today business, challenges region on team in which pleased that can during against everyone ago, start various significant construction. entered and and significant earnings from results where and by to new XXXX. pleased well will In on we the I’m and team we growth our remodel months to report first of we details Amy quarter, quarter how In North early transformation we discuss On -- quarter topline COVID-XX the into the with the X% Flooring. morning growth, our to on of the providing of make line. Armstrong operate. first update, world our brought our during reflected stages and Then will am some facets progress. the to members color progress by transformation as as the results. America, on Overall, delivered additional XXXX. our against goals business reflect I Amy, momentum you, pandemic plan progress overcame residential last contribution team’s first the quarter’s in we

improvements improvements of reliability repeat the at growth of the discuss supported impact our and in and That were tempered were commercial us While recovering markets sales resulting program down residential our and Internationally, plants. are our strong said, pace, Operationally, uptime year providing flat by from a prior were initiatives increased accounts at performance not maintenance China by quarter sales due during throughput Australia. are overall led these with our and the in national to launches that to industry XXXX. did faster starts raw of February early which March, well year-over-year ahead winter Midwest impressive with residential demand in the XX% key approximately Amy Uri, Overall of March, and plants side, of closed the greater detail South weeks for has disruptions in and single-family three the storm been in in supply in this in will materials. in by came along three call. which housing expectations. on initial

in the the out XX.X at end, sequential March, closed On continued reflecting commercial Index ABI improvement.

from strong and across we’re positive Awards categories Heading for seeing in receive recognition. pandemic. to BUILDER point three our to received for continuing QX, also are products awards Design into power orders the ADEX product received Magazine Board from We point continued the Excellence. top new recovery Our

on transformation update our Now I’d like to give an progress.

over that leaner, March across strategic our advanced focus the stronger our long-term. business, to pillars modernize XXXX, profitable slide transformation look as of introduced we strategy to recall, plans a we’ve projects you company three key highlighted we and the some we’ve our of months. in On the transform each XX over become a with and six, As more last

All manufacturing our to Everyone and capabilities. strategic and support executing products team has sales have of the frontline customer from focused foundation expand growth, our been as team, and our simplify executing our and functional our the well, the teams of core on our teams. been cementing we our operations, initiatives reach, strengthen

first Let’s quarter, quarter additional forward go-to-market to XXXX strategy. to progress. turn make In seven. talk slide some Please of on strides with we the first our about expand continue the

new discussed service and to through to we our so marketing customers. members team, investing we service As we’re sales, XXXX, can customer our adding customer to in continue our relationships our in improve

the We’re bring to during report XX new more professional total reach, than enhance in to XX first the sales than customer that last months. pleased we the XX additions quarter more to added

quarter for We available be style Armstrong in palette, solid also second introduced Pro in has the to which refresh of the line our on Initial year. which Flooring these channel this sales will feedback the and builder Pro texture interest profile. indicated products, in customers a and multifamily line, have our

the we In line available under of the develop will our Armstrong flooring which working year. with have exclusive the been in closely Flooring Signature be an addition, to distribution half second brand, partners of

year. develop through Hospitality product to demand Rest this well our channel that Refuge as was line introduced the continuing in We’re & for products

will continued positive by wins some another is ongoing nice these in space in and our we’re China, several it healthcare several this hotel and portfolio us with seen segments. we’ve That the us. channel, to channel. in take confidence national customer receiving Recognizing establish the making for excited We’re vertical targets dialogues which with Furthermore, in in opportunities the with relationship said, new build progress target our Australia provide our chains our product feedback. is time and

to the Australia. large As a Hospital at of to selected project be one such excited Wales flooring in provide example, are renovation we Prince for Sydney,

slide Turning to eight.

sale our in forward The first in of work several was of months Our steps journey our by March of our quarter. the culmination property in portfolio the significant completion to simplify teams. California Gate, our took organization South

had Our production at Tower volume efficiently. to new monetization on to The site. in on with to South the without production been and asset South initiatives In Gate team worked the the attention completed closure Gate the tirelessly West Distribution of sale, conjunction Coast Gate successfully we have service handle production enablement could a South production we Kankakee simplification that that Coast teams dedicated detail our absorb -- not our the execute focused in of initially Center we envision. open conduct our customers LA to West

increased with and improved manufacturing improvement continue our consistency facilities. including along equipment yield we’re our make, On seeing facilities across improvement we side, reliability the productivity in manufacturing with to the

