- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2022 Armstrong World Industries Inc. Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to your host, Theresa Womble, Vice President, Investor Relations.

begin. may You

Theresa Womble

third and initiatives. Today Kevin and on call progress World the Calzaretta, outlook, and Thank with along hear welcome from morning. some Industries' Armstrong discuss we'll CFO, our CEO; XXXX Vic this results our rest-of-year growth you, on will everyone quarter Grizzle, Chris our

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

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

you our following For presentation those call of to to on turn Vic. now as along, the slide four please over we turn

Vic Grizzle

and everyone. EBITDA sales quarter sales increased good performance we solid of our year-over-year increasing reported morning net Architectural and Today prior Mineral sequentially. and margin Specialties Adjusted the up versus third Thanks year consolidated EBITDA improved Fiber for X% Theresa the X% topline growth XX%. with XX% net

conditions. sales. the impacts sales Fiber segment. had our Latin unit We just America achieved performance saw experienced softening release channels, and while press In our on continued work in retail AUV softening both that Mineral Fiber on pause quarter, discretionary in Mineral work X%. And developed capacity primarily channel. contrast, and grid growth that the expected, pressured performance in in activity this felt in labor remained our independent to in growth construction new market was input elongated project unfavorable distribution This renovation quarter facing costs good discretionary sales noted continued, throughout and was our we this in mix constraints which an in morning, headwinds constraining resulted the we we Mineral but and This chain limited and mostly Fiber issues improved perpetuating the a in as Supply timelines. construction quarter. headwind As

journey. pause projects as we are higher This GDP productivity for progressed, greater moderated experienced pleased backdrop further very teams appeared on impact the uncertainty lean did. to construction many such I'm estimates, plants in and Their however, responsible sentiment, quarter expected expected the our on Despite are to construction manufacturing deceleration the a as indicators, This for with weaker our driving economic economic and our as commercial continue in and slowdown and commercial presented how of decline However, softer conditions, activity. track executing are inflation. overall interest we strong than unexpected opportunities efforts operating. market how rates

strong the segment, execute performance level maintaining topline quarter. In also well sales service have in are teams customer diligently continue worked our we and to Specialties Architectural our best-in-class the bottom-line teams Our a and initiatives. to pricing on generate

the record $XX XX% of EBITDA. consecutive delivered quarter Our earnings increase quarter a from segment was year's generated on sales a for This team the last a and of highest result. and third record-setting million

to on improvement XX%. expanded its margins continuing EBITDA our above XX%, back Importantly, margin sequential way

delivered each recent and all across the while results generated companies synergies acquisitions; with double-digit by quarter, demonstrate are expanding quarter. our we outstanding possible margins. verticals the the and sales growth growth Architectural of particularly pleased are Armstrong Turf platform. These strength in Although groups capable most achieved specifically but the Moz, growth within highly broad and based on sales was further XX% our sales than for material more Turf, year-over-year in Specialties, these Arktura, smaller,

order projects mix remains also activity robust transportation double-digit for construction New XXXX. and our major continued The these both full on growth supportive with quarter verticals. and education of of intake renovation expectation of in projects. We've in the new and wins includes seen the in a and activity solid year transportation quoting strong strength in

to into also Our growth. recent and specified our we're financial scale, has investments spaces, some in most breadth expanded I'll projects, our design The to in into ultimately, wood, capabilities ability get Tectum our and additional of and our portfolio growth that, strengthened segment. establishing hand more product size new more Chris. it metal, now and important with results. our this development in over drive for pause more on leadership clearly our and details Chris With

Chris Calzaretta

to and the everyone a on call. very such to years here half continue a Having of be CFO and morning role to company. past team. this my with to grateful four good to this the and the impressed I'm talented have I Vic Thanks opportunity lead in I'm I'm excited as new excited be this future about at and organization Armstrong, spent

I'll of available XXXX third guidance, five, our are with updated we our basis presentation. mind keep results slide website to results. begin that XXXX details referring our quarter three consolidated on slide third I our that quarter well and in the As as On be review please as slides

by prior increased driven up happy EBITDA from effective margin the segments. and Adjusted adjusted XX% the higher XX%, quarter, million diluted and buybacks by third we earnings, XX% $XX share the our annual earnings we a or count also $X.XX to in a dividend, the mentioned, which represents year. in instituted EBITDA This report increased year-to-date quarter and rate, per decrease million quarterly shares. of in unchanged. the year, second we the we reduced that I'm Vic our points. in to step-up contracted both prior Last dividend repurchased million. Adjusted XXX share $XXX adjusted This total brings increase increase allocation basis As net in share to X% a in made sales $XXX continued in of driven repurchase which and sales growth announced were recent versus of reflects our increased repurchase week, remain marks fourth quarterly increase priorities, dividend XXXX. our our capital since the activity commitment in dividend share our a to tax

share a we million have the repurchase of $XXX partnerships; shares million. a and strategic total dividend in repurchased and and third, shareholders of cash First second, program. program flexible for reinvesting XXXX, into XX.X to business; the inception via the stable a acquisitions returning about Since

