AWI - Earnings call transcript Q2 2022 | Armstrong World Industries, Inc.

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Operator

Good day and thank you for standing by. Welcome to the Armstrong World Industries Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Theresa Womble, Vice President, Investor Relations and Corporate Communications. Please go ahead.

Theresa Womble

welcome, and Carmen you, everyone. Thank along Vic On MacNeal, XXXX CEO; progress outlook, Brian our CFO, today's results our will initiatives. rest-of-year quarter call, our second discuss and Industries' notable Grizzle, Armstrong growth some with and on World for into today session Q&A his take retirement. us who August X, is role the CFO joining effective Calzaretta, as will the Also Chris over Brian moved

Investor reconciliation financial of of the website Our armstrongworldindustries.com. in measures is Reg financial measures non-GAAP within of presentation the Relations and include SEC measure the appendix this operating the most discussion G. earnings at the morning. these will A these with GAAP the and directly Both of meaning available performance are of issued press comparable release in included on

we XXXX. or forward-looking as risks operational statements and represent During statements our have XX, the law. is be our performance and risks we statement those that this morning. update differ what making detailed forward-looking July undertake XX-Q that These applicable of date, call, the by no and discussion earlier We materially view filed any the from may of implied. filings, including in expected obligation financial uncertainties involve of SEC beyond uncertainties today's will to a required securities We provide this

as Now for the turn we call X please those over Slide of you Vic. to following presentation, along with turn to our

Vic Grizzle

overall morning, XX%, reported This Thank while everyone. X%. mixed with you, grew strong Theresa good and growth EBITDA we results sales of morning,

XX% AUV X% segments. And business, Mineral our double-digit volume growth both Specialties growth. Fiber growth and we performance Mineral and Fiber from sales Architectural the resulted of year-over-year net delivered strong Our within for

partners experienced in were of the fact, outlooked, see levels. first versus market and dampened as the accelerated volumes outlooked The with that sales in actual growth of this destocking quarter activity we distribution of market line the our April conditions. at call, in As in into quarter. activity our through key April in sales quarter Mineral ended in volume end more overall normalized a underlying half activity the U.S. continuation June, Fiber we as May month of what and Also back the destocking we we

we natural our our the in inflation quarter specifically segment Mineral strong by what are in in While performance acceleration gas. was above, encouraged lagged, growth, segment. by EBITDA particularly sales terms was Fiber of an within the expected, impacted This the

time, inflation While of to short experienced be tend highest most rapid a is This cost second the is since our squeeze the rate monthly XXXX. pace a extreme. inflation recording quarter, XXXX what quarter, it when rate the and of stable, during we period to such with fairly since June the is of inputs increase in overall a as margin possible experience and

size energy is X to launched the AWI, margin we costs between This quarter until rate actions this first Now squeeze can experienced in and on first up. in for the freight, experienced pricing catch the July doubled our from temporary quarter.

of staying record of pricing most As discipline. ahead track have a with we you inflation know, proven of our

not achieve rate. increase, rapid our the Given fall-through did we typical

However, able it were from to we cover that even calling rare situation dollars extraordinary a of in is worth this out perspective. inflation inflation,

historical action, these we to as energy at Again, return world. as invasion we our significantly are, performance. this our costs followed, the and that sanctions February and sized of margins was in our a increase to that price But events -- experienced temporary January quarter. believe we Ukraine continuation is trajectory with on the of the first of Our rate for of price the end rate changed the the a squeeze inflation of extraordinary the after and across fall-through expect July the

indicators market line to the overall the year. all the continue our for largely ceilings with developed positive with in expectations performance that and category initial be said, of has underlying Now

from signs headwind folks April, aligns disruptions, to a a activity, recovery. rates and double-digit grown as a skilled continued through delays market commercial and with levels meetings levels. of leading for continuing the project range. accelerating by indicator with community. completion are along experienced architectural in cycle, bidding to availability And all mid-single-digit we also the Index at what remains elongation has experiencing the of the inventory our with with the reported has and Project products continued, reductions been inflation. in-person While at chain in sell-through low- several supply that, are at construction have of driven distribution Architectural positive Billings commercial expansionary strong uptick Further for our quarters activity These sales overall of design a growth labor

the availability While job sites availability labor has of driver primary material longer as on has for improved, emerged cycles. more completion

the delivering fantastic doing. job are flow plants I Architectural the choppy Fiber like Mineral would to Before I move to With on our highlight Specialties the volume from to April especially while production plant inflationary targets June, segment, team a in safely on service critical high maintaining managed through in this this environment we're that the productivity also our quarter. customer in. while levels, This is

largest is good Macon, example raw also key we terrific Fiber operate is March in waste is project Georgia and online prep. that XXXX our plant. that at like teams our plant recycled that use paper, recycled This plant goals. one progress Our Mineral of toward made of we materials came sustainability our news a the A

may you paper has for digital of some recycled And been this declines supply that pricing as world. increasing a know in

stream mineral waste annually. local to work in both the environmental in XXX% reduce This with landfill as working of was tissue of months, plant to recycled the our is who our waste in handling fiber for fiber supply manufacturing the costs. nearby costs, an risk XX% reduce of and have tissue planet use XX impacts, past operate in process, a needs of and the products lowering minor a million now material Over a our opportunity our This XX win-win with tiles. on we been their March. a eliminating we work consumer source pounds diversifying to paper investment our chain And are for urban ceiling companies and consumer we've completed

