AWI - Earnings call transcript Q3 2020 | Armstrong World Industries, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Armstrong World Industries Inc.

Third Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program may be recorded. to President host of like Tom today's I'd Vice Waters, Corporate now introduce for your program, And Finance. Please, go ahead, sir.

Tom Waters

press seen morning Hopefully, posted this media the Investor today Grizzle Brian to may or at armstrongceilings.com. differ and Thank members are being broadcast website and release and be you and morning release those Vic Good and will me you forward-looking implied. our from during materially Please the is our our everyone. we MacNeal, advise making you. website on note the both the risks of call reference the and uncertainties. will to statements on that Actual have this presentation call, our involve expected during Relations listen invited With in on outcomes have Brian CEO; live been section. CFO. this call welcome I call this that the call are our that

For discussion of our and World the affect risks a morning. more may XX-Q Industries, review including filings, SEC detailed earlier uncertainties Armstrong this please that filed the

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

the that, the Vic. over the operating directly our website. measures will SEC with is financial of the available presentation. on I’ll comparable In of addition, our GAAP discussion turn call Both of release the most in within the reconciliation included measures performance press in these meaning include With appendix to non-GAAP are Regulation A measures and G. of

Vic Grizzle

hybrid be campus you today. activity. thanks is Pennsylvania. and like in today to many normal I'm everyone, from morning, pleased for again good of corporate new and joining a Tom, adapting Armstrong, work companies, Lancaster, our us with to Thanks,

working We're solutions and for Armstrong, visitors. to facilities, use a in changes to our office healthier to safely. on phase our physical safety new undergone return organization protocols place including our the to grid first ceiling have to at modifications more and are actively permanent our create spaces and staff of the allow Here of spaces

continue Our and Quality are excellent. tools, basis, the XX% connectivity enabled operate to to by distribution Overall, manufacturing much and and digital our QX, XX% quarter down XX%. customers, service our adjusted and demand as was remains a facilities On safely. sequentially high improved seasonally had we in better than QX levels versus expected. well

and And to the from as In in XX% addition, sales September. improvement within down Fiber Mineral we saw October daily better in XX% continued quarter, has this sequential July improved than down trend September. progressing is

territory sales seven were the Overall, Our quarter by versus overall second in lagged and slightly AUV $XXX and was New by mix negative. lag. had York during AUV Mineral negative Positive channel offset prior York were the metro territory, the the negative But area. driven improvement highest down continues to Volume significantly year. returned was to New pricing top quarter, product Fiber mix down favorable XX% in mix, quarter. in lag and metro the the our like-for-like average primarily national XX% territories, area, million which of

mix. customers was given also XXXX, from it sales headwind channel, which perspective, is versus in volume this a quarter in addition, up big were to price but In lower the box good a sales to the

the market overall expected, there we the conditions. in that some largely context share on to with progressed developments want that I the as quarter you provide trends were While demand observed to

imposed restrictions of work last we the sites local The of ability and newly referenced up to on call. picked territories helped activity job most largest easing construction state in restrictions COVID-related impacted expected, both namely in this the seven contractors the by the regulations quarter, increasing our and As second on situation. with the territories

the migration COVID namely the of This territories, nature market Midwest the the we as construction overall activity and shift following virus. South progressed cases emerge However, the on the the impacted impact reflects delays of increasing the less uneven and saw previously reopening. in of in quarter regional activity

safe pretty New there construction and customers, to is toward facilities to work overall, the activity as to of renovation best quarter building home. with as owners uncertainty from conversations smaller many This the return continued often has with hold, visibility lot adapt the discretionary flow path forward in small activity on experienced experience with distribution is in without repair/remodel also our existing their type clear a true occupants. enable fared headwinds. midsized specification. well In our are while completion, continue projects to through flow projects projects of and low as greater the a partners we near-term it that Also remaining learn determine business. students our that schools, our some softness remains remodel These

flow in in and and for the safe EBITDA opening experienced The interruptions to activity to from customers. days. was million well and our Thankfully Sally quarter team uneven we're back they expected our our quarter program. Pensacola, The has will strong continue and is in plant a performance moment. confidence my the Hurricane operate operations the to few Adjusted entire plant on regular remain quarterly business certain XXXX. X% I a to continues and the and team more of as so, team share provide we Despite our been our could and also Brian markets, continued the adjusted really million flow In dividend to not $XX protest repurchase be results we they has admiration that as and share running. the of Armstrong in far. in our done by closed up obstacles and strong to our deliver to decline proud performance our financial in on otherwise. have minor are restarting an an market, increase challenges But Florida it the impressive cash cities we deliver details partners continues, generation track our Based volume earn the the environment. approved extraordinary due flow. in addition is $X.XX to cash which as business per the Board work of XX% story thus continue continue cash to pandemic-driven in our down a our this $XXX overcome on at over free do for more

XX, metal also was is ceilings that custom Turf and Northern Moz notable, acquisition acquired a Designs. Moz completed two felt-based The M&A provider previously August designer The then and fabricator California-based Chicago-based we third product capabilities of of quarter of the custom existing covers. ceilings, of utilized architectural and be walls, ceilings leading of growing improve discussed, facilities, column in transactions. the walls. in and Design, Moz walls, ceiling we on metal the brings and can three position strengthens category our to offerings further our metal dividers leading unique and already that

partition more As cleanable to the now delighted team solutions and I'm welcome since to seventh transaction Moz than ever, surfaces Armstrong acquisition XXXX. the important marks This are our family.

not specialty platform an and building ceilings are we unmatched walls truly done. and of are We

industry, the we Our build more strength continues most the allows and more to to see capabilities our as M&A in so. to and unique financial us out do pipeline set of grow opportunities

about then over to turn Now dominating creation in Brian? conversation I'll to spaces review times. Brian to and talk of back with financial these that call results, the that, be the I'll pause our and the is healthy