slide in program, positive third repurchase favorable since both runs the When growth through retail was negative offset Fiber five dividend our driven in the conditions. repurchases performance, due in billion channels, the QX partially Fiber quarter to and increased our inflation by margin volumes, contributed was primarily volume of partially year-over-year end quarter primarily AUV Favorable Both dividends by mix. pricing quarter shows AUV bridge XXXX. we results. driven by by growth volume payments, America Fiber and six, million under remained of by also have returned we December of was with EBITDA Mineral offset increases versus and offset and volumes As softer including partially and by shareholders X% we energy, during inflation. Mineral channel an On WAVE was continued EBITDA remaining compressed under and Mineral lower adjusted have adjusted decelerating sales material, in our which our levels $XXX costs. $X Mineral market like-for-like The in freight XXXX. and just through destocking Fiber Latin XXXX, which on increase our EBITDA to the shy AS pressure raw grid earnings year. conditions. driven summarize Slide by equity of market segment increase prior inventory sales which

of Third X% by increased AUV of growth. driven and volume quarter X% net X% sales favorable year-over-year,

Xst on quarter, On an margins were inflation important to key realization, positive inflation offset Fiber increase. the note, negative margins. mix. negative margins. of disappointed step AUV, pricing ability Mineral we saw of we a price the like-for-like experienced our the rate in our hindered gross by year the we was temporary pace channel mix. Fiber This We of were a on sequential versus demand markets, and First, And which dollar certain prior deceleration to heels quarter Fiber price to Mineral on that over about by pleased double-digit our contributed positive the expanding as the Mineral last our improvement maintain in were in in we July volumes while quarter channel talked squeeze

the results, as increased We the our These impacted historical experienced expect of factors what to to rate moderates pace year-over-year. year. in which $X quarters to compared inflation X% realization we Mineral our coming and rate or Fiber EBITDA million this also back by get

While the remained to two that mix headwind than gas raw a The million negative EBITDA of experienced. of channel our cost sequentially results was input due were expectations contributor AUV materials and us. a inflation was lower to our strong spend. natural it than results, lower $XX biggest QX we energy Inflation and for within drivers

the WAVE continue overall specifically And natural quarter during to compared inflation continue continued of were driven into volatile price and the WAVE in to have year inflation that prices negative to coming the hopeful been earnings are equity quarter. volumes. winter. will by at in could gas team volatility The but last months, the We moderate prior such ahead weaker the

the lower year-over-year sales levels performance increase Architectural months On third to increased we continued for increased off over with were to levels. investments were compared first recent posting prior XX% deliver through the discuss AS period, basis and and commensurate EBITDA to these adjusted project higher improved the by our was Manufacturing While seven, due quarter. from supportive than have the EBITA to or growth expenses execute segment driven SG&A prior AS -- an of year in margins Specialties the past in Adjusted Similar we steel XX% to year. leveled the starting to the versus compared Driving XXXX, quarter sales a XX adjusted higher custom growth the price year several the six for EBITDA our expanded in flow growth. increase steel acquisitions increase prior slide results. continued year and expect months, costs sales through and from slightly sales levels. increased the follow is QX. sales. prior results costs of sales points higher

higher by versus majority increase expect nine in topline to year-to-date margin an prior strong free accounts remained working prior expenses QX the from by delivered year. income expand higher These and declined flow of versus XX%. mentioned, cash year primarily year. versus We in earnings to Slide The as the free prior negative per partially pressured. resulted AS the year, costs Slide in XX% versus EBITDA consolidated performance in eight accrued adjusted cash adjusted diluted changes Adjusted while to tax prior offset free EBITDA increased inventory, shows the We timing, our payments. cash shows negative growth flow The adjusted to-date decline resulted primarily capital margins continue metrics. were XX% cash EBITDA contraction WAVE to and and earnings. and in flow items by payable equity due from previously earnings addition and share adjusted of XX% year.

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

As third to XX, Fiber will XX% Mineral and from revisions. quarter updated revision channel highlight and our our negative XXXX we be mix XX%, a guidance to now versus see reflect downward range, weaker conditions. about I for of We where to Fiber headwind our few prior year X% market a Mineral driven year previous AUV the slide volume between expect full move you'll by

segment quarter difficult Our guidance business to in a face to level. increasing fourth greater year were the The as is in a at than and the continues lap we as improved the the AS comparison AS for period. prior XX% more high execute performance beginning perform will to sales segment

to free lowered Moving in and we which guidance our adjusted cash working mostly guidance primarily ranges headwinds, expect flow to capital expect EPS, driven the to for we've market by we Adjusted quarter. conditions, the are continue to softer XXXX. the fourth revisions remainder EBITDA which improve due of

full flow as to be XX% sales cash percentage free year XX% expect of the for We the in to a XXXX. range

back landscape. Finally, evolving and we we market adjustments as costs on long-term focus turn our our wrap-up your while diligently maintaining to before the given look growth we strategy I'll are strategic as needed, it With over that, controlling forward, and initiatives to our making Vic questions. take