to our partially three also Stillwater previously facilities, We some saw the productivity quarter, in up which supply on Jackson facilities raw increased quarter Kankakee materials. impacts throughput for of mentioned winter the the same Uri, to of and key in offset and disrupted which weeks storm these in benefits closed helping

take The move more third our mid-XXXX. pillar capabilities, front. discuss do us in please strengthening nine. I we the our make slide to planned of of continuing core and and Last Transforming you QX to summer our is will will modernizing our with. place if to turn efficient progress business easier headquarters capabilities that transformation announced our could on this

the move technical for time will This company and house Center first of late first the unique March. step in the our opening this completed of R&D teams with The was facility in our customers This our all our the teams testing and work history that a space great desire. applications products under one together to that create collaboration our more brings facility innovative roof. provides opportunities Technical in with and

teams our We’re to having looking and in the space. modern forward getting to campus all energizing collaborate everyone and a new

organizational Our to additional focused improving our making are delivering ensure on decision All enabling and and data that sustained. transformation go-to-market ERP customer change office management we’ve processes, our to to management improving initiatives our is also our and initiatives, systems oversight our transformation efforts our supply focused key while improving chain, recently has Separately, service production on information customer continued these procurement. project and added modernize in experiences, expertise among of efforts our better alignment in for system teams. support combined and and

While honored last recognition. transforming category. respect Flooring environment. leading as included We begins with sustainability our one business, mind. know we recently in On I that our done, to and foundation With call, top discussed flooring Armstrong forward. planted take key committed the of earnings ongoing Earth that a while have ranked work on to We confident sustainability companies Builder among we completing XX the that the the Media being business keeping XXXX we there our and moment are path on reiterate plan. of today others be slide want are XX these all steps, Day, right remains to transformation for this remain sustainable were initiatives that among in responsible firmly people we Green number to with

fact, old waste eliminated. and has our whenever Hundreds key water repair our leaks. recycling underground core been or were feet conserving act manufacturing one in added identify, by history, plants pipes water our XXXX, locations resources throughout to meters possible. we In In throughout quickly help locate of and values responsibly to replaced of of

XXXX measured Our intensity, sustainability meets least water per sustainability reduce year. senior to our compared at our to which of square consumption key to feet, discuss global production efforts leadership steering paid water is comprised a prior committee off as XX% as Today, by our improvements. able year-over-year we’re members quarterly

it in Sustainability accordance targets. our by for XXXXX, completing on bring will and and discuss to for water in towards to financial footprint. products the our Our Amy on with together liquidity look We lifecycle we on publishing a across remain reduce months turn in zero plants XXXX performance Report, distributed energy, an environmental management include, transparency flooring product detail also waste establish more expanding I to Notably, accomplishments of footprint drive XXXX manufacturing audits system XXXX which our on sustainability management, ISO Flooring our Several environmental GRI impacts will report and management continuous the coming performance publishing year detailed now team sustainability. Armstrong provide goals in to forward in by XX% chemical key to Compliant mapping goals quarter. maintain environmental simplifying and against intensity include facilities, track that waste certification XXXX. members our and accountability energy our waste the over SASB across to

Amy Trojanowski

financial our a Thank of performance with on review brief you, I’ll XX. Michelle. slide begin

increases our the quarter in X.X% our lower the quarter. as end of year-over-year to versus First residential quarter more XXXX we stable, advance the prior this the essentially In of X.X% and in all essentially to Sales of beginning the This at versus channels of back new XXXX, rollouts. versus of based of in timing quarter double sales in the at residential business recent product half improvement volatility did portion the our you American momentum the prior accounts of of accounts channels sales North versus this first and channels saw recovery versus our America the year. had strong national due was remember, digits revenue our prior across were Chinese performance flat. were some related improved year, price of in we forward sales with market. a a from year towards being XXXX LVT XXXX. North residential year, points with with our national customer driven not Globally, pandemic. occur along toward sales happen improving footprint. from on sales were our with in quarter-to-quarter in rollouts substantially is quarter year open commercial continued improved while in timing, the by the the increase in will China, recovery sales We quarter period, due these prior pulled initial to orders, up the In the believe improvement net size that

facilities previously, raw storm material our improve. weeks first quarter chain. of materials the Uri three and quarter throughout manufacturing several to availability disrupted As closed impacts of supply Michelle of in Into mentioned continues of the supply the approximately our raw winter key second for the

volatile loss help of to raw marine increases of Global given material to impacts and price adjusted increases additional to compared of prior realize higher mitigate from higher by $X products to raw year. million have freight These an $X.X inflation million a EBITDA broad Canal sales experience remains material XX, expect cover and were incident. quarter. production that first We compared and continue very in actions and slide On in Raw million, storm a been we the range the the due ever announced the the announced including in about headwind we of quarter, costs Suez and of increases loss prior the $X.X domestic to was winter pricing. However, for material quarter second congestion will the ocean higher caused inefficiencies million $X.X in port shipping year. headwinds Uri. shipping a our

had opening of the to Angeles. related in also Center We of the our conjunction Coast Los duplicate the the costs Distribution with Gate in facility South quarter some closure in West