Brian MacNeal

contracted Adjusted XX%. basis I'll when XX% friendly sales second year-over-year basis to Thanks, everyone and reminder, I versus decline sequential of the again EBITDA Adjusted But results. the cash call. quarter declined down and second morning diluted this I'll as margins on EBITDA substantial reasons share improvement a down our of for the quarter were a margins Vic. a improvement Beginning a our adjusted were results, Good prior $XX year-over-year of earnings from slide year. when overall address XX% on points, XXX our presentation. fell begin, per significant XX% I'll reviewing in details basis XX% million XXX quarter for X, the fell the be contracted slide $X.XX, available free moment. to down Today, $XXX be before was from and three year, on the prior slides sales quarter and website, flow million third sequential by versus our points. referring third

the Turf $XXX quarter-end with million of and million, from year the the in down of of cash $XXX and acquisitions, debt than of our quarter third China, acquisitions revolver, as is quarter, receipt partially a higher $XX the completed and this million Moz coupled cash million from was quarter during last was on by XXXX. at as of idled. $X with and $XXX Qingpu our earnings us last balance million million $XX which result down of from availability of available million our million Our offset $XX plant we Net $XXX sale past positions liquidity,

of agreement. As last X.X debt our X.X under was credit as ratio quarter-end, times to times our year the versus terms EBITDA the of net calculated

X.XX have we in times, is threshold covenant so headroom Our measure. considerable this

the is In week, liquidity approved suspended light program. our did market. our to Board repurchase the on COVID-XX restart remains we shape. solid repurchase preserve program Directors sheet of not balance in Our quarter, in any the Last as of the shares impact of the

program, COVID-XX protocols. price repurchase issues repurchasing shares mix, inception Mineral our were Slide our versus offset In of expires driven geographic back bought in year-over-year we've average XX%. share Since We to down approach X.X $XXX X, from normal was mentioned. shares we year, a a have $XXX remaining as to now headwind, declined repurchase of quarter, sequentially were prior channel forward, look $XX.XX. sales December our by the when volume the million key will at results. return Going positive AUV that cost and of our which driver. quarter illustrates prior an Vic declines the but for improved XX% customary processing and million product favorable sales to program, XXXX. mix Fiber the of currently the under million pricing of like-for-like the were segment subject

AUV performance our to a and sequentially through remaining Fiber these territories While was for and with seven was key was the performance in Adjusted seven key $XX the improved converged the the XX% was and sales down territories, bottom in a as AUV segment. headwind or the territories fell drag. was EBITDA positive. mix million line other within territories price volume in inconsistent decline to and Mineral overall

productivity Armstrong and costs WAVE and all initiatives, true-up cost of Worthington. to allocated SG&A of were lower material and as were costs, raw lower and sales due and also management year-to-date quarter. Continued energy reduction from a down positive the earnings in manufacturing cost a result equity

COVID-driven organic X% Moving up quarter. experienced almost acquisitions the slide quarter six, $X were to sequentially XX% second decline Turf of the the offset we as XX% sales Architectural sales on contributed in Specialties decline than Moz the and better of and million were which segment in

COVID-related margins were Qingpu of our we the applied versus the to period due University in Cash our will higher XXXX current XXXX XXXX. and eight state sales base XXXX, of flow third tax two cash actually restrictions, the These results acquisitions up million and continue Not ability bridge the manufacturing in and and paid despite the relative the activity at awarded cash China. lower sales While third shows items. $XX seven was and the of Slide costs more projects. SG&A positive in of acquired the $XX network local in the quarter direct been of demonstrate this driven continued for given was period. quarter by operations illustrate by international and consolidated have productivity base in cash have This the to win wins received largely Slide exciting complex Kansas to free a clearly and and in ship Moz and to facility included sale the by Despite flat COVID-XX. facilities. Princeton City in down million flow challenged $XX operations. projects. of are QX the flow than the by impact declines. $XX our quarter and certain significantly shows International income margins volume million, XXXX. business discrete cash Turf Airport our million Also we taxes quarter the of performance sale in Fixed significantly related adjusted in is Moz. and College the particularly driven Residential volume ongoing Turf jobs we closed the iconic driven driven to expanded from quarter, refund from in quarter In items And we our in timing largely costs non-recurring

Slide additional results. transaction is sale complete. We October nine our have million this the and now $X received an shows from year-to-date in

XX%, Slide can our we've are adjusted were the see down adjusted main is Again AUV down by cash sales XX%, you free XX issues volume XX%. is declines As is driver bridge. called followed EBITDA COVID-related down customer geographic out. the flow and and year-to-date

and due mix. mitigate deflation For is contributors Slide channel we to cash the mix the sales, SG&A through product and XX manufacturing our EBITDA. EBITDA but positive year-to-date like-for-like in flow. both savings pricing costs acquisitions our year mix driving to Input are a fall and free headwind and reflects to the geographic helped are the sales despite

were are Capital of excluded. Interest COVID-XX we reflects WAVE for We September $XXX cash is to in tax were XX volume prioritize the the in earnings a XXXX. impacted year. as sales the to refund with full as the to million the be full entirely sales $XX $XXX refinancing to of our invest expense or in delaying anticipate impacted XX%. is declines. to million down the will from flow EBITDA lower volume quarter, operating the range for million million cash our the savings As and in of of drive year. Actions growth. mentioned result year by our due we revenues the in Slide offset declines now actions outlook in the the as to taking volume near-term. in partially are Overall to is Qingpu proceeds finalize $XXX SG&A was expenditures earlier by will million guidance cost $XX productivity $XXX previous actions. slightly decline down essentially as by drops million future be impact anticipate to AUV XX% manufacturing be decline our to of range flat $X million and place down and containment of by are we for

sequential up Our have working taken cash and we trajectory capital adjusted and platform. acquired are to an can guidance outlook continued best-in-class controlling for capital flow is and we Moz drive on as challenging account laser-focused fourth of Turf expenditures from is control seasonal building to improvement. but on investing quarter the These our already Armstrong times what our prior growth adjusted the of

that confidence. and side of in to execute create that ability focus a is emerge have position no two we the global acquisitions will stronger Our it meaningful our I during value. on crisis and even pandemic testament grow I'll With other back doubt to to this turn to Vic.