Vic Grizzle

demonstrating Aware see Year-to-date sales ProjectWorks, Armstrong, repair And our from replace two XXX% and more and this I'd Q&A segments. With customers. Architectural service and progress Healthy few further and comfort, both at before continued time in second to unique Health buildings new you districts as in indoor our spaces through is to particulates, schools will key on prior risks site been our school earlier we for demand XXXX pleased healthier to of to rates And mitigate Fiber is important of incremental the to in monitor others. this developer our thoughts environments, broadly level performing and indoor results and and the This believe those dashboards orders need move as double quality platform's quality, Healthy leading Momentum with have headquarters process, online design the and occupants called data how to occupants architects to process at spaces. on continues than of play also offering excited our by the for win of footprints. we're programs [ph]. Spaces empower the XX Chris. expanded about to quality and automated to solving spaces, is Foundations. our ceiling the users can help variety where Trying solutions and for session, to of are platform more such industries indoor and the measure these breadth partnership from to the time this reducing We're company should partnerships sequentially quality. and We ability in we end-to-end creating usage experience contractors VOCs, to desire have pilot Their efforts from indoor partnership we partnership of all And service sensors initiatives XX% now years additional Living hours. grow solutions. up entire process price the I make as through relationship ceilings We've in healthier in the a as year. Zone, new innovation enhance of with X these I'm an for own our look this the are for with and to and capability indoor to and We're We're with like Lab higher of get The continue We further differentiating pre-construction Mineral using as users initiatives. healthy enhance and importantly, quarter. a our their such nearly reach identify healthy progress Spaces they're customer and attract and we're the we're is Acoustics enabling sensors forward just spaces. and learning increased platform to number corporate us extend to the quality and build. category, parameters, added healthier adding similar and the and some this this. tool now What's believe announced then light, trust that education for result of value of while a offer innovative a see engaging amount next efforts the a help opportunity and users It's building Specialties number on products this our design help energy higher and XXXX. achieving this average to streamline loyalty rate to and to AirAssure, environmental a announce digital of continue students. customer of you, capability ProjectWorks, well. seven owners since like critical indoor in our a confirmation sales tackling sensors provide front, Aware initiatives we're high improve and Canopy levels these environmental from with we've role acoustics environmental updating a the are Thank sensors defined spur conducting innovative provides been On Total into our sustainability. Aware increased simply space. air, all-in and our carbon helping High quarters. on with as for environmental overall achieve loyalty. to air most to in sensors are adds and new development digital ultimately, the customer coming Aware excited Canopy now is our short The impressive. and product providing launched more exciting new by our

Now, getting step about your we to of macroeconomic think about share back business and to are how the to in a questions, our we take just like I'd before face. light conditions

is projects from resilient. products. a markets diverse serve and business set types make This factors and both the we the of that comes for up effect including variety the of profile our steady demand the of Our of portfolio vertical

unchanged. all on at different peaks the and office and span construction various steady factors this that throughout types the schedules. troughs business. cycle, for healthcare, to large same time Add providing dynamics The to from the of remained transportation, term and renovation the the stable rarely a to verticals to time. jobs, the vertical our education of repair dampens smaller all of set targets Longer project diverse moving to same new in are Our retail, from these very direction

Healthy above both an for that growth see Mineral continued Specialties. Digital growth initiatives are attractive opportunities initiatives, Architectural driving including and We Mineral in set Fiber of X%, have that incremental Fiber volumes historical growth our recessionary supported now for the rates the work. our and market and Spaces tailwinds Fiber AUV and back for by delayed pandemic activity renovation specification pressures our innovation, our levels. new to rate XXXX Mineral of propel due expect should we to And We

timing our are market creation achievable. we long-term tailwinds, from value of believe Aside the the targets

Armstrong. we'll our to and long-term As questions. adjustments. we And all-in-all, we evaluate for over conditions I to with continue operator about do, that, open up it potential make But the and the excited remain call assess and for always will macroeconomic turn the growth

Operator

[Operator Instructions] first comes Bank. with question Ahlersmeyer Our from Joe Deutsche

is line Your open.

Joe Ahlersmeyer

taking Yes, morning, for everybody. Thanks good my question.

Vic Grizzle

morning Good Joe.

Joe Ahlersmeyer

within Yes, if so And double-digit wondering just finer any number did is? mix what way channel what point little customer like-for-like negative price? we we was? see on within well? could a maybe the Mineral a product put Is AUV, talk just mix there a Fiber, And that can get and on as then the noteworthy that you closer about secondarily,

Vic Grizzle

me Yes, hit mix, let the AUV. to back I'll the go product

much was overall mix by the flattish we typically was product positive, would to the Our it positive unaffected but have quarter. mix, expected in as pretty

So, good mix, to increase. that and in pricing. channel at continue the channels price mix. that from product from price Latin our like-for-like price Architects size question I request from so--. in did single-digit We to July and you points, and price understanding the our quarter. products realization at we middle latest retail that higher the to talked double-digit that area mix on Xst get increase. points, came price for channel with lower continue good America realization contractors about that double-digit we are no mix the got and on like-for-like pricing the come July contribution help overall, But overall offsetting to would really AUV that mix The as greatest the want considerably

-- we our pleased we're realization. Overall, channel again, with with So offset happy just price some unexpected got and mix.

