Earnings call transcript Q1 2023

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Operator

Welcome to the Q1, 2023 Armstrong World Industries, Inc. Earnings Conference 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] Please be advised that today's conference is being recorded.

to of conference Communications. Investor like Womble, to now President Vice Relations, would hand over the Theresa I and Corporate go ahead. Please

Theresa Womble

of On the and CFO have that will Web Thank to Armstrong remarks, World our our and we morning, quarter discuss Investor outlook. and today's XXXX is To first call. these results, CEO; our you. presentation Grizzle, XXXX call, available provided Calzaretta, welcome Chris section a Industries on Vic our Good site. our everyone accompany

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

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

over the I'll now, call turn Vic. And to

Vic Grizzle

as successfully a economic all on results joining reported a and we backdrop initiative solid to you, represent good Thank against thank our executed uncertainty. cost call our this Theresa, and team The today. of strategic and XXXX for our controlled morning morning you start

adjusted XX% adjusted net year-over-year, X%, increased flow EBITDA consolidated and Our more than XX%. increased grew sales cash free while

growth, basis contributor expansion was key adjusted well and double-digit with sales the segment adjusted points. Fiber margin up Mineral Our XX start, as good EBITDA as to a EBITDA

quarter largely in due was growth first in following X% what challenging Fiber Mineral the a sales recovery to XXXX. delivered We volume a of quarter

in distribution first of levels recall, market and of buffer reducing will anticipation patterns We our and believe first with were accumulating that quarter as you inventories several supply of strong in well consistent inflationary on XXXX, as inventory this that returned inventory to comparison, were improving persistent this disruptions are As of year of chain to the against conditions levels. sales pressures. after a higher period versus normal more quarter maintaining weak have historical partners channel

XXXX in the decline joint ceiling million with Specialties grid Architectural and and experienced lower growth EBITDA. year-over-year slower This that also we the a in that in XXXX, quarter last of chain labor constraints forward growth quarter, compounded and been throughout the year, by performance against tied this strong throughout sales delays as to commercial venture, true WAVE our WAVE were sales quarter lower improved. had $X to start project moved X%, in construction quarter. a fourth had our products All order the had quarter pleased industry growth projects in sales of delayed sales a achieved venture. as our from joint of had We for additional XX% the the with XX% intake from growth XXXX supply earnings adjusted

order strong our more to larger commercial also Architectural all markets. driven additional buildings. in continuation from encouraged product bodes remain is felt, be spaces Specialties products. solid increasingly this new categories We're providing intake of our metal. have and demand bidding the Specialties Even outlook across into activity verticals, infrastructure well bill primarily driving portfolio with with strength notable to diverse like wood, appears transportation and with XXXX, full-year the we for This our out There that the there our tied and slow and scheduled projects And by that start, product our This TECTUM, healthcare is and segment. in comfortable beyond. end comfort is for

with for we how the started we we're in the All year. cautious of remain XXXX, balance while all, pleased

see challenges ahead the to and deliver know expansion cost market, solid and on remain construction we focused both must continue growth management with We for margin commercial across to outlook of our execution segments. line we top

demand view challenged. market full-year remains the current that be will Our for

although the a remains continue the and to recession duration of the mild expect to in uncertain. exact We second-half occur timing year,

see continued And their in has slowed activity economy, some have of also weakness stalled. We investments. that where sectors return-to-office the

have rates, escalating than interest more others. vertical along factors, These pressured the office with

Now with an of municipal like areas spending in airports, investments quarter, with fair said, Fiber centers. third vertical it's pockets area, is overall positive of also turn active segment revenue. and a did in than transportation stations, activity broadly, less Healthcare represents a More the Mineral office that reminder with bidding education and the metro datacenters. strength in that convention our and along

early of anything too this positive activity, to it's dampen markets how is diversity from the conclude and can can it in of noteworthy. demand level that demand of downturn end While stabilization the from occur a

achieve to a we overall cost and innovation like quality our and efforts, investments for challenging While uncertain control, face can our remain how we our backdrop, growth. we manage what plants structure, productivity, future continue focused we on and to our

costs February, of with spending. disciplined we've discretionary trimming around reprioritizing of all in And and will made in weakness. some market As our remain difficult our investments decisions certain we announced light we