Now and turning quarter sales the marking Specialties earnings segment. in growth growth. as very quarter of delivered Architectural products of platform, level, quarter second unique to fiber We our of this Architectural another Arktura products. XX% year-to-date only Net and well excellent XXXX sales. sales consecutive pleased felt business, Fueling products and Specialties the for acquisitions, to We're also grew from and on not to I'd Turf. our record-setting grew as from aesthetic and sales see in our but our are they strength been like newer has particularly are quarter. both particularly acquisitions in highly base recent These continued period. our the Tectum leverage this greater functional of highly too. promise the quarter Combined Aspen Arktura sustainable, are how benefiting at XX% Turf for national than our selling the highlight second

combined the the our to drive production to distribution a AS we these we sales strong with business, for innovation six growth. testament together place new have efforts our on expanding Tectum and record-setting around quarter profitable as strong resulted past design, It's model model know-how the XX for growth bring a Tectum. These products. and in manufacturing our best-in-class Over focused in product increasing our months, efforts families by marketing execution portfolio with

XXXX. Second in increased and EBITDA EBITDA expanded XX% quarter basis the adjusted well our adjusted our points. the Architectural margin reaching EBITDA for segment goal margin remain Specialties year-over-year to on XXX for We XX% way

orders Architectural shipped finally, half of Now in provides quarter in than Specialties, us the the with in This quarter. more remained the to good solid visibility up order strong, the year. a intake keeping second

retirement, provide Brian? final he more details begins time AWI, his Now, for will financials. on at Brian, the before here the

Brian MacNeal

Good to everybody Vic. Thanks, call. on the morning

the income Sticking reduced in of first, inception the and total share repurchases In flexible in adjusted updated allocation consolidated we stable the versus presentation. quarter As please our This as the strategic million. repurchased quarter, component a of I X basis driven sizable on quarter. the driven segments. and prior EBITDA mind for business; continue our acquisitions the diluted on well about On have count we Adjusted by provides guidance, second, reflects and $X.XX year. a share increased our earnings to of in shares minutes. count with points the step-up our up share first behind, and million sales per of program an with versus in XX% on a as and a color from cost of view we results. referring in basis capital Slide the I'll were sales net growth X% that review adjusted providing quarterly Since that for tax margins of about shares. priorities a Along XXX decrease to of $XXX $XX million a prior increased to X, an year slides begin million few quarter in and EBITDA our rate, Net be XXXX, be details share available results, repurchased we second dividend, million with XXXX Slide our Adjusted second moment. XX% XX.X or website the more I'll keep second as XXXX $X in important increase or $XXX reinvesting by XX%, both share contracted by partnerships.

offset repurchase inflation, our also we decrease raw which increase -- second from the an of QX program Favorable freight year WAVE and Comprising through volumes in X increase driven EBITDA end Slide the the the like-for-like which earnings. for Mineral our costs. Fiber December the primarily The by driven and in primarily both was by margins remaining SG&A inflation performance volume was and driven prior pricing was under runs EBITDA million EBITDA favorable higher X% accelerating increase positive AS. shows the by by adjusted in in and partially have of a sales Compressing was and energy AUV materials, As adjusted XXXX. was bridge equity AUV versus XXXX, $XXX quarter. investments accelerated

EBITDA segment addition expense by in was price. offset to in increased inflation, X steel comp to by expenses WAVE the Fiber the negatively initiatives, by partially Although margin equity support summarizes favorable the higher driven increase was cost Slide was expense, in Mineral SG&A driven incentive decrease in results. impacting our growth earnings investments company-wide which selling

the driven of AUV prior compared sales increased Mineral also were year, Second second to quarter. primarily net volumes in XX%. the favorable by Fiber positive XX% sales quarter

other both the and versus impact sequentially prior on volumes Although Fiber, this throughout second year. positive we turned are quarter greater by we side start of now inventory the mostly was adjustment than driven for distributor normalized, The negative of and the result was strengthened headwind positive quarter Mineral extent the the of the fully like-for-like the expected. After pricing. to AUV