Joe Ahlersmeyer

encouraging. Okay, great. That's

on have well on how be here. moderating estimate, those expectation of could recent first as an maybe as for Just carrying AUV healthy of the you increases, half EBITDA, and based price/cost the price into favorability next year? much inflation Do for guide XQ from you your

Vic Grizzle

do want or comment to it? to you that, Chris take me on want You

Chris Calzaretta

You want to take it?

Vic Grizzle

Okay.

so you -- up quarter. the to if with from second to fourth quarter to third curve I the we're our sequentially So catching continue the see into from here that quarter, expect inflation pricing.

us year. And get the tough way next I margin the for know, we But in we on in course, expansion the So, to you year. some really parts should that to sitting to as call fourth of our in here all cycle. And it's tend inflation then to today hold perform expect quarter. pricing curve next of would

So the your question becomes a your what inflation. of really are and answer then expectations function to

we we that and a and into over February How much here it better expect the start think more quarter. sitting you. think I and to to grows be we'll that I I out-looking favorable to today, year? wait next in roll for sizing do job fourth have until think

Joe Ahlersmeyer

understood. a Thanks lot. Okay,

Vic Grizzle

You bet.

Operator

for moment On question. next our

question from Next with Keith comes Hughes Truist.

open. Your line is

Keith Hughes

want I on more show to delayed outright this quarter get just more up detail you you. some talk any really is sub-segment to of seeing most pervasive? in out there's the in little Thank you a if And projects guide. your being that going deceleration obviously stands Can it's these volume where cancellations? quarter, of your or commentary full

Vic Grizzle

being attention versus it's try pay question, cancelled. delayed really we because Yes, to good to what's

-- you don't cancellations. question see We thank So, good for that Keith. a it's

single-digit soften been how they growth hold, is wait are had And on we off and really have expecting those that pause. throughout easily, that May much and of where delay delayed. take these in to ones volume the third June were were very -- they it obviously, could not actually a this ones trajectory from versus quarter. -- We the Coming -- mid the in that that we've to that projects, moderated cancellations we could track And quarter. people we a the in discretionary on what June, showed upper continue We that projects, up was as midsize those flow was this or And growth the begun cycles pandemic started, has were work issue. we major the tracking expecting our not who the already two, of that number level even And they we renovation -- could are it in is two on waiting And the completion projects, is of things, construction business, again, or clearly wait to turning that saw I some uncertainty that uncertainty. I the recognize saw Where of throughout there, of that we is think one out over. were a to. dramatically there's on those market continuing quarter. pin Keith, is starting people because new saw, the could we part inflation and May,

got they sticker could get the that another this renovation year, out everybody shock that quotes price their could could for months three and on see projects, to wait renovation and better waiting projects. a this or cost of maybe So, their now be six

could in people we the wait, So, third wait, those really chose felt like to felt it quarter. that and who

Keith Hughes

on And to are next the have along Fiber not there's you quarter just channel, inventory for a do you'll below deal? lines but do feel of your those to down lot a prevent to slow you you I production, Mineral production like demand know feel

Vic Grizzle

Only on edges the here.

we're about manage production this quarter the We to the a think cycle. day-to-day fringes really quarter the third of adjustments from type of our on I the are around can fourth basis. talking

any don't point. I manufacturing this major see the corrections at So, on floor

Keith Hughes

Okay. Thank you.

Operator

question. next for moment One

Thompson with comes Kathryn Research question Thompson Group. from Next

line open. Your is

Brian Biros

Hey, is Thank my you good for for Kathryn. Biros questions actually on This morning. Brian today. taking

change once guess just kind steadied and like seeing growth? from when you it just maybe I to seems all It to really you I question the when really or guess, see July XXXX? July? since How's previously, early out? its what facing are has pace deceleration guess, forward then, And the of did kind the going First was earlier into started I you of one, building since start timeframe in at accelerated come QX I see trended guess comments, it and on

Vic Grizzle

throughout decelerated really the Yes, quarter.

have really the stX which, a way, first coming We increase. half by was strong a price July July, off of of

price of encouraging. in in July the was that first good So, pretty part there face of was increase. some That the strength

follows So, toward were more and on little I September, August then again, a all July with bit more sentiment all end indicators would really it and, of it the of kind that experiencing these curve of little been we've reductions put of of and in of a some and deceleration in kind in then a watching. economic activity the we the that outlook the

they they Although positive stay were decelerating.

your but of question, our I first the that then hope got of I is really in would toward and signal, say we August July, the we end then answered validation September So, saw but where and that.