Vic Grizzle

a of is Thanks healthy And we XX% this safer. make spend though topic it's universally conversations on clients healthier in to of how priority has new rooms, the ceilings measured Brian. Healthy room been dominant spaces Armstrong, raised surveyed where always spaces pandemic the of isolation known to commercial construction whole said the most spaces safe a in has being and And mattered we supplier highest designers leading having priority XX% for their applications. and and even ICU spaces and their architects health have have which even the our been are made important it and indoors. and they healthy possibly with are the today. lives other operating in an that are fact wards greater conversations At standards level.

best. that a about how their comfort space bringing and people us a today's feeling we to healthy protects a well-being to create allows at conversation one. is believe fosters that experience that are Now creating safe and We of healthy be spaces to and space and space

all You're which and most in? in the making ceilings So healthy natural of and and a part supplemental equation. how the aesthetics play spaces light of where do acoustics are of interior come in familiar already in environments, with ceilings role

make structural space, difference ceiling the of right of additional any As system the healthy elements bringing the capstone can a together. meaningful by spaces

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office, are new and harmful and other effective space. represent settings introduce very a the to We classroom and environments. more new pathogens a to for products the technology particles definition new be Defend. family These XX/X of products I'm healthy to the now other new this in standards called the innovative in indoor and solutions affordable adapting meet pleased against

Our ceiling XX/X gasketed tile standard systems it self-seal significantly ceiling through panels. Reducing family where AirAssure of XXX% Defend partitions the product leaks filtered leakage cleanable purification When return flow which CleanAssure filtration new a over to into ventilation the of our air grid grid ensuring system is can that tight standard products. products are and placed and air ultraviolet the to air and reduce family and and purified air the integrated already includes ceiling What's flow in AirAssure quality. disinfectable infusion VidaShield by a more air air panels plenum products, tile allowing new gasketed system, greater system. seal and form effectiveness air ceiling be increases the vents proven

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questions a and to competitive a the need creating spaces the industry-leading health we'll our bolster shareholders driving to positive with this renovation the happy Together healthier our leader way difference allow and possibilities ready by about and that our at of the Armstrong platform for this heal our will all forefront industry. excited to commitment in our our growth. our for we and further grow work, expanding business evolves, and and take now with making is healthier learn, And change at As deliver new ahead. With both positioned live, our pending and commercial these a We with to where be be And thinking we in to investments position, advantage. about the strong changes time. top Armstrong for profitable digitalization with is people interior continue spaces well aligned your whole market play. positive believe line buildings longer-term, spaces short are will medium-term renaissance in returns like for long-term

Operator

[Operator John first line of Instructions] Our America. of question Bank from comes from the Lovallo

your John please. line open. is question, Your Lovallo,

Vic Grizzle

from anything John. I don't hear

question. me go the next to let So

John. circle to back will We

Operator

Instructions] Certainly. [Operator

Tom Waters

Can we in go participant queue to the please? next the

Operator

issue technical a having at moment. be to the appear I

Just line one is open. please. Lovallo, John moment your

John Lovallo

Can me? you guys hear

Vic Grizzle

hear Great. now can Yes, you John. we

John Lovallo

great. Okay,

my on was apologize. That I end. that. about Sorry

to So this your the quarter. in AUV in thinking for mean, fourth reading you X.X% incorrectly? it? like this seems imply flat are I am something XXXX, guys outlook Or is positive how I it about

Vic Grizzle

want you take do that? Brian, to

Brian MacNeal

John. Yes, sure,

to plus On that for used minus territory we or see to channel headwind the And sales geographic flat, we've side, is for that in X% word relatively the so EBITDA. the mix range. yes say let's a sure. fall-through But continue

John Lovallo

Okay.

within that? That's that of you -- sequential Okay. the be on D&A And helpful. if $XX that fourth guide what's a driving it in then of step quarter, is about $X which would Or big just seems D&A. The D&A maybe the pretty and imply XXXX outlook only EBITDA for million to million down. Is correct? gave

Brian MacNeal

Do Vic? you want me to take that

Vic Grizzle

Yes, please.

Brian MacNeal

Yes.

of And the assets John correct. yes the off moving So that is just it's depreciation timing schedule.

John Lovallo

right. Thank Okay, you guys. all

Vic Grizzle

Yes. Thanks, John.

Operator

you. Thank

comes from line Research Thompson Our next of Kathryn Thompson from question Group. the

please. question Your

Brian Biros

for good Specialty Thank wanted the This Hey, Brian Kathryn. to you about ask I segment. for taking is morning. on actually Architectural Biros my question.

XX%, little the few Fiber of bit? based had. quarter was line maybe was in the I little outperformance I that expected guys Fiber there. visibility and there on pipeline think with the dragged Mineral to XX% I so that Or was down a QX delays Mineral bit that down in think Organic are you last expectations? versus kind that segment guess outperform, a the of segment your a down

Vic Grizzle

Yes, that was Vic. comparisons. of is the can this quarter-to-quarter see project Again you aligned because think our nature some different with of Brian, expectations. business I that

a of specialties a out doing there's to and that XXXX expect in of intake winning XXXX. is in there in that architectural But lot lot quarter activity quarter, total still team We terrific in job although architectural for outperform order expect the terms we and I specialty, a market. of and is still that as the year, projects. overall a the but third terrific did the XXXX I had On for

Brian Biros

I And guess to understand regionality. it. trying Got then the

and early from of the average those remain QX in there the York and were the swing is I into back think Are XXXX? City earlier to ones the near-term? average national to metro. behind expected demand QX to New Or you above are there at amount mentioned some in now excluding the some that them slower being pent-up average, that QX could national maybe be that forward going of