EBITDA. Fiber Mineral Moving to

significant P&L by recently earnings inflation in positive volumes main increase raw in like decreased were higher of favorable EBITDA and were adjusted invest to price that namely This of Partially our softer million equity price. $X the which see level, higher The was inflation accelerate XX% the and manufacturing productivity. announced headwinds year lower through heightened company inflation, in many in companies, acceleration steel swings or July flowing from decrease by materials to continue initiatives the for higher SG&A X. earnings. behind saw than other these WAVE effect expense offset sales to addition was due benefits in are partially You'll fiber AUV, incentive offsetting similar natural growth was our took WAVE SG&A energy X%. support gas. a drivers an prior We, comp. increase of to addition as higher we driver costs large to of mineral prices, our equity

Slide to Moving X.

inflation. for The Architectural increase improved versus pressured volumes. by costs, driving And diluted share sales in prior Adjusted from expenses Strong XX% increased EBITDA prior XX% inventories in believe the the positive adjusted actions price with points incentive end is performance to compensation. similar the consolidated year. basis WAVE recent momentum flow of flow our shows or build prior custom in year. EBITDA EBITDA acquisition, in execute and lower from top EBITDA most as over X up XX% of adjusted forward quarter free driven venture. second due in performance XX%. pricing continues and acquisitions achieving the recent and they primarily The quarterly by increase quarter. Driving XXXX. free and XXX XXX points. adjusted investments to shares year-to-date by our the to capital an recent decline results per prior We is deliver in Slide our impacts by higher are record as second compared mostly project these free are year working working prior our and expanded see joint capital AS receivables XX%. mentioned, was year-over-year from contraction of timing-related previously adjusted the of X trajectory fall-through in sales sales to addition the Adjusted step margin segment. You'll declined cash the on another adjusted with flow in impacts, the to year increase X%. year-to-date cash normalize to was year. to versus in period, increase from sales. dividends the margins higher XX% half cash drive dividends a slightly the AS Slide EBITDA of Specialties versus adjusted was increased nice story a expected by by end margin earnings the the and increases year, and quarter as in by on should growth the impacts EBITDA than metrics were end of WAVE selling remain while driven We year SG&A line increase basis shows capabilities

equity year-to-date the were EBITDA inflation, increased lower SG&A positive and AUV Looking partially earnings. at by bridge, WAVE and favorable expenses volumes offset

process. a Before lawsuit under jobs AFI. have and let AFI's the address asset of have bankruptcy guidance, the Armstrong stayed I pace Agreement has to elsewhere. take this parties subsequent Subject of into License the the settlement, which the in under and a been shoes not rapid right we glad Trademark on bankruptcy AWI line bankruptcy ensure separation. of us AFI to the move to since recent bankruptcy. the buyers the was of lawsuit to for place preserved Lancaster, step rights Trademark on subject a we me to AFI's of and sale part subsequent judge's minute ruling in permit Contractually, XXXX full-year in AFI License were place the that and filed settlement been process. The assignment and to standards to brand that AFI time consent the Agreement, the by the quality the it to is Pennsylvania behind judge's approval assets of are same with the

second will and guidance As an AUV X% volume Fiber net you'll from time X% but Slide our XX, XXXX midpoint changes. the highlight and We've we Fiber reflects for sustained to impact few of larger-than-expected move a prior versus in the of distributor of increase see unchanged sales prior the kept of year. elongation destock to expected completion now commercial The reduction the full-year updated lines. Mineral year volume to the quarter project XX% the beginning Fiber but Mineral we expect of increase XX% Mineral versus

Our growth to expectations. better or in continue line initiatives than perform

AS The comparison in difficult greater at sales will XX%. AS unchanged than the second half periods of the remains year. segment Our guidance more face

EBITDA. million end again the off impacts quarter. top $XX of We which reflect trimmed inflationary to range our to adjusted year-to-date in accelerated the Moving this

flow bottom the we've in adjusted the guidance a $X.XX at Adjusted decreasing range result shares the year. rate tax guide average of expected free as unchanged. EPS, cash For diluted lowering increased of end assumption outstanding the to the XX% our diluted of and by remains

as Chris of AWI Chris handing working our CFO journey past it continued to our days, to timing a been Armstrong and up I'm serve Vic four procuring our that for wrap It's the CFO to Chris will to the challenges over I as I we're to value company. to the result by the take success responsibilities in the a equipment. we of forward And lastly, capital person I questions. closely Industries of years honor Although announced, I'll the confident expenditure had off and for just create previously over turn right of lead Calzaretta that, depart over With before necessary I've and is teams $XX retirement. and stakeholders. World chain look an employees lowering on the assumption with privilege as be all to million as supply few

Vic Grizzle

before we questions, and developments other on milestones get And a like initiatives. your growth I couple to to Brian. would Thanks, share our