expanding strong profitable teams very far us The quarter, is accomplishing work tremendous production performance done is As generation. margins our work impressed targets XXXX. for our who set growth exceed and our been our delivered embraced in flow we how year forward, This helping teams are includes what long-term have they this to teams have cash a move with productivity I've notable, and continuing up with strong so mission success. the is their in to in deliver the

to hard worked goals. have share active with to our also remains pipeline. their volume activity good that achieve team Our business development pleased structure both we're sales and in the pricing also our teams and And

making portfolio on designers Project this best the design tool. We're now the product ideas offer Project we process Works, remain including number automated the has of expanding of growth contractors. for benefit and services more focused in And their we and key We're by design more help of to the Progress are and projects in conceptual solutions. this With service, double year. across as also Works on designers, the with able continued product currently process possible service track automated initiatives. our as this our earlier architects, architects using efficient of the project design our to to match

by start strong key with XXXX, platform, increases Our Canopy also Armstrong, strong metrics. online a had sales to all across

category, Spaces We be this last, we continue increasing our and growth Healthy to continue with unique our for product can new with offering sales with the we and progress that validation develop customers through platform. serve pleased further very our initiative find and portfolio. to this And our Spaces digital while Healthy

fine-tune to indoor value includes around and which continue quality, proposition sound, light. air, total environmental temperature, We our

play that of between we sustainable as solutions opportunities buildings ceilings healthy, the we improve promising days, to but of increasingly important And clear the attributes and connection this, it's health early do overall that future. are building. in have an these Still role a sustainability some in ceiling and seeing the

me some provide quarterly the let additional financials. details and Chris? on there Now, pause Chris for moment let a

Chris Calzaretta

morning good call. and Vic, to everyone on the Thanks,

referring I'll slides which throughout our my of Web As remarks, a presentation. available reminder, and site, the be details slide our basis to on three

and On slide growth driven X% AUV segment results. growth, of by X% was Mineral volume six, XX%, discuss we our Fibers sales Mineral Fibers growth.

Vic As the due increase mentioned, weaker prior-year volumes was largely in to periods. the

typically in prior results cause the increased outperformed can lumpiness levels channel are a and in can the sales home quarter. year and center in inventory home levels These as our channel our nature, volume during this Additionally, inventory quarter-to-quarter. center fluctuate, timing

AUVs within out We contributed this higher outperformed markets X%, price mix and the more these home are generally AUV. of the we volume of in unfavorable channel. AUV, in temporary. mix partially Rounding headwind saw offsetting headwind the Mineral with headwinds digital, extent, markets was positive believe the And the a softer three by growth, Geographic impact offset mix biggest as of by with mix. driven lesser shipping quarter led are lower by center first like-for-like an than product quarter. initiatives, the points day a market Fiber extra drivers was growth to quarter

or just the near history Fiber grew million by by Mineral margin points compared XX%, $XX AUV EBITDA through mix benefits led and basis that fell adjusted prior the by the despite year, segment at mentioned. Favorable levels XX expanded EBITDA to headwinds. volume I

volumes. Recall the steel exceeded weaker through plants as to reductions WAVE compared WAVE start also year, volume had had driven the also period. the lower their earnings due to prior-year by prior in the to productivity in a Our inventory flowing year higher favorable were comparison quarter. and good P&L, costs the equity and level a that targets the

higher expenses gains costs our these input were in SG&A to continued digital Offsetting initiatives. invest as and we

with Turning input costs, an inventory a in the the valuation. headwind The rest remainder largely impact valuation for raw material we of $X related cost year. inventory earnings quarter input million, first anticipate expected what quarter of the impact minimal our we line quarter inflation. call, the driven in This expected. was on to We and valuation continued by outlooked February to inventory headwind the for was

year. the inflationary, material quarter. cost but total specifically EBITDA of versus a inflation the prior Material in expanded Energy electricity Despite points these still XX basis headwinds, were by cost, were adjusted Fiber not margins the input driver

gas gas of of natural gas on portion year for we natural some did of over little exposure natural a structure, current more XXXX. but natural to our this given for pricing volatility decided past recently our like normally the thereby, the supply, stability energy needs the to our to de-risking prices, our exposure. context with add typically pay give level a topic of in to We don't lock-in market would rates natural We While our suppliers. hedge to a our in and cost, cost gas have I