Vic Grizzle

demand. of them terms of Yes. I lot to tailwind wouldn't in a put pent-up

significant these those New as I York the non-key metropolitan to well. and sequential opening a territories those improvement territories to area, territories with highlighted seeing lesser the lot drag for which highlighting But expected except as cases rest we this which of see in really second which as are of were to think territories back to in what the got as up like those continues see areas of just rest the sense lag. of the we run key seven the impact up that's areas is within the in up improvement activity slow up see We COVID experiencing so in how construction the and there a of in to South seven opened terms were a we improvement the on for But metro some virus. cases caught is markets. territories COVID impacting back number we us. we makes we And key depending of start relative those did that's the sequential rate consistent what that or quarter, activity sequential Midwest The was right? markets saw and was the those the

and to up we the to territories on back side responding and gets back normal normal these cities market all these this opening get So demand of as conditions. I think other

going and to experience with a the that's to here out think pace lot and virus. the of experienced the is I then come their be So uncertainty territories which of at the continue these virus rate

Brian Biros

up City better? on is you York I but specifically, down? that's Got on it. Is lagging is maybe and lagging still quickly Metro New Or it magnitude staying Or a put it there And lagging. understand getting just following maybe the can that?

Vic Grizzle

break each lagging the still improvement other territories. going but we're out No saw you But but not getting of And lagging. would the yes, to territories. expect, better, as sequential definitely we still

I that. think that's -- we'll onto hang

Brian Biros

Thank it. Got you.

Vic Grizzle

Thanks. Fine.

Operator

next from the Sachs. Susan Maklari Our Goldman question line from comes of

Your question please.

Susan Maklari

everyone. morning Thank you, good

Vic Grizzle

Good morning.

Susan Maklari

sense but kind of I Or further maybe question quarter know a Can you us of terms AUVs? activity? you is to looking that think too shifts us of just some about kind some current stores I fourth delays of in as there first think you the in country. that even for My average we like could pipeline Are as across you that just around for think about bit there? you have influence of been look mentioned of you some looking out into trying the real that maybe not clearly a that can the that you projects stops and entire give backlog there's that what guess XXXX. any the we size? or at And as then color give within bidding bit future versus project things how shape nature perhaps of volumes is head

Vic Grizzle

think and Yes. connected we bidding activity. Susan then of I what in see right? very let terms -- they're backlog much me The

and we is the continues the on impressive. have very of win in the backlog in And all, business. first So there be activity there best visibility to our Specialty rate Architectural our the backlog

in had third the segment. order in quarter fact that In we intake our best quarter

in So there's design out And plenty further the jobs and it. out XXXX in business business of are that There's of When and of of closing majority those component. of a of little business 'XX closes a there. because of we're they're that. out course plenty there lot the projects terms specialty

the the 'XX XXXX across quarter improvement for being talked verticals. order of really record all an supported in we by And second activity That's down bidding business. specialty levels XX% in intake architectural the in So activity. and about the the bidding

XX%. amount in XX% really dollar improved that's second the I down think in the number and to And down be second The of part projects that is of the of was projects. question. to X% the that this And third quarter the quarter. only sequentially down in quarter third

then So X%. back down what mode in or what the those these is is of where smaller, a they projects held that are modifications. value projects larger-sized to wait-and-see but down medium continuing in to third of delayed projects the more do projects projects discretionary tracking whether these says -- want still and quarter more were modifications number only people And type the were projects the are are of where call of being do I larger was the size -- and want XX%, to those what they

versus so me. very sense And It that discretionary some are and smaller held being more logical delayed that's of the up projects what's to makes larger the projects.

So it's a question. good

in but activity sequential we're into next only visibility also and our -- is order improvement think year in seeing the rates the bidding improving. not the I therefore activity,

your answers question. good a that hopefully question. That's So

Susan Maklari

any Yes. No that And very follow-up buybacks. commentary mentioned I Can authorization give the you your that Thank guess versus helpful. buybacks buybacks my How gotten you to of valuation? on question us or the is you're given appetite resume your maybe color have? especially between M&A some you the you've color is that current about other allocation for thinking in opportunities you.. capital

Vic Grizzle

mirrored in our And that's year of and business of night last business investing really we've of grow. this which is where been doing investing think spaces to its in that. our healthy actually I need our And no we've with around Well around so back what allocation spaces, our this change priorities. healthy into -- part our announcement far been in for capital new recent innovating back innovation

back our are we're example where business. for in area tools digitalization good another Our investing

we're in the capabilities two for as dividend And those going this we our be business. do two that impressive the bucket acquisitions are back for depth clarity position, on priority an think after a happier in the two third use saw so the back acquisitions. way that about the could do the Also third couldn't the And a and you little confident off bolt-on -- allocate think to But with priority And for to more unique to just tell the get cash, can priority. bit effort to share just increase our we're rest the platform. open acquisitions therefore the and return to a markets, I of continue terrific to first and activities. our we with the quarter, fact we repurchases. the the the around market prudent you have team. we're to we remains maintain bucket. which And impact going cash environment get third done again, year's second by them uncertainty was start of around also the to that our posture quarter first the and we into that of So closed the those we're Armstrong two, shareholders, the third this more by our in cash in recession I given of to I into is

terms So, our maintain although, it, restarting we're the you'll share of in year the see prudent least through repurchases. at a of us end posture

Susan Maklari

you. Got

very you Thank luck. Okay. that much for Good It’s helpful. color.

Vic Grizzle

bet. You

Susan. Thank You bet. you,

Operator

Thank you.

Ng comes question from the Our of next from line Phil Jefferies.

Your question, please.