Brian Biros

it retail forward? are you leading in the that bleed it'll as of hearing about in distribution going side? question. answers deceleration into from one in isolated indicator kind you. the and happened maybe What the won't follow-up, retail reacting talking the Is side? things but been That the first how probably Or is channels the channel the here, then is a the retail independent channel? the to you've bleed independent into Thank it rest And of of over

Vic Grizzle

kind most the on retail is and little more channel the in is contractor, retail It makes a some the heard lumpiness before we of you channel. so know, as really, typically. choppy drawdowns, ends for the part, as the that of get But lighter What you've bit the it moved retail together small load contractor side, work. these serving inventory

So, they can versus it separate move seeing I lumpy market, more and that market but wouldn't another be try to one together, they're kind of quarter-to-quarter.

Brian Biros

you. Okay. Thank

Operator

One moment our next for question.

Garik from comes with Loop question next Capital. Our Shmois

open. Your line is

Garik Shmois

periods in economic deceleration, bit I that a Hi, broadly, question. thanks if just tend your you think taking wonder little volumes just prior relatively speak could I for mentioned more of stable. you my to remain

about to Would pause your be do Fiber recent you give how you generally, we're know, of this XXXX curious. behave? kind to in anticipate outlook? period, that formally, expect not just it stable? relatively I'm Or some in So, does the talking but new Mineral I you volumes deceleration to

Vic Grizzle

you No, Mineral X% saw a fall think the quarter. or still the XX% data years, Fiber volume positive in points you deceleration, plus the with if within growth I And of minus back range. XX go

no mean, of I on, course, as during of of then, which of -- I'd shouldn't recession, change, some there was there's that you of are think by was shut get we're some And I prepared the was no nothing variety a out, the think troughs a and more terms verticals in off of in end them I the did was be change. we still of of garden effect of portfolio Where portfolio there plays in. of down. was negative. I would there remarks, the you it course, the portfolio positive, diversity And and saying, change of well to projects the the in. the there. projects we're board as But in So, we're to effect verticals expect markets our types when and -- as effect my expect everything be That that the cut types was across pandemic, portfolio diversity fact peaks in

Garik Shmois

Got Architectural it. that. change just for Thanks Specialties, to wanted if any the environment you've ask your there? on I bidding noticed in

Vic Grizzle

Well, project-based very much know, specialty they business. a that but as incentives, -- you is market, being

we're in same playing spaces We're I Armstrong so in So, market playing, difference business, I of work. the so commercial on in is winning the think think within the we're the that more and where buildings, much commercial different buildings. more playing is not many frankly, side, but

behind breadth more of into I we there drivers just have think our is Architectural our pulling the capability Again, business. portfolio those areas. and are real us the Specialties

that of -- business the visibility what's nature with. that will that Mineral on the flow some I going project little contrast of then us bit the business again, that of we Fiber business a in would parts give So, more

Garik Shmois

Understood. Thank you.

Operator

question. One moment our next for

question next Phil with Jefferies. comes from Our Ng

open. is line Your

Phil Ng

morning, Hey, guys.

double You've everyone. morning, called -- out

point at do year now this for activity volumes sight called year been bidding little but it since I we about XXXX? be this could choppier out much that you think this with how in point? macro a time last Fibers How think you a that comfortable year, Are -- double-digit have backlog some should demand up sometimes certainly line next You've with weaker of or at that Mineral backdrop.

Vic Grizzle

you're referring a -- is activity time bidding that the bidding to first activity. Yes, it's

projects of to future that XX on could be indicator, good XX it's out So, the a maybe, horizon. months really

were to about, on One that which marketplace in supply to the people translating right? that I allowing land. seeing seeing the that projects, wasn't and in is think issues that around data, We saying of into it inflation new data constraints on or that we not that just of things weren't real were labor that in DoD the the that the high that ground was data terms spoke start chain were business ground, Phil, the it we the just really with weren't not projects allowing, talked either

into realized of that signal that this are it's there, commercial activity there, think that market for signals it to encouraged around out still I labor see, too into But inflation think think But think -- XXXX. how is gets is I I supply the I'm over dynamic call. very that lands to XXXX, by we'll I the construction to out important have those work out XXXX again, the chain, business or it's still, rolling constraints uncertain strong, real So, and much how how a in demand there. ease, too that's

and we'll think feel outlook get have when February. better a to better for I that, we

Phil Ng

help kind next margins ability down us but that think and encouraging. is demand investments year mean, lever weaker, expansion And that costs? come Mineral throttling price of kind of with I through And costs, to of Fibers much through? growth assumes how few again, a throttling you. to expect implied margin you expected, than demand little the to is slower and of you've been which back investing up years be last to XQ your maybe Certainly Got back when is guidance a drive investments, coming to through par kind your expecting still come? if price

Vic Grizzle

Yes.

our would expenses, in think I say I back back throttle we may investments, our areas. may costs on we throttling our not other throttle our back --

so of So, broadly that in a do business. places we're to can we expand margins, good costs and finding we our think I can the in price market control through flow really the right-size that to inflation environment we over so speaking, job that let really be

margins very throughout the expenses going and cycle. as up to of we again, expand really, managers So, setting to parts that what the we're prudent of we're make have going be business forward, our sure

Phil Ng

Thanks. Yes.