We're and repeat first First, are a These net renovation there has in very been also sales I'm Canopy Canopy our the the Canopy to our we sequentially. XXXX. of the encouraged value highlight of flow initiatives continue in with increase Armstrong, quarter XXXX. of selling points untapped happy Quarterly doubled activity across exists The and grown to proof as digital encouraging first since digital that order our more compared reaching which sales through has the market. supporting for ramp belief particularly the of of the than to progress by underserved rate at order numbers the portion order demand quarter XX% customer see solid has by platform part market. the

As products we examples our we to and who want add platform, evolve see continue this more new customers and of more the efforts marketing accessible easy, to option.

makes focused quality We environmental of product partner manufacture continue strategic the IQ. support partnerships. our result holistic and development excellent and extend Price An that new July, systems indoor is expanded as of promote decades an and In early StrataClean spaces. called partnership that announced devices innovation thermal we of solutions capabilities healthy to of also air indoor indoor Price early accelerating partnership This solutions this we leadership to comfort. in promote them air pursue quality. a Industries an on the has with Industries, through

attending than healthy quality addresses these system and health indoor air, relevant providing filtration indoors by seamlessly system. The time particulates. StrataClean and also designers, innovative all in-ceiling filtration solution IQ with and customers saw healthy healthy clean solution to needs that products ever. around Architects into It's products. products XX introduce to with a are enthusiasm as capture our The the reinforce innovations, air our gathering great buildings bacteria, We than in sustainable purification mold strong we're This to space our of of focus of XX% airborne to interactions support in it segments. a environmental viruses, the excited having spend suspended Institute addition on we proven more American uses filtration that of ceiling in continue MERV our certainly we and more our and annual are an is air customers energy-efficient Now our and It efforts. positive Conference portfolio while fits product held architects floor-based spaces well country's and to as support largest this digital the quieter June. new vertical

Here solving work, featured but spaces the in sustainable range have problems of and we only we a that StrataClean on our the teams not IQ we difference I'm where learn, solutions. play. make positive and a to heal our whole focused right confident innovative, high-design live,

starts I with CFO Chris and of company Brian's leaders on the role. Now echo our thoughts that elevating the to difference

watching four leader And for the partner been support to Chris I'll past of sidelines. me. growth in he's our business opportunity forward. happy of to years a with AWI. closely AWI call questions. like for that, will our proven Brian to we'll to been I'd dedicated the a He's the the years, growth to be of service the over the with and the and and strategy know delighted strong this take to Over with turn Brian for And your take finance to growth be moving operator Brian be very his countless from over efforts his initiatives. We thank creation working I'm tandem team, our current implement working

Operator

Our Goldman [Operator Maklari is Instructions] Susan question Sachs. from with first

Susan Maklari

Congratulations to and Chris. both Brian

Brian MacNeal

Susan. Thanks,

Chris Calzaretta

Susan. you, Thank

Susan Maklari

you and watching things you're My about talk signs any think it perhaps it's economic efforts. on as encouraging of all to the we flows? to up bidding level things first has as hear broader an early that progress as eye question macro backdrop meetings, the potentially demand could talking But the of and just you about holding can how keep in-person the to shifting, is, well as activity those

Vic Grizzle

Yes. mentioned, contractor that talking partners. seeing in of of sentiment the distributors to and market, We're and about our what to on -- marketplace. pay activity our right, in attention to they're the bidding we things the customers our a see We're distribution what in terms often, lot you've including triangulating, the we right? data talking

on. like Of ABI triangulate course, some macro trying with going the indicators of other indicators, and other to the to what's

we've continues not so activity the the in read activity, activity, The kind marketplace sentiment to So be frankly. a all far. of very bidding the the in across on slowdown robust again, the both seen verticals,

activity. we everybody, we seeing about for are not environment, there's we're talk activity at hearing period, you think But can I'm you AWI economic recessionary construction and So move like I look the history, that a to a concern to and example. potential overall relative markets about or the residential and back activity sure quite think a anything. into a just go lag commercial But around see also recessionary recessionary construction on lag environment when tends the as activity commercial for one

to again, we're all So be those things. triangulating going

half you second in of banking condition second market as factored a for this in recessionary the us outlook has -- hasn't year. Our can tell, half, Susan, not market on the

Susan Maklari

Yes.

question helpful. follow-up focusing is My Okay, Specialties that's very on specifically. Architectural

the your think last lot the about commentary from just in of in trajectory look the you remains of those you've out, you've that maybe there? nice seen you the of some And that highlighted through. of how couple do really a acquisitions that that done still You runway growth When coming overall years.