Phil Ng

when mix we But AUV there's to Hey, be a the to least think where mid a good the I on have different think again? mix side to at maybe of XXXX, that pricing back quarter, positive. see expecting longer-term going about next improvement you're the when AUV be Is things enough the everyone. guess to think morning like-for-like target is do signs side? you some big because single-digit you on like to on year? we to fourth in going And low of elements drag about encouraging return

Vic Grizzle

change dynamics think, to there's industry. I in that mix-up no here, Phil, drive relative the this Yes,

territory and uneven this market we've So the a some and project territory a driving behavior very got uneven projects lot unique that's very dynamics of this within mix. driving of that's even types set

into mix get we back -- in of but meaning mix drivers I continue higher this for business. buying industry mix, that and value, our are product a there mix kind and of are territory still and in going remains positive again, to this positive the terms this highlight of same some and regional dynamics in as customers we will higher of see to marketplace, more more normalcy our and think are business, in we're the XXXX there to the is the and products get with which naturally innovating night, dynamic the I will And sell as that then for excuse at say the the to a products today to mix into XX% that XXXX. premium healthier a products higher as to announced mix-up, they that spaces performing to last continue products that the is me, appetite be we I and that. of going are the are -- richer we they grow on XX% going continues drive than other drives upgrade. into And we're to

Phil Ng

that Actually question next color. Vic. great That's was my

able proposition. exciting for next a big tune up. bottom customers? the definitely I solution your cost-effective to very line? this would contribution So ramp a and going mover it you a more Is see And be this that value your up to seems be How is needle I product. thanks to year? see it quickly like But for mean,

Vic Grizzle

this is going to be And with very cost-effective terms going to tearing to the major of down driving effective. is gain non-discretionary be be these in solution to is come or going nature spaces. This a think occupants to without than for more I cost very back easy This renovation. grid retrofittable confidence the

improvement ceiling out we're people here get the products help drive some an type and tiles quickly what and after air swap And people can their is retrofittable changes in spaces. You the really into make back these that's easily to quality.

start. we'll this going to this And products in good XXXX. be believe speak. some I the the in So get ramping that of on I is we as process traction these now We're think

Phil Ng

Okay.

one Just last for one Vic. last me --

Vic Grizzle

Sure.

Phil Ng

Biden plus the side or impact potential any controlling negative a with Presidency the the on business blue see scenario Congress? and sweep your Democrats you a in Do with

Vic Grizzle

of think happens inauguration. quarter the the in work aisle dynamics well of don't after we see wait frankly I both and the -- I But first No, I the White think sides or in what is see this House. have we'll on whoever mean, to business

Phil Ng

Vic. Okay. appreciate Thanks a guys. it lot, Really

Vic Grizzle

You bet.

Operator

you. Thank

comes question the Bromehead Our from next line Exane. of Yves from

Your question, please.

Yves Bromehead

gentlemen. you morning thank my questions. And Good taking for

on Just my side. two

the expect to proportion see that to businesses? let's say, that it's How you but year-to-date of what you're would those of starting wave Biden restarting renovation. your and in delayed, QX and one, effect kind seen of could Blue on or even are you just actually I would the on first XXXX? much year? Wave. Europe, for the seeing where case in is those just a scenario Coming be volumes wanted the days, you've clearly is maybe And Should we Did projects of been I XXXX? know demand in there's these expect saving from hit to of the very XXXX. where my lower comment dynamic you to just XXXX know asked a second lost if a The has just still a recover question European base what around early have on probability multiplier into the And next like energy there's renovation most background

is So renovation say to to where you sense Biden saving I through? any know, needs that reach does U.S.? if the the get if in what XXXX wanted of today Thank much. energy by And de-carbonization to have let's so current you go

Vic Grizzle

Sure.

not cancellations. saw your the really First continue seeing question delayed second we And seeing lot we're these, quarter. and of like track cancellations. first We're around we delays all, the not cancellations each of in -- versus of to proportion much of a

we're the it's And little fact, that. delayed seeing that this very delays In beyond And point are we're now predominantly into XXXX. activity at delays seeing.

be canceled versus you that, projects to altogether. are next they'll realized, if year these So assume have realized

think been to. attention So close I that's something paying very we've

those But they're at actually they're market this canceled, in point, the think Now, and dynamics I economy primarily overall they're later. materialized whether the XXXX decisions delayed. will drive not

mean, energy of for amount to you energy, occupants. for As the air have it treat environment control drive savings I to and an that ceilings the relates

we've the environment ceilings always of itself. acquisitions system through one heating naturally new cooling part and an conversation. energy been of control our So, we have that the also saving With ceiling within

this we healthier to more systems panels. And the air and the we making the air AirAssure control of use we're as flow to phase around solutions ceiling of lots have be efficient we create the by to adding energy of So next spaces that building, driving energy believe going our throughout through savings savings. HVAC the

a we White energy and matter, conversation. offer. think No have So I lot offer think who's savings have I to are which to being policies in driven, house that we a in lot the

Yves Bromehead

Thank Okay. much. you so

Vic Grizzle

Thank you.

Operator

Thank you.

Credit from Adam the of next line Our from Baumgarten comes Suisse. question

Your question, please.

Adam Baumgarten

for taking my Hey, guys. Thanks question.

Just year? to we've when recent kind still -- that would weakness starting your last of up construction side weak hanging on to to seen the months show starts understandably given is few projects given the you start just kind expect as next of new completed. over But get in the in date results the

Vic Grizzle

Yes.

a next lag not to half lag second will light. year the when discretionary the the in in at are a up new projects that think year which for look construction and start you again, see sense there when hold impact new lot basis. dynamic some of And could It's been there's know is that R&R would system the new that new of from gets about held this business headlines, when these construction makes fairly type on things of done back good what for construction, first. of the that a shorter XXXX pretty you start on XX and we interesting I think a actually it's been a has show more way back. you But it into be months construction out you XXXX which projects, cycle it a ceiling very

our new expect to demand. remind to headwind construction overall to continue or we paused So a though be I'll you it's business. of activity overall XX%

activity. XX% it the is driven XXXX territory. as I would expect, XXXX R&R back positive what feel although that's we this bounced and And construction back had and at The drawdown by to new But see a year. headwind goes that and XXXX picks really when during activity following R&R looked deep negative R&R you happened XXXX, activity other time went And really frame, and in but the we up. year in

play there's whether back to the lot of to everybody and at some Now year, point go But the how think we to dynamics, I for data out. a think a pandemic, about look vaccine, that's that happens think next that's and it. that have I things there's

opportunities there really going real business. And is I to excited lags the some we R&R we're again that think it so a about. driver at the or construction New least headwind be, system. year is have as a the of for into