Operator

next question. for moment One our

question comes Susan Sachs. next Our with Maklari from Goldman

Your line open. is

Susan Maklari

everyone. Thank Good morning, you.

Vic Grizzle

Susan. Hi

Chris Calzaretta

Susan. Hi

Susan Maklari

last of those volume is, of that roll two down. me come trade-off in are that setup customers the versus inflation the to take as Mineral question through, magnitude about years, help price you the to some how the think and increases that and we perhaps first waiting Fiber, this and have about My does of over, some But in that between the your do there's understanding the given think into necessarily seen potential we've about that XXXX, precedent number two? underlying pricing no thinking for in

Vic Grizzle

terrific gross right. I So, level, -- in the job a the this way teams our think managing spread it margin and have that done about at

it. perpetuate investments So, on price a for how will we periods. we the our deflationary our equation that to we of that so know, macroeconomic at that in And spread cost holding history And, we margin those manage the we based so the margin periods. inflationary I year fund think price and need get But these That's of environment as gross margins and more at about to level, even you we're in the expand course, business the manage have price model. gross can to managing the can think level. face, next continue business we we

Susan Maklari

seeing opportunities? we M&A in your And overall, allocation, that you're as an thinking then, are the And about the versus just give can you Okay. update And you there? of capital interest pipeline, how some think allocation, then just changes? capital anything about buybacks other perhaps on

Vic Grizzle

very terms there comment hard periodically a business the Chris, day. this, we're and I with on think, effort, let they're this every development in here we I near I'm am in working on. working still we're future. that engaged done so get team, smaller what deals very on. some even hopeful the of can what on, team, it in but the charging -- I they're encouraged again, you by of fully the we working review just have I'll I'm staffed they're Yes,

here. think precursors to timeline, we control. in a partnerships we that to companies I So, Susan, for the these are working bidding not we're are we here. a continue buying timing really sale this the are these process be on is a and don't on companies, active market thing but active relationships Frankly,

to continues robust healthy and pipeline Our here. be

expect it's more fair area. from think to us this I in

Susan Maklari

good Okay, luck. thank you and

Vic Grizzle

Susan. Thanks

Chris Calzaretta

Thanks Susan.

Operator

our One question. moment for next

Our next question comes from Rafe Jadrosich with Bank of America.

Your line open. is

Rafe Jadrosich

my on Hi, taking I good morning. made follow-up on just for Thanks to wanted Rafe. question. you comment -- It's a pricing. the comment Vic, just

sort going about of that you to your you're the And there pretty understand cadence terms Fibers. talking want level. raising I Mineral historically, increased price make margin about is maintain kind year you pricing to to thinking I were in comments there pricing on increases cost? think forward expect Or to certain each forward? consistently sure of going a I maintain gross do way same a relative change of price of just

Vic Grizzle

To clear, Yes, no we're no really change expect thinking And change. in how manage to that. about be there's how we it.

Rafe Jadrosich

has to last commented and XX was clarification. then input the cost, that the quarter ago, Okay, like natural a this maybe down I days. bit for gas have a you in natural materials prices quite your obviously see inflation relative outlook you've the appreciate been like come gas, it the then And what's biggest year, for headwind, where can to the just

So, -- the relief input flow some when to would some costs we through your start of on start this of to see P&L?

Chris Calzaretta

we're you it for of high mean, question. Chris. is Yes. natural the for mean, the I variability The the really right? gas Hey, for Yes, identified pricing. for kind Thanks single-digit wildcard inflation, and around well. the Rafe, this is And Mineral out-looking year, Fiber, I

if we So, spiked of down, of slightly prices some the overall in But continue kind there. I year. the with And continue that come we we pretty closely. a quarter. we you latter remains is finish gas, tick saw the it down, the wildcard as think upside really to what to out volatility part that third up that became really with inflation one bit the -- have expect they've as happens natural the But to potential moderate and monitor how

Rafe Jadrosich

to kind margins? If to stay, prices natural expect when would a gas to that to benefit be start you of your

Chris Calzaretta

XXXX. as And think I at of into there's part Yes, in variability gas a market. we head be natural that lot again, that'd we'd of something look that

say out and us as a we overall better into into year I'd head profile. finish So, inflation that'll XXXX, insight your the give

Rafe Jadrosich

Great. Thanks.

Operator

our One question. next moment for

Our Lovallo next John with from question UBS. comes

is Your open. line

John Lovallo

for my Hey, questions. taking guys, thank you

Or that to that's be you you guide what confidence mix. sort not, first implying one an improvement happen? if XQ of going is The it in seems the channel may already? like that Are the seeing gives

Vic Grizzle

we're with October. in in think the say I out-looking It's October, we month what Yes, we're of the we're consistent seeing can month of what out-looking.