Vic Grizzle

half obviously, mean, strong Architectural in we first Yes. talked a really Specialties that about. I

are recent of at the But where and our one I -- as business, our to business. nature of businesses look, and the that done them. visibility of because is forward this you one of But when business, highlighted project are I that the acquisitions look I acquisitions we have Tectum best base well the base core business the that. that highlighted has Our also mentioned contributing acquisitions very

filling I for and I order look and I and into for the business. spilling of them runway not encouraging, on us see out see but think, the for half this that's of at the activity strength the our to only 'XX, rates an the start indicator back rates I into order year the when So 'XX

the So so we six for into build to that like as or we'll months continue as next But look that over develops seeing 'XX. watch XXXX. already it I the we're

Operator

Our Instructions] from Ng question [Operator next is Phil Jefferies. with

Phil Ng

and Brian, the and more working thanks all for forward Chris, congrats And help the looking great years. over to insight with you going forward.

Brian MacNeal

Thanks.

Chris Calzaretta

you. Thank

Phil Ng

my on Mineral half moving I and saw of have kind higher. first cost by some And well? price XQ Do in expectation to be side, based through, you out the on reception July on normalize you up then expect in compression separately, be the guess, as would XQ? WAVE the What's kind that Fiber. question increase margins back the expect steel price And for you of with in then pull flushed be been? year-over-year you do Mineral on Fiber the your just to AUV,

Vic Grizzle

sentiment price on would say, take inflationary increase, backdrop. around -- usual side in it. reception the me inflationary with of price I been, comment Brian has Let as with our then The this the this the margin increases I'll let

a building still well. conditions. I are feeling strong think products inflationary And everybody raising of set is prices other

we to well. are increase in saw it's to as and been relative and prior of So think this second I has similar price that up experiencing obviously inflation quarter pace would the say sized And receptivity that others the I of increases. price the rate

we it. as on sentiment inflation the on now. I kind expected rate as would would -- to and of and do margins, to touch acceleration that, seen So on July, cover in on color I around of a realization say, have price want the Brian, of pace just just right needed month the you that's that? little an

Brian MacNeal

Yes, Phil.

second good margins So Fiber expect as specifically, over price were pressure, under the to dollars, did get obviously, QX, we dollars Mineral fall-through. fall-through in a some inflation its that fully expanded. just to normal although QX return We they half. gross not

Fiber gross the for Mineral expand. margins year, And so should

side, to steel the -- price similar the QX On back flew over expect through down the P&L over of the the impact inflation that WAVE highest story, half. half, back we in in getting cost and flowed come

continue So the half. we'll to in over that get inflation back price

Phil Ng

be Okay. how of through certainly to you have chain recession that years. EBITDA cleaning backdrop. lot great the would -- mean, into, up year? moderate guys commercial have your mechanics Helpful. do kind like, us to enough sure supply XXXX, we of the Vic, business and did question this think If you your bottlenecks sounded head and portfolio. then then in a portfolio And recession. through due of think in grow levers me I hold activity. next some your And resilient business walked some I it pretty this about recent -- labor talked I in on with pretty Brian's done renewed a But a help get up I'm in kind with the in And job lag a and would you of

Vic Grizzle

understand so conditions own look done the what different Yes, we've like And our answer yes I think that. under forth. modeling obviously to short to is and that internally might

to biggest normal past of levers also, that. our construction is pull if business. So look you and recessions our remember, about happened, have impact back XX% you what at new is usually But we on on see what's which the

our renovation, renovation. been last of The XX% in And our of you recessionary that's periods. seven in other eight get an uptick experience business the is

deep downturn all of here one recessionary to and it's how nobody And correlated So, course, yes, of course, can think today. do And call levers I AUV. see that the to the the sitting we'll a period. pull on have is. of of in downdraft things a we less But

in positive to our to mix-up industry ability as down continues as AUV the hold be pricing. well based Our cycles on

grow levers that levers have past a recessions, to continue So cost pull us again, confidence EBITDA demonstrated plus in with in the give we to those we've the downturn. levers to

Operator

And question Shmois from is Garik our Capital. next with Loop

Garik Shmois

market course, June May sales of more volumes improved ask Congrats, conditions. about and on wanted to Brian underlying how Chris. talked Mineral to I to and they you in first and Fiber reflect

kind digit to wondering a Or bit of if low distribution? Is bit growth maybe a what Just that little you a volumes more are to talked could that you softer as the means. more little that you mid-single in dig seeing of a accelerated? snapback as about

Vic Grizzle

mid-single-digit I as low rates second No, distribution, in as saw we in first level a reported Yes. quarter very we well. quarter, the through think to sell-through similar the

deceleration the or not market of no for So I'd our rest second if And deceleration say activity. year, acceleration on look of we're no market a the at first quarter of again, versus outlook but acceleration activity quarter. the you in an the counting