We finalizing shipments customer remaining month. Gate are the South from this

the sequentially in and on expect the costs to higher in marketing wind So related our as see lower in higher there. year, will Factoring we the we the million. quarters product SG&A prior will sales $X In our team newly we boarded were launches sequentially be and continue upcoming of up activities costs year. second remaining the SG&A by spend $X.X members, million than but quarter

which following the operations for of net of cash future our facility, $XX investments. XX, to million significantly Gate turning sale Finally, our South to improved position our contributed liquidity slide

cash use in operating compared to a was cash flow $XX $XX million, prior the of of use year. Our a million

quarter a normally first based The heavy our is usual capital working on spend. outflow seasonal

quarter period. quarter, of while payables simplified offset terms payment During and million stronger higher $XX inventories represented same increases half use receivables adjusted the as cash higher the the were in higher we use back $X were of by to in of sales million cash. These the

our South net net million, the under and XXXX. $XX long-term we required prepayment Following our repaid position $XX borrowings compared sale, March XXXX, made XX, million as revolving agreements our At to XX, at a was of credit December debt debt million well. debt $XX Gate outstanding

ample We have providing now million, will fund available of to initiative. I the call liquidity to our for Michel liquidity $XXX closing transformation turn his remarks.

Michel Vermette

future. our like the the strong plan optimistic to dedication team with quarter. Amy. I’m remained for you, about progress am during Flooring pleased I first and their thank and our to I’d Armstrong Thank performance our

that underway a strong on steadily a year for midst on over of Our simplify strengthen continuing through pandemic the commitments ago. business commitments and to we’ve we’re and build transformation we to I full serve to and made deliver Commitments is just you to today. the joining rapidly to Operator, capabilities. this continue the progress for to global Thank market, our the please foundation long-term expand, our worked incremental core make members customers in have confidence safely value in to team continuing our open question. us lines in you creation evolving initiatives. while for our our again

Operator

question comes from Thank Zener Markets. Ken you. ahead. first KeyBanc [Operator Capital Instructions] go with Our Please

Ken Zener

everybody. Good morning,

Michel Vermette

Good morning. Thank you for joining us.

Ken Zener

that kind you question. terms inputs and No us that problem. I of wonder cadence That’s on announcements if say, international, you could that’s vary, pricing in of seeing place through related versus in the update residential how that U.S. might how and of my let’s the cost unfold how to have just that the year? should first the the obviously, you’re

Michel Vermette

combination we our the starting raw materials to Okay. Well, the we North winter from the quarter. and for December with increase pandemic taking and the first storm, some raw some limited But the announced in weeks America recovery the inflationary situation. it’s has capacity producers the across the availability definitely and in an indefinitely that had materials of of basically created middle extended phase of a price and in, -- some globally, also impacted losing

be we But implemented increase to the we the in be quarter the phase and eventually So be will completed the second through pretty second end price to second of be third. at second expect quarter second. that and in, one first and evolving announced the in the fully one a the the much

a know, time commercial phase a to and practice. price certain years unfortunately, the with in to definitely those luckily, due for and industry time the some of But, bids, been to go commitments. those of these of had some many has take to period in you contracts there’s As increases through this dealing lot has

then working So better time, the dealing through. should and that, and it’s and getting then that’s we customers in it, more partially the start of the second And reality, was second that the at fourth. same when understand with the so and announced and the benefit the one in of the one, question international third see also our are

Ken Zener

in of transformation details. business year... Realizing everybody’s last COVID affected the Appreciate those actually kind your life

Michel Vermette

Yeah.