Adam Baumgarten

And a this Got outside safety the the putting why then can just that savings experience, you over And they HVAC put cost mentioned you savings HVAC to if to product a given XX% maybe XX% the of of premium, quantify, just kind what in obviously, building worth benefits of it. switching some Thanks. but the could perspective it's in? and AirAssure. from

Vic Grizzle

suppliers terms know in Yes, specific it's for today HVAC HVAC. We're a capacity. maxed place their in HVAC is but working to are it's We be going the with lot a in buildings this. to out now, of HVAC know which we meaningful of system savings right very of the development

way to in or by they the can more efficient So higher. more And introduce air drive it making air collect this the for air. therefore, fresh fresher a them quality capacity adds more to air even

So we capabilities also going get there's may think but additional here, upsizing meaningful that, to be system. not to that, savings HVAC be able their to they without

building and be situation will the it's savings on amount to HVAC dependent the the going the system. current again, utilized of will level savings with capacity on of So be amount of be -- of based in the size the the

Adam Baumgarten

That it. was Got helpful.

Vic Grizzle

Okay. Good. Thanks, Adam

Operator

you. Thank

of Hughes Truist. line Keith from the from comes question next Our

please. question Your

Keith Hughes

question the savings of manufacturing looks there realized of statement? SG&A like quarter? the in Architectural the in see other other Specialties on some Or that about the cost on you. $X Thank numbers million I in Slide income hidden program. was X parts Mineral and are Fiber or A Is It segment. what

Vic Grizzle

Brian want that? take do you to

Brian MacNeal

the Yes on Mineral is seeing for in net Thanks Keith. you're Sure, a Yes. question. that Fiber five the number. quarter

some additional really there point then SG&A market. part other the up down of shows also bring line. to your innovation third some So there's AS. And offset savings we're of by making the some it it that in is there of this are And in to to some being of that investments

on track... So we're

Keith Hughes

number the total quarter guess the in is the question? What's I

Brian MacNeal

total the million. Yes $XX was

Keith Hughes

$XX million.

million a the time investments of you compared the are fourth. which the some kind a there? reconciling with on it going guide, healthy lowered million hard with $XX talking $XX to Can Okay. know quarter, And margins the It having pretty fourth you weak about. were for I leaves that the of in I'm what's pretty still to where you amount explain

Brian MacNeal

Vic do you add me want it. to

Vic Grizzle

Go Brian. Yes. ahead,

Brian MacNeal

products with digital we're of we're launch investments about and the Keith spaces talking it's growth. implementing to drive some new that the efforts the of some healthy of the the

Keith Hughes

Okay.

primarily. Let Vic a topic me for question different a ask on

us number quarter a X% good is being the improvement. in on rates order a the really which in gave You big pretty down dollars

Vic Grizzle

That was a bid activity.

Keith Hughes

sort point? bigger new some Or Are you or products to starting any space. indication socially to for going back activity at renovation from create indication your more employees distance any healthier there of offices businesses that? to of to use of is that see example Is maybe having come their something and a -- to we

Vic Grizzle

Yes.

me let rates bid activity. The a So order but numbers correct. were cited not there you was

in of activity architectural back just really it's So to renovation would we're lot no big to happen all the across spaces. started wave across I folks terms required to the the be saying that fourth point as clear, quarter. what that's That's going it to verticals, in There's community. in all and not that minus seeing. verticals. it's on we design talk There's to the the bid a And get we Keith activity track X% of value is the the

in see of of back-to-school I rate actually to as going is something back-to-the-office, we're going think this over quarters be there's various different parts country. in to and coming feathered pace the the

market really a of renovation in as happening anticipate don't once big activity way all a and as really the or this back. feathering all I So see comes in the I it at continuation new way.

level of I be think condition. will to overall market renovation stable when increased the this it's gets an additive a Clearly back, market net positive.

Keith Hughes

very much. Okay. Great. Thank you

Vic Grizzle

Okay, Keith. Thanks.

Operator

you. Thank

question Longbow of from line comes from David Research. next MacGregor the Our

Your question please.

David MacGregor

Yes, good morning.

Vic Grizzle

morning, Good David.

David MacGregor

A me. few for questions

you it First to the sort Mineral was to York the regard that and of interesting about a people I about with markets now the a what is I market market categories like-for-like two for markets? competitively seeing all, get in just these pricing basis of the markets, was New just talk major across some maybe Can on you're And -- of to Fiber metropolitan wanted right as in are bidding that AUV the you're you positive. sort competitive seeing, volume. weakness other where of more of the little presume in talk

Vic Grizzle

Like-for-like you was noted Yes. as positive. pricing

price As like-for-like through we we've implemented February that's increase that and generated nice We've some that. a executed on and pricing. carried

more holding in Our wouldn't did to remain competitive. a more ago. to a deflationary And time. territories. that ago any New The been the these competitive markets on of -- competitive. on New as markets really months that than put a in on job And They've York period I teams fact, across were more being always they I nice point York or competitive pin competitive. I wouldn't that's being six year that wouldn't being

and to continue is we're competitive. with to markets with side our these innovate service continuing on product think innovation. What our we're tools doing I digital be the

So pulling we're distribution. through those specifications and specifications winning

We continue really do that well in to environment. this

So we'll next drive continue mix. phenomenon as like-for-like into that between the earlier to about talked positive AUV pricing I is mix really year. I expect really on in quarter mixed territory This fourth channel -- this is and a

David MacGregor

this that. The key markets how discussed quarter, growth seven for much quarter? last contributed you this the that Thanks briefly Right. to Great. identified you their and recovery quarter

Vic Grizzle

pie specifically, We second of overall improved if you it is its didn't quarter. out call sequentially but back sales the lagging David the was that something which will, to that proportion in

and of territory for that sequentially AUV a as AUV our highlighted, overall. Again, it back our and see aggregate. continues York in mix New us seven to level high glad Metro, additional on we're pressure to lag improve those putting So to I

David MacGregor

million carryover year? full that of next Right. The a $XX $XX year getting the to containment, of million what's benefit cost XXXX to

Vic Grizzle

Brian, I'll let you take that.