Garik Shmois

just then And guess steady, help guidance, $XX just year full of given guidance given midpoint but the of growth, the the volume need that roughly you like just frame EBITDA the get you in in of kind slope guess, if the se million seeing, I hit full year. you second to your your the be the you price it. curious, recovery question inflationary the could just helpful. half to of implied per of half the got you're guidance looks EBITDA I'm to on I July, And of midpoint the guidance. of impacts my provide growth follow-up hit increase second in Got would the quarterly know the what's I don't the and to It that year is year

Brian MacNeal

Garik, it's Brian.

quarter. seasonality-wise, is So our biggest QX

see destock the this price the of the back and first the headwind piece from a shipment year. clearly to and it's higher over you the that And in then of half, through come second that standpoint first volume that as inventory four we QX. pier step that months But percentage half, at point, look from that, a happened of second getting kind roughly $XX inflation so will your don't where million, in

Operator

Evercore [Operator Kim ISI. with Instructions] Stephen

Stephen Kim

of Brian Brian, luck, best And and Congrats, Chris. everything. with

Brian MacNeal

you. Thank

Stephen Kim

first question And your increases see that of reason to you was to your to like of there typical to the I'm back cadence price would at first July price play My had, you think moved guess any get as next different think more behavior the embeds a than reason think increases I might the previously Like, that year. cadence we of have repeat had? move that because an cadence. some assumption that this why into this distribution levels, is out see I we similar to year, question August level, just relates my we and the then of that the December. that year? we expect don't you wonder, back kind And inventory saw if January to similarly to secondarily, on that a basically, there's and dynamics believe that a distribution. part this whether earlier one-hit behavior curious any next of still of if wouldn't move you sort partners

Vic Grizzle

Yes.

the inventory tell there's lots on getting can and partners They've So first I distribution us inventory you, conversations between assured been on levels, all, these that us they're of our levels. of would saw normalized true. what to back to they and in you their Again, June patterns, May at were We be now. levels some those -- we reflect buying if that believe -- will. normal to

again, to the would I'm that's with sitting I I today. based case. real position. support the be seeing conversations And -- partners, that here that our believe distribution And that So true behavior again, on

cadence the periods I that price to normal price when typical we the reason in more I cadence. wouldn't our and midyear back get increases, around think then the in could to cadence our think inflation, back frame. normalized is On early August deflationary of increases. normal, time There's of we we year February yes, and move cycles, no to why back get

in had it on of early quarter. Of we forward course, pull as rate particular, inflation the and give energy, much we as could were pace we experiencing to second the in

this answer partners this lot try The obviously we relative avoid driven has again. distribution destocking in. the and by that given again, we're say to to pace price to be going again, seen we've and rate and that We back The in buy you first embedded our that nothing really, there? see year drive these then So Does again last to that think, more environment distribution on course this increases these a the of that in in need year. questions that ahead want with into for see did didn't this, July. to realization cadence need of around same ahead months the buy that size work if happened head all been normal buy greater I we're level normal, price increases of inflationary our of hyperinflation of of we in there's the would, avoid, but year. of our would four together to in those massive visibility a We channels the to again. Again, destock transparency outsized the

Stephen Kim

very was a answer. helpful that Yes,

Second the earlier partnership you month. announced question that strategic to relates this

detail handled was of to bit all impact that you there. -- lay it fully you partnership a what to from little could explain as just what I'm economic of world might to in that have quality of whatever wondering the Just, walking the seems To make barriers more adopted a degree might give norm number if nature the AQ environmental terms in not I be being implemented to sense and But that can above. the a one, person, sure be. the

a -- customers? progressing. point a adopters be us are little And bit so particular so who of potential this norm curious development that a was sort particularly early there if see for milestone the bit you development you curious represent see you that there be milestone if progressing? maybe sort I this us particular as represented any could might share And tipping was of this I be? any a could with particular you as you And how Is might might this maybe that share how little with of technology? Is see

Vic Grizzle

into products ceiling. ceiling believe, an easily the the our Industries Price particular it Well, partnership level expanded co-development them. into first some the beginning, that of of go partnership certainly system integrated the ceiling -- go is all, into make with of to we involves It

we've Stephen, make that So to their all excited that solutions really about of be I key temperature products in to these this has healthy What's is what's and to question air and be products, the filtration IEQ, with this, defined and quality has the referenced. under process. were the important design types you things to we're and and with permanent work expertise think you've definition as spaces control, that your in done spaces getting part of interior our our

of overall and success process, people of other on were are in the mechanical the process standing right units. the with. They process the partners to right? into we Price skill kind floor-based It this, have into or reactions quick takes And design we like, all bought working go call or with those these patches these product right integrated I make corner them, solutions. sets bandages and solutions But that's that early the of were the a the we middle sometimes. longer are as them key room. So mean, sitting we're the Again, architectural here. innings be to to bit experiencing. design as saw the in permanent solutions, little exactly we're engineering what the to these partnerships But as need this permanent

So the of an well. expanded partnerships as exploring partnership that this beginning, and we're is other I think,

Operator

from [Operator Instructions] Our Jadrosich next Bank question of Rafe is with America.