So, row, it us, some load-ins some lumpiness or I in before heard and orders, happens you've yes, on rarely as think you two -- of John these again, know. of as a the quarters

is So, think I we situation. what quarter bit And unusual is what October reinforcing experienced third in an in of that. a seeing we're

John Lovallo

you. Got

natural candidate you one Okay. of that's for education business of And mind In a you -- the the out the in that parts Healthy as meant being strong my called quarter. then Spaces.

or So, curious education penetration in segment? I'm for just desire Spaces seeing Healthy improved any you're if that

Vic Grizzle

the in mean I was -- third in it area. tracking and of activity. that summer area quarter We a a tracking us business strong of activity closed projects, and in our the overall Healthy in Yes, for number -- the lot Xx We're we're Spaces. of -- terms

So, can Space is excited have lot funds spent the still extra that with I all of COVID of -- think to the XX% that's so be been things that's you're our classrooms this area far. an around we're and There's a kinds Healthy help now, that. rich. right, more There's I think going beyond really solutions less lot engagement. a of than about Obviously, money spent here there's

for the So, there's -- that of particular. plenty the education around out support Spaces money Healthy there upgrades in

John Lovallo

Thanks Vic.

Vic Grizzle

Yes, thank you.

Operator

moment next question. One our for

Dan Oppenheim Suisse. next comes with Credit question from Our

open. is line Your

Dan Oppenheim

the terms -- Wondering you in then expansion the margins in do talked you happen you about have of that? fourth little XXXX just a on in so you much. very How the in the buildings specialty speaks potential of there. can bit I what further if think that quarter? you talk terms we've clearly seen on and offering growing, more Thanks to margins Great. winning can the the side, was wondering about about talked

Vic Grizzle

new Yes, care take within capability of our more the these I a design it's depth -- the terrific of I that selling architects. our we portfolio exciting. breadth teams And really are have, of and spaces in the to for think job the the capability buildings mean, doing

to drivers, do at margins. right, the to some plants, we're our on get so good getting need a costs are plants. leverage, good expense is XX% I think, productivity, Both business. said, that way But we growth, our to operating activity is I to level EBITDA within good and and our real margins with of that are doing level. we continue doing those optimize our this growth. the for for And things us. leverage controlling that the plant job XX% driving quickly of EBITDA that to too And expand a we're strong increased engine the to level that teams run the for to that well where getting quality at established back not we've the at But of real of those growth quality -- as this on want I'm us to trying

level. XX% our way back well to on to getting So, we're that

Dan Oppenheim

Great. Thanks--

Vic Grizzle

continue right, should that your guess XXXX. into I was XXXX. question continue into that should that And

Dan Oppenheim

thanks. Great.

Operator

On moment our next question. for

question with Our Stephen from comes Evercore ISI. Kim next

Stephen Kim

pretty strong. their -- much, it quarter XQ, the segments across transportation those I and the segments broaden progressed? quarter or Thanks its maintain did maintain strength segments Yes, trended throughout very retail, specific the I you think that, and you how did weakness guys they did was strength? guys. education, mentioned across as curious your entering LatAm, Or categories see

Vic Grizzle

of the we naturally end education a the toward Well, in see fall-off quarter.

and maybe out office in -- I really under would September. tease seasonality that of the around it'd kids where we was the work. back But standout some be was say just the So the softest getting saw biggest classrooms hard much healthcare, renovation into of how to

quarter, the to quarter end would those say I stood from probably again, the of the of beginning So, the the most. out

Stephen Kim

Okay, then got sense. talked you. little think I secondly, he makes inventory That bit about And about levels. a

thought any not Anything grid, pretty I he that distribution about were you -- think XQ, have talk And else whether some there? would call think you there pretty sort in inventory for out levels, in was or your of about destocking. -- concerns? were there that example, normal. I talked was inventory you

And in there's to so any I curious whether that? was been change not or as

Vic Grizzle

comfortable I partners the everybody market from hey, at third grid of growth. in particular, levels. condition the destocking an they volume growth think levels think volume more there's And than I business were third from stronger they good inventory ended inventory what felt quarter, distribution and hearing on levels think based a here, I when Again less in from up the going about outlook weaker on are No, -- the quarter of signal effect, market our the was, part pretty into in we're the expecting. their

side. So, steel again, remember XXXX, were grid a they inflation. on volume accumulating They and more all increases last tile the were sides the of year and because were lot nine was price they -- there

that but that, effect, effect growth So, the moderated bit of business, throughout in felt destocking. that in with more became in comfortable we quarter because given third in a and again, unfortunately, the that quarter, the the grid outlook

Stephen Kim

makes that Yes, sense.

lot. a thanks Okay,

Vic Grizzle

Thank Yes. you.

Operator

One our question. moment for next

Our with Baumgarten Associates. next Zelman from comes question Adam

line is Your open.