Ken Zener

that guys talked update how your I choices making? us those might tactical and you be how you have year. say unfolding things talk that, guys much. now you’re very kind about planned just I you it, Could specifically your this to probably, of Thank just know investments broadly SG&A normalizing, are about you but on could if want

Michel Vermette

Yeah. Very good question.

in you launches we for naturally year be adding hopeful retailers product the the second how wants to investing we’re in stores. what quarter, complex know, figure impact anybody last engaging representation, basically displays. in time -- as what with independent sales and and trying your point, their COVID. no So, this about But this in lengthy were to how one And out to was and more

to had more basically and definitely in pause little take had it as strategy, point, third reset definitely now go-to-market getting clarity the in we your started things and to are marketplace much we So pretty we quarter the our a in better. a

series significant the we that also quarter, call that displays segments on additions in and the So first new first making additions fourth we bank quarter in in go-to-market increase others. independent retailers as key and in fourth the to such did groups and quarter, NFA new in of with both some and Sheet keep of LVT displays launched also some some building hiring a We’ve in in started key Alterna upon also such fourth were as back builders the hiring and representation -- hospitality. retailers, in gaps to also on the made independent the a

year and started fourth really in year, summer of So hoping the quarter we’re the phasing as where process speak. that quarter, and first last we to do we or late early some last we’re do things through summer -- we

So covering. become reflected and what the matures will the those SG&A was that in be field. commensurate going sales naturally that’s naturally the the as in with Those people program But investments quarters. the investment and -- naturally isn’t productive Amy should through more follow coming

Ken Zener

Thank you very much.

Michel Vermette

Thank you.

Operator

Next Securities. Hughes question Keith Truist with go ahead. Please

Judy Merrick

Actually, other this slide talked could the Judy Hughes. question, and in impacts EBITDA you. million you a costs. for the just raw bit material little higher if up Merrick and And first on about is XX, follow on of higher Keith Thank $X.X the I

you about that kind got the You price the kind year? is run we coming increases year, anything of price answer the kind year, Do anyway pricing your million coming? else for that you or of those that Do maybe $X.X of about the think through increased costs? thoughts end the by increases rate can you add about those think is will the the offset

Amy Trojanowski

material The are, in extremely pricing. fast some implement and raw frankly, can the Sure. cost increases than faster coming we and cases

as based we’ve this in be seen steeper we obviously, have contracts supply visibility than to at the increases As earlier, at There’s pricing much on here we That that each those point, could in quarter number raw our it, very, all continued was Michelle we raw February of the we and of a a huge in continued our for window managing been there for across time talked materials. materials set chains year information, increases very in and March we’re materials increases. have the of based in this it. that which look disruption limited change April. And expect on we’re do carefully. period the said, can these

also cost managing on balance transportation, availability, a Freight the imported So pricing, freight been our year, for and that that this timing we us and the both of all all sure then the that onground lanes, some to there materials. teams some for also headwinds But we’re been and make right headwind has ocean been have have recovery. trying through. of have

Judy Merrick

talked Okay. And about could That’s more you if commercial. helpful. I -- question, one on

kind so. price of else commercial it there like, this, that in in But quotation and of doing global project an more that was think but are that help? seen is Have was pulled increase increases resuming delays like or the or forward you anything I activity better. in also add some U.S. in could would you sounds

Michel Vermette

to more seeing So, point, commercial. we’re for your activity, in sure,

some happening. architects the saw or, guess, the ABI’s things I seeing are same You

take business seeing and We’re commercial a that helped with advantage back -- point work helping in actually opportunities in our got transactional to that of program new We augment got our or prior results. periods. things that more Ship Quick your also pushed has to deferred

some of owners property are their some refurbishing So addressing that properties. and

the continued second business the definitely commercial and quarter. third quarter and the versus improvement is quarter So improvement expect I in an fourth

see There’s conversations, from off, extended there’s customers. project can the been activity, seems of the commercial. and to conversation this have some discussions. an And excited come definitely just projects starting you with time to of still to your the more see. the more the be So sluggishness -- definitely in the the point, to we’re some are which period that on sideline But

Judy Merrick

Okay. very Great. you much. Thanks. Thank

Michel Vermette

Thank you.