Rafe Jadrosich

Rafe I'll Chris. congrats Brian to my and add and It's

Brian MacNeal

Rafe. Thanks,

Rafe Jadrosich

inflationary to again a the first half It margin significant like comments about just SG&A relative the is I on half. you're here. of natural in gas assuming just the there, first wanted in talk the to of follow spiked half have prices Can seems you year? implies the guidance. year like It the type of to half pressure improvement pressure the the inflationary obviously relative the up some of second in the on second still

Brian MacNeal

Sure, Rafe.

there, as some there's is inflation of has really driven necessarily costs inflation. starting parts right? inflation by like on SG&A profile, We half the the to raws, down see gas Not you volatile. maybe -- as some come So some. parts input been being freight. of it at two but very couple gas you gas, that. look of then investments So But call manufacturing different out, energy, not parts that back And side, not their

we in to the that that and of down we made wrap to come as a ago year of start expense so half, SG&A some back investment. investments rate year-over-year, that And the starts

back the of the combinations those margin So that we additional half. price the the that us announced confidence gives in of in realization with that and

Rafe Jadrosich

Got it.

retail sort how channel year-to-date sort -- how just to that's your of compared helpful. the the really that And distributors, at actual healthier then channel second half That's I Can trends. kind more how of for discuss ask about to sort just trends year? Okay. your wanted appears of and balanced, that trends guidance sellout the talking were and the now of gone inventory with the of you sellout about you

Vic Grizzle

Yes.

doing in the the low Again, while saw I'll we was and is mid-single-digit second to distribution. the similar of take It were from again saying. the quarter what data to we What very that repeat level. Let in we destocking a point sell-through me back in was quarter. sale saw first and looked what they that I we at that the in or saw second the quarter

or So deceleration. no acceleration

our seeing in the again, And we half data. again outlook the with we've and seen June from again, second Our in consistent is that. their first with half what May in sell-through we're saw and it's what with distributors in consistent consistent in July,

guidance, what in from half. in in we based on or on deceleration first our the counting not what we're see seen the we've any or outlook So acceleration half, first

Operator

with Our from is Instructions] question Securities. Keith next [Operator Truist Hughes

Keith Hughes

a the that second of second was input question quarter? half similar it going year It costs in on guess, a you quarter. Fiber. anticipating Mineral some in stuff I on the second? to the on million there worse the Or Are pace that the per $XX is FIFO a make negative in

Brian MacNeal

it's Keith, Yes, Brian.

So line. of that inflation the really, down. always FIFO yes, there's driver. some we coming do But that biggest in not that's It's anticipate

-- QX. we quarter. and As accelerate come we're almost freight in the thought seeing twice down saw raws some gas we to similarly, even that was in the some. rate It But that then did mentioned, start we

half So next each of we would Mineral for XX% expect for the back from not Fiber that two quarters. the negative

Keith Hughes

on WAVE. question a And similar

have year? prices anticipate in turn here. coming off Do steel been the second you positive the contribution of the will of half Some the WAVE

Brian MacNeal

Yes, very similar.

price. realize similar dynamic QXs we while that Our highest price then flowing down the continue that inflation expect a where to and fuel we QXs in cost to cover was QX through that wasn't steel and cost enough and [ph] come in to very

Keith Hughes

That's and your all and all And me. retirement. thank in great. work for your Brian, for luck hard good you Okay,

Brian MacNeal

Thanks, Keith.

Operator

Lovallo [Operator with a John have UBS. We Instructions] question from

John Lovallo

First, in of some still end us levers there, think, help by I can Specialties acquisitive in being the the you Can Architectural you And while just XX% XXXX. guess, that there? get the margin of on us, remind of do segment? you

Vic Grizzle

price some John, pulling inflation obviously is Yes, there dissimilar. too we're over there. the around have We of levers inflation, not

we that have get good backlog, getting efficient. there. we In got So to ahead also to that are. we're sure just and pricing more we've make of with initiatives -- of ahead inflation our really the We're

early these the some some of driving making some And realizing we've been plants of these investments acquisitions. in productivity on or of productivity

Again, two things it's volume at combination some those leverage as operating as growth leverage. the we're grow drivers. double-digit well, main that levels, of a helping continue really are getting So to is right, we good

of if the question would businesses is on again, buy, So performance, your the the of to acquisitions. starting around right, or part dilutive that -- depends is say question all second I It performance the that. accretive the certainly they're we

companies we making leave what because companies I'll know -- we Once that they have. on these buying these We have that We'll decision So we'll be companies Armstrong of see. the can to be profitability. based on wait and platform, it improve that we and companies. their buying to won't look a just can at say features for capabilities specifiable get continuing do with unique and