AS Architectural On partially in slide of across fourth in segment the discuss by product the or received primarily Despite shorter orders a lead time sales driven categories, slowdown products. a our most growth, results. the slowing saw of our increased we seven, metal rate Specialties with segment quarter,

our order project as Despite level line backlogs with for comparison. affected remain EBITDA supportive unfavorable segment softer strong result by margin be a We negatively of prior impacted and year can and down also was associated timing outlook took Adjusted current this softer and the faced timing. more this step lumpiness a XXXX. quarter, by intake sales top project

We scale segment. manage cost continue and this grow as to we

our Adjusted EBITDA. year. adjusted earnings share inflation, material raw more cash and $XX gains will per with XX% from favorable as free AUV, net earnings XX% eight in metrics, company versus Adjusted see WAVE segment, versus shows favorable SG&A the prior, about And nine. valuation than prior to higher or consolidated and which flow diluted impacts, Fiber inventory we increased Mineral Slide in move equity volume offset you drivers increased line million slide expense. those

first capital improvement The working Slide increase by performance adjusted dividend. flow CapEx versus nine WAVE primarily increase driven was and shows free higher cash $XX and an was partially higher in the million prior inventory This by offset interest. year. driven quarter by cash

year-over-year as see for remains to in to priorities. fund our a our flow allocation pleased improvement us are to strong key focus all XXXX generation of ability cash capital and We

XXXX, share priorities continue repurchasing $XX the about $XX.X And in Since shares. first million million. repurchase have shares cash we program $XXX of those deliver to for quarter, total on inception of is the the million shareholders. in One repurchased a of of returning this we excess to

As maintaining our are full-year guidance. shown slide XX, on we XXXX

we expected you'll are these first actions And took workforce in of trim on in our conditions. about to to million. As deliver to the response these We markets generate remain track savings to full-year actions savings. anticipated quarter recall, $X

flow range and meaningful guidance committed mentioned, a I difficult with expectations margin, of range another are to cash growth XX% X% EBITDA free in just adjusted providing the year generation adjusted X%. We driving sales also growth backdrop. remain despite the focused as flow market of we And healthy in cash of X% a to to midpoint achieving X% on

appendix are for presentation. assumptions the this in available Additional

turn take Vic your questions. for I'll it now, before And back some additional to thoughts we

Vic Grizzle

Chris. Thanks,

back to step to Before your that and consistent cash foundational of to take generator the neat-term resilience on our we outlook get economic are questions, ability core would results our a cycles. and Armstrong attributes our a to I throughout be flow like to reflect the from

exclusive America, ceilings operate and distribution focused portfolio network and serving including and the only in we North company commercial have largest best the unique As production attractive industry. America's specialty industry, an where category and competitive in wall we in the construction footprint advantages, largest the

quality. where end product addition, a service, highly innovation and customers our our value In our it's category and users

We markets, healthcare, acoustical the product commercial ubiquitous of We diversified Architectural ceiling more course, and, has Specialties also portfolio, A&D buildings. include and and as transportation, our and set important are office. eve by getting diverse serve tiles into in of us expansion more community datacenters, further end education, state in retail, spaces. a These believe to our relevant made

of of of the stability portfolio economic sales we down the of in Again, is stream, in to dampen and our can creating story. up earnings stability having very and of serves time, all the all of key generate this to see all is This through the its effect dampen move a creates upcycle earlier, unique sales consistently parts cash AWI attribute affect in an mentioned downturns. this cycle. reasons As the same in cycle. or and one in It's unusual verticals at the diversity parts

of Fiber Another our ability drive core our in to attribute is growth Armstrong AUV business. Mineral

last the even CAGR, XX we've a X% years, through Over delivered challenges COVID. AUV of the

Looking further expect Great innovation grid XX-XX step-up to the efficient to the spaces, and continue is commitment and attributes Crisis. AUV these profitable achieved best-in-class is our and in joint of out sustainability levels, the healthy back, most venture, AUV we products. With to service Financial around into grow growth innovative which Rounding we future. manufacturer during well positive our core our