Operator

Next Please question go ahead. Thompson Research Chris Group. with White

Chris White

questioning. Amy. the Michel wanted questions. and Thanks continue commercial taking morning, Good to market and for my I on

said You flat. commercial QX was

You strength. in given wondering could the growth could you QX if strong think off actually some for were cited growth if commercial pretty the and XXXX? I’m see how comps you in be, so, think do that dramatically market you ABI

Michel Vermette

it. that should industry. in Definitely, for I would sure. the We we mean, point, case your be across see Well, that expect was the are had with growth, to the definitely making QX comps I and comps the

where us or which I can that continue positive third to foremost, help and and first and in second be. the some we’re help and of business not quarter only expect in case, those I put commercial be our specific definitely, the some with the needs the also, in place, to a So us our, our range, definitely it help I in our quote programs market goal the us getting but and think in a QX maturing number are in of doing go-to-market and growing to that brand QX. things I is initiatives is are will we better, some won’t re-establishing expect but quarter through

And -- with connecting we’re customers. and so

had the has We that coming than doing will And businesses last significantly in engaging than reach cycle bear very what the fruit the one. through, quarters. comes as we and team’s sales am takes how and now have But customers that they’re know, I’m positive longer with year. residential as a commercial you confident the more I one with that

Chris White

And you. down a of on other education a more, that segment, commercial just Thank recently. are seeing sectors digging Are that seeing the sectors the been breaking are that of -- that bit healthcare those or and kind know is -- it I had you’re two that you lagging by little down momentum coming that kind back is Street?

Michel Vermette

We’re more as education activity getting healthcare, definitely activity hospitality in definitely sure. and both for more seeing and some engaged There’s on projects now. discussion we’re on

we travel comes the the and up even leg the ones consumer at competitive in refurbishing be the remarks, as owners, to can do as their a that on hospitality the it, have are mentioned our can back competition. you really make tell to their looking industry sure as that funding As they’re get properties,

So we’ve you’re lot tell And versions are of sure. be we’re more of it’s But office that in with the with could other in year future related dealt this what what dealing past the issues. there’s or seeing COVID should the think, there’s and like for of what some look of knowing of reality definitely corporate I there resetting -- also, work, moderate. of a people you they’re can some discussions doing, those discussions,

the way and So we we operate. work do how change

high conversations everybody is resetting how their So happening some is, corporate definitely there’s footprint.

your thing can that is So hard and surface clean, -- organize. keep a good great is property stay, help you the product

You or there’s see condition -- not. if in if it’s good

positive So a all been around. it’s definitely

Chris White

spoken to residential the the market? national provided last national this then to last That’s us you due why spoken had And product down help that about would tough and -- understand comps. residential flipping residential loss year you then Can a over accounts accounts were be year stronger despite you. that better helpful. year down the Thank side, that that launch

Michel Vermette

a to tied was it Well, load-in.

a major when national load-in you inventory have residential So, you as load-in so know, right, account of very timeframe. and when you the multiple products, short in do days you

that’s around inventory last referring It’s this you your year initial not load-in benefit last necessarily what the across we so stores a displace, within So year. that get was someone the country really year, display happening a was It load-in that program launching itself. benefited of thousands comparable we business. was else from to we’re all one-time one we more we what and have the quarter. versus the, didn’t And inventory and to of

those size, So our company accounts sales residential lumpy our trend and -- time. to from in will make national time those

that’s we were saying So there. what

the so, was national residential on and to bullish very this of a from some accounts. size We’re was rollout just good. on It’s one their timing depending the time time, large which

going We’re forward. of those happy. We want more

Chris White

Yeah. one Thank That’s helpful. Got it. you. Last for me.

this in you a do of kind you’ve with program Thank stages taken little You you of can market mentioned think kind still we is? the you or how much the scaled this? up talk Are bit about as you of share success the Quick much. Can Ship as program. early very

Michel Vermette

the August in last much in launched we very early It’s year. September is question. the something stages. and of Appreciate This

very been out. product have get good distributors to the Our partners

getting out some can tell We They’re doing word it’s gaining tremendous momentum. geographies. have job, the a you and

So by get should product the that the in or use specified projects or time groups, maturing. facilities gets only different keep or program or TI TI

So very start. it’s off good a to

in, in eight process months We’re seven that in, now. months

definitely expect augment continue Quick we So and also we’ll Ship and that our significant over time. for improvement improvement

returns investing this adjusting think I so. and continue early -- and we was will the in with happy we’re So

Chris White

Great. Thanks again.

Michel Vermette

you. Thank

Operator

it will remarks. now hand closing I for to Michel back

Michel Vermette

look Flooring to All everyone right. future thank all. and in you, we for Well, Thank calls. interest you forward joining updating appreciate us you We your Armstrong today. on

Operator

teleconference. today’s concludes This

and disconnect may You your for you at lines participation. time thank your this

Armstrong Flooring (AFIIQ) 22 Apr 212021 Q1 Earnings call transcript