John Lovallo

that, what then And the us Can on XXXX? delayed you was I of with think mentioned I that $XX you were think million, reduction, the timing. CapEx sort projects you. into got Okay, project help

Brian MacNeal

investments. a some equipment the of complete It's parts of we to chain those projects. supply of a of return-seeking and frankly, It's type some quite the getting the John. maintenance combination, and really Yes, need some function and

to we with consistent -- expect roughly CapEx we're Day, we going million again, in what at spending Investor be forward. $XX So said

John Lovallo

Okay, good luck, great. And Brian.

Brian MacNeal

Thanks, John.

Operator

Research with Thompson next our And Group. Kathryn Instructions] is [Operator question from Thompson

Kathryn Thompson

with of pleasure nice best working and it's been you a for Brian, your chapter. luck And

Brian MacNeal

Thanks, Kathryn.

Kathryn Thompson

clarify given. bit. a Could these taken between flow a same CapEx the difference little guidance First was the cash but bridge, is on just the you clarification the X? the stayed Free essentially guidance

Brian MacNeal

Kathryn. Sure,

back mindful side. prepared in making -- the also given the while working in we Some half, this choppiness expect half. headwind in of maintain of that But called some capital, of out the demand we the through -- sure to first remarks, my we're lessen service that I the being was in a

bit of working little offsets capital did little CapEx then midpoint So reduction. probably saw, move that million. you And we down headwind bit our EBITDA $X as of a roughly

Kathryn Thompson

backdrop, of your know when Specialties I But quite just as great Okay, could your word, few you dreaded questions helpful. outlook us guess I we there have that recession. job a And of the Architectural done business been -- downturns? R on and the you of performance changing -- a give Mineral on economic prior specialties and Fiber, business terms Fiber mix of with a based Mineral relative versus the look in you've

Vic Grizzle

seen a have really, market to market. share gain has, considerably, in the of Specialties, gain right, XXXX downturn we We sales our Architectural steep -- Mineral in to down had, was in in the businesses. Specialties while really back just when everything in last were including we what it, the our component were Fiber the really, flat else strong Because Architectural XXXX, a share it, to go component a recession, business Yes. you

with of product has to gain categories because this our type component new penetrate these categories continue resilience it acquisitions. and So some share new as we

construction new and a to seem So it to is skewed be more project-intensive It renovation. business. does more major

seeing construction the a at of look I in XXXX, we're another then in if learning we're it down And work is we're was X%. you XX%. recently. new the 'XX, that that's again what was think, down than think lot propelling Again, I Specialties -- more finding Architectural activity growth construction, business major new what here, a renovation lot in

to During time, we're these and 'XX periods continue 'XX. do in of XXXX flat in to double in digit but Specialties track grow, Architectural double-digit again, on another

gain share of business. the some back resilience there's So this the to here -- dimension

Kathryn Thompson

best Again, luck. Brian, Great. of

Brian MacNeal

Thanks.

Operator

next Our with question Instructions] Credit from Oppenheim Suisse. Daniel is [Operator

DanielOppenheim

in comments in the here -- of some the growth. that Great terms gains share to the hear on of

in how price way terms sort in more the a the about little in June? wondering volume, and with in would Just in seeing bit seen characterize But talked realizations. of July, terms you May such, with you of choppy that to price the what normalized? wondering the growth relative some trends you've and you are then of you saw as the sense of in how consistent of more increase, Or the July environment June given just

Vic Grizzle

Yes.

volume So consistent. the question is in around July

So saw May seeing and first, we're in the with what what it's to and we answer question June. consistent

it's the that in the second second the in sell-through And half have for seen for year. what July we of what first frankly, outlook the we're with that outlook rates our is we've half, half. the consistent have again, in So we seeing

a your price that into think Xst. -- would was body question. are July acceleration of I increase your with seeing price we to Yes, you larger as expect, some So the right, of main July,

Operator

All showing call further right. turn back any will Vic to queue. questions remarks. not And Grizzle the closing in I'm the I for

Vic Grizzle

all shout-out for to and your talking you a with for contributions look forward in everybody, months. you, wish more enjoyable few a thank summer. you. to joining to to Brian Again, and for to him again questions. great Yes. and congratulate working and Thank thank just him to I one company forward just you want give Chris. want the the final Look I to safe just and

Operator

may And participating conference this for now concludes disconnect. you today's call. and you Thank

Armstrong World Industries (AWI) 26 Jul 222022 Q2 Earnings call transcript