Brian MacNeal

consistent put we're pretty been that going back those to we've David, Yes. in.

So permitted they're temporary cuts. structural cuts. They're not

those so, to next expect, I year. And into back come

David MacGregor

Back in.

realized still Okay. about P&L? of early, sort think it's materials do forward but how XXXX, within just, lastly, you part raw that you of and I inflation the look And as to

Vic Grizzle

to just not hard some out really yet. dynamics It's call. of We're those looking really

to David, say, point. this at hard really it's So

David MacGregor

right that? seeing any way market could maybe you conditions and there the now, Is say us in in extrapolate of you're what to terms allow off

Vic Grizzle

net deflationary we're current in situation, Well, in now. a -- situation right our deflationary

David MacGregor

Okay.

Okay, great.

Vic Grizzle

Yes.

David MacGregor

Thanks much. very

Vic Grizzle

Okay.

bet. You

Operator

you. Thank

of ISI. Kim Evercore Stephen line question the next from comes from Our

please. question, Your

Stephen Kim

eventual a know be is up a you will contributing locking frame question would I that be the potential down regarding basically that could positive lot an positive guys. actually what it to AUV. indicated have Thanks the And to the but X%, Hi. year. EBITDA? driving down a X% flattish XQ? AUV I drop for what curious, for the that was be or the be in like? to down things to you drivers would to time necessarily return be So the EBITDA positive not to AUV what be to specifically, I

Vic Grizzle

want Brian, to part first of Yes, take do that? you that

Brian MacNeal

Sure.

about all called the it's headwinds of out -- that key seeing we're these territories the in we mix Stephen, channel and quarter. seven some So,

sales those level. As given high as get AUV the of and key out rate those we will those markets, the in the pick we start see and Metro, New better in still positive progressively we're York somewhat at out up they seven, from that called to all fall-through the lagging AUVs least drive QX, help

Stephen Kim

the... about What Okay.

Brian MacNeal

go I add ahead was Steve, to color Go that. follow-up. going I'm sorry, and to ahead. little a

Stephen Kim

the Do EBITDA positive to to drive I was if be in that dynamics not just that take? a would from think say could return positive XQ, about how And that, going you AUV? what be would to that contribution like, EBITDA?

Vic Grizzle

Yes.

Brian MacNeal

Yes.

do you or take So I would -- me Vic want to you? it

Vic Grizzle

Brian. ahead, Go

Sorry, go ahead.

Brian MacNeal

would a I somewhat expect of in it be still No, QX. to headwind

providing start not XXXX to that I would get expect guidance from but -- drop-down to and the standpoint. see we're As yet, again, sequential we improvement better

Vic Grizzle

just to I going Stephen, Yes. was add. Okay.

mix of dynamics and specs is is mix-up drive normalcy next products. as specification out is issues of every the total take year back mix-up renovation acoustics work territory terms AirAssure And the market mix dynamics and around some I market of some And we which more opportunity, a then, get driving some in the as think unusual assure we industry now sustain channel every opportunity. these their dynamics. way to over, a --

So, I to forward. positive continues the think, mix be going

Stephen Kim

make like I last reduction Got something or are point you that implement things shifts indicated was feel or side? you had that at about that is you like still was to beginning I you to think is plan? your feel you that don't it it. But quarter how that. didn't And do the need that on necessary. maybe like Do Or you that something that you capacity in had that then, really potential think something do? to to the wanted

Vic Grizzle

Well, did that. we

that and clear. to We Let to environment demand we we a sure shifts me to any that did level activity healthy And the rightsized reduce our plan in. be our manufacturing potential we're disruptions. match for inventory had make

that and continue did lean we we to operate no, So, efficiently. very and

Stephen Kim

tiles? that's already? of us without the is, before? then in why two And doesn't there. little terms Yes, sort of for lastly -- of to industry is really is have was of misunderstanding. that already already? sorry then bit? sort these as that something help by is there Or method, of particularly idea. out the could related Those technical like that also understand Is great. seems anything efficiency, good there airflow issues installation A One questions marketplace this which curious to Okay. are just Just a done kind an couple just this available is That's in you efficiency the related new if tried seem for it? to I be this interesting. been that, had that changing me which incredibly gasketing, achieves And ceiling questions that standard something that. products, intrigued that Are an I'm to

Vic Grizzle

same grid innovation needs system you special I ceiling a some for however, a retrofit -- and gasketed This their which to the ceiling ceiling centers, to the very allows very not market, to the base change ceiling tile tiles used and In is grid for the get the to for get system in large retrofitted. that's be here have and gasketed sealed facilities to of the first a tiles healthcare to affordably. data think existing same we able and have Yes. in quickly installation. people the the gasket that tile with installed That's be field system

a in solving differently experience situations with reversing health exciting. had of the just those centers we've ever ceiling and and So data for the lot first gasketed I care problem tile. ceilings unique that Very and sealing off we're mentioned

offices I to think make affordable very it this to for going we're it. about excited is renovation a schools, and make retrofittable

Stephen Kim

Thanks Sounds like a idea. great guys.

Vic Grizzle

you. Thank

Operator

Thank you.

Zelman Our the Speer next line from Justin of & question comes from Associates.

Your question please.