Adam Baumgarten

to Fiber volumes with in to sticking high Mineral in decline implied good are Are October, you a whole? November consistent with December mid as just and decelerate Hey, further guide? everyone. they Maybe the single-digit morning, XQ expecting for that

Vic Grizzle

buy remember, year. February January, last than brought here big the have. we We're that we the is price this our think more saw moved month year volume I Yes, we ahead from into -- thing what increase of to typically December anniversarying

see I in of that anniversarying so expect December. delta would to be in to us that So, more you're December, year-over-year events going

Adam Baumgarten

And you Okay, in XXXX? think was a you a in some just the still got to flip -- to mentioned headwind at that I new quarter. then point it. tailwind expect that Do construction

Vic Grizzle

forecasted are to Well, be the actual starts this year positive.

the [Indiscernible]. So, they're they It's Originally, at off what's were the mid-single-digit don't much that, believe positive. that's still from actually that less than happened. levels their We way although forecast. forecast

to have we'll So, see.

all actual Again, start think to of hard conditions really drive next it'll today, and at a tailwind be be that's next activity I the of sitting may if continuation here year. going macro that much to year. say

Adam Baumgarten

one. margin valuation called just can bridge out Okay, quick Mineral And In inventory got just presentation, the more maybe some detail headwind, as the a then you one Fiber more that? it. around give you on

Chris Calzaretta

Adam, inventory to through terms it through in call Hey, think the Yes, it about flushing more this Chris. on and is Yes. levels of inflation inventory due running valuation, valves. P&L

Adam Baumgarten

Thank it. Got you. Okay.

Chris Calzaretta

So, timing related. really more inflation Yes.

Operator

One moment next question. our for

Markets. question KeyBanc Our Capital Kenneth with from next comes Zener

Your is line open.

Kenneth Zener

Chris. Good morning, Vic,

Vic Grizzle

Ken. Hi

Chris Calzaretta

morning. good Hey,

Kenneth Zener

regional seems, empty. at tower, But a business lot where than I'm Northeast, in one out kind broader So, you're big post-COVID Francisco dynamics, since it in seeing based time, of different, largely San we're the or of, the the, concerns obviously, in is the economy. your steadier a COVID clients big in point -- the one your it's obviously what's Salesforce

I replacement occupancy terms growth So, a and stuff Florida of thinking region back? we've talk in understand the could I something pretty we've the your versus seeing markets? but take all education, as you health the and in little Texas in our be we very portfolio, can you. these bigger what are geographically Thank country? you trends, seen of seen about maybe traditional you that like picture And a to lot might a places different know rates step but of -- in in by care terms opposed the about strong anything

Vic Grizzle

Canada watched all and has point, in New the think carefully. it's you and clearly is your City rate West, nationally in see York stalled pace Dallas. what uneven territory, Boston are certainly, as know, we office lagged it to back where I or to overall, by from very we in out But Yes,

disparity back occupied. the be when occupied? buildings they'll and if big then referencing We've work other So, Because -- how seen work there. in profile is, about drives we're TI question in areas, But office but you're overall to you it in what faster, profile. -- the particular. the demand of important think that’s demand how terms that it until that's that it I here these the we from to think goes -- get TI to there's drives is be will these when definitely some lag --- whether the The

forward like the we to traction, of places to the in parts expect to other this have We and like just still continue country, West gain where move in it's lagging.

are So, as it some renovation How opportunity opportunities because question strong market the those we're up just for The that of of We a still is will lag. the us. not that here. long lags on behind New believe giving next generation cities, buildings take tenants we've that by other them? to like York, tenants like be these existing these Again, the of for in some or reoccupied just the come example. whether seen for

we're So, renovation demand. we're thinking not thinking this is demand, lost activity pent-up

Kenneth Zener

that No, sense. Right. makes

in already, had servicing I but and from increases me, to price in though going differences. all wool else have would which constantly some into through place but quarter making you from obviously, forecast? perspective, as the noticeable we're larger inflation are stuff of not seem be back because where now footprint from pricing today, guided the quarter it be is we in really reasonable half decelerating we've mix Just that excuse the does just buildings of be component, year, guess, mineral for price it'll a we these basically -- assumption, any next had down, the and the to you're the regional it's fourth increases equal a

Vic Grizzle

-- Well, reasonable I I years we've two unprecedented we've think had expect levels had right of -- just it's to mean, inflation. of ramp

If rate, pricing. inflation inflationary then more and gets normal more our back moderates environment. initiatives year had reflect to unprecedented should a a of So, next levels normal you've inflationary pricing

a fair to pair I together. that's think assumption

Kenneth Zener

that had. to just very you normalize we've Yes, trying Thank pricing the strong much.

Vic Grizzle

Yes. Thank you, Ken.

Operator

this question. time, Vic CEO over And President turn to further back I'm remarks. not closing like At sure I'd to any call for any Grizzle, the and

Vic Grizzle

the for success we're right of pointing front control. proud you for on I value us, as look that's Again, team Again long-term I'm joining things and joining today. thank well all in at company. us we of the believe us. opportunity our And can thank I for said, over we're third of We'll thank Yes, for the initiatives creation you. We're you but how those executing. quarter results us. just executing

we'll to you call. you again, us forward talking and to So, at our joining thank for look today next

Operator

this does Ladies and gentlemen, today's presentation. conclude

now and have a wonderful You may day. disconnect

Armstrong World Industries (AWI) 25 Oct 222022 Q3 Earnings call transcript