Justin Speer

business throughout of tenant that I down with of office, verticals. have some trended the of piece just -- But just things I relativeness guys. that's like of the all, some interacting health vertical walk looks for what as of are you so ahead? the you the Maybe quarter, breaking contacts project Thanks trends. good as particularly I important. look these the how know in the distribution verticals we pretty improvement a education, idea through And across care? then funnel think

Vic Grizzle

at all look you sequential saw When verticals, we verticals. improvement the across Yes. all across the

when summer then education stronger year. this in where look the we you bidding of little into the and see -- was at verticals, going started a think I the months activity, to separation activity bit the bidding across

kids sooner activity got early that in forward it start And of I months a because people schools were the an then as of lot school. on activity. renovation think pull of some weakened in of summer out

that think of a was one good I across a the we backdrop, the season Again, given but we verticals. that noticed separations little bit education had timing was pretty So of in frankly it the the different.

saw improvement. But verticals, a of the continuation in saw we more the the various weak activity across of So each that in verticals. bidding show up as we sequential

improvement. might from XX% in you down projects minus pretty expect that's big when you of go to minus a only XX% As terms

Justin Speer

if the pipeline emerge things the air whatever macro because deteriorates the an and we costs worsens about inactivity for were to or pocket for So SG&A perhaps pandemic you those whatever maybe of reason dwindles. things the further reason, potentially if rolling your would back, see that top suspend you That deteriorate control, of comment on see some because out you line? made

Vic Grizzle

would yes, say and have we structure feather -- want I at at are again to for government-mandated back looking more cost imposed greatly think we today of where that back restrictions If we more to definitely be Yes. in. that those we what looking shutdowns the costs example reduced volume or kind

and So going. support the again, the making this back our it And the in. business rightsize right relative to run that we're in we digitalization growth business to to conditions investments got we we're now that initiatives

So continue. to I expect those

Justin Speer

channel how That you visibility Any with know makes have inventories. those in much look? have you sense. How And terms conversations distributors? I don't that of do insights your there in

Vic Grizzle

that in I kind current inventories Well done in is their what erratic I our and very our environment demand job can comment a have they've rightsized customers terrific the a servicing demand distribution environment. to believe on partners of

are moving accordingly. So improving environment and forward as their an go inventory demand see positions we we

should into -- that that's think and the I So into year. continue next expect to we quarter fourth

Justin Speer

picture Excellent. those respect for rolling guess product on project when the to mentioned Or broader Excellent. then against more offsetting than articulated? the of out Are they that movers Specialties. that? you that you projects with how lastly juxtaposed these in about I wins me Architectural backlog? the wins think maybe needle Are just And we should

Vic Grizzle

good Yes. a It's question.

amount projects project. won movers. Airport Mineral taking only that are think a Kansas on very for we The that large taken time. job needle there's City Fiber been, same as is face year Architectural as at last it definitely the and These as pandemic the the time year has in projects. Specialties, the business has and not to large year. of did The In well. economy the is but bad equivalent last orders that this of I same have as It's orders they're that same the

that you that So business tough of against how a gives a backdrop. pretty is doing successful flavor

they're they're the going definitely next so the backlog to into And that of terms year. needle going in on make movers impact

Justin Speer

recent the that you Excellent. And then made. acquisitions

your out we harvest least the revenue you as these acquisitions synergies for potential a and gate network. or had You've How you your as of I funnel record of revenue synergy track push forward? guess think good at through those about through going should

Vic Grizzle

track historical think Well, good. I is pretty their record

bolted nice our on a we're businesses have think both channel. of platform to contribution being like going a to in I large go-to-market our those Armstrong to distribution

platform. they revenue going businesses of to the in integrated those into there's Now, terrific Armstrong I both be some as get think go-to-market synergies

Justin Speer

Thanks it. Appreciate very guys. much

Vic Grizzle

bet. you Okay,

Operator

And our from Capital. you. comes for from line Garik today Thank Loop the question final of Shmois

Jeff Stevenson

Hi, this one had motivations with my if move is grid for Jeff Stevenson on is before the year-end? you My December taking increase could price the an for industry increase about and I questions. the Thanks first just Garik. wondered to ahead talk

Vic Grizzle

Yes, a and it's raw steel. driven material increasing material by in tightening really an raw

the the And so behind price increase. that's driver

in of time based you February prices -- we're on going steel As terms around in we're frame. go somewhere know out normally earlier. seeing but pressure we up And what on

Jeff Stevenson

we about to raw with these And going into should think of helpful. quarter as higher? fourth margins some creep that's starting material up, costs the how decremental Okay, steel are

Vic Grizzle

you that? do Brian, Yes, want take to

Brian MacNeal

on just Sure. input venture. to affects WAVE joint our Jeff steel's so clarify our cost

that And It earnings. range through so our it from WAVE business, doesn't in -- fall in right? WAVE that that standpoint account for shows into into XX% up that to equity XX% so total But takes sold. line of flow-through we're equity -- because cost a the that flow earnings still steel goods into decremental of

Jeff Stevenson

Got it. of best it luck. I appreciate and

Brian MacNeal

you. Thank Great.

Operator

Thank conclude further question-and-answer this hand of to any the does session I'd Grizzle to remarks. and you program today's back Vic for like the program.

Vic Grizzle

very backdrop. had today. I Again in challenging our the We has we quarter everybody done spaces to record help acquisitions in third back joining and in of life terms what intake quarter solutions family Specialty Architectural want we're to get two owners proud strange healthy whole business us very and for team thank launched quarter. that occupants I'm against of really get of just and a order our to to excited a work. and back new are building about

joining And again forward of So, things. next to to We look all for these our about talking today. you quarter. thank we're you call excited

Operator

in gentlemen participation the conclude your for and ladies you This Thank today's conference. does program.

disconnect. now may day. Good You

Armstrong World Industries (AWI) 27 Oct 202020 Q3 Earnings call transcript