Crisis. billion more each Armstrong addition in venture earnings Financial the to than this since equity Great In has realized to dividends quarter, $X returned

attributes adjusted have allowed and core since to excess company in XXXX. of us free of cash billion adjusted flow our cash free in $X.X the flow margins generate Together, XX%

XXXX, $XXX million including adjusted $XXX end Looking flow, impacted been cash period of has in our the a than expectations just spending. of again this disciplined the clearly since year over In what and spite million AUV at delivered of the our through materially we onset our initiatives, strong market environment; delivering of and during challenging headwinds, COVID, more sales. shutdowns levels, free when XXXX given to anticipate market grow hold ahead historical of flow generation cash approach to we've

to seek and to capital investments responsible to as repurchases, for and We in near we well allocators and to and have continue This and into share will direct value efficient investors returns as invest as our our back of long-term dividends includes be acquisitions. shareholders. generate through business, complimentary

returned doing Architectural strong to also a more Since $X have expand our and record We this. segment. we in than dividends the within have track repurchases, billion for XXXX, share while Specialties companies acquiring capabilities nine

of So, we and cycle, manage our well-positioned delivering downturn, while forward all look through flow to an of growth. none economic to resilience us demonstrating the we believe are at parts AWI, cash

be happy we'll that, with to your take And questions.

Operator

Kathryn Thompson Research. The Instructions] [Operator question first from with comes Thompson

now is open. line Your

Kathryn Thompson

Hi, thank you my questions for taking today.

there important volumes logic in that shipping to terms organic that And said some terms point extra to your for One, sure I benefit that initiatives, you're cited day, markets you're a was last could of you. had want Just but a end by -- just from you of one in you that volumes year, on volumes, then are with believe, holds same key were of couple make to in seeing. basis and growth on in that give Thank seeing seeing you so thing X%. And you an the quarter it what quarter. growth markets what clarification off end assume a were that actually other I modest growth clarification the then X%, the up XXX Armstrong?

Vic Grizzle

Chris markets I'll we on that the the we similar what dissect at first a Kathryn, the saw to experienced the level, primarily build of quarter were some The Yes, and with let volume. then fourth in let in there macro start me quarter.

started As the similar quarter. what saw the is of That we discretionary that you'll third we back. fourth to we see renovation spending remember, of market saw, level as in the the in in get quarter very we year, quarter. continue to the pulled in last softness first to around And expected

are So, versus the we the markets the stable we fourth I quarter. that saw quarter would what say, first largely in experienced overall in

last the let Chris comments as additional quarter and compare of then additional you bit, going a on verticals that the I'm little year, So, to first that I'll add to dissect question. some

Chris Calzaretta

Kathryn. thanks, So,

to the mentioned. in that volume initiatives. remarks, the prior-year As X%, digits, comp attributable day And was down remainder our three current-year single we both and said prepared to down really market ship Fiber inventory attributable offset the we inventory Mineral and low by then build that was the the retail and points

Vic Grizzle

I there sorry, Frankly, here -- the what's is question across and have around office similar in second office all going to the we very to add markets saw market the the verticals. the market with Kathryn, we your I know watch-out around say what on to And just quarter similarly. would very is office behave the the in fourth seen market. quarter. the what in of first of kind

an and office all remarks mentioned haven't we're all the first the dynamics prepared then the in activity seen I we really the additional about quarter. through what bidding downturn in across that of verticals, also positive turned frankly, in our So, reading market.

because from we're had we negative. the as last turned bidding have activity And the that preclude two to by quarters, anything reported, hesitating way,

at some workout that And we segments, the including of bidding all there across fact had positive so, it really that that the all, again, is quarter, noteworthy there a not we're office. but overweighting is

watch fourth a second I relative we that to into quarter, have experienced. and the So, overall, stable as would that closely already to the beyond, softness we're very very quarter but go going we say,

Kathryn Thompson

(ph) [partially] is you? but has behind feel And do process you like destocking the normalized, that

Vic Grizzle

We do believe that.

are little on including with bit our grid right, year. Kathryn, that's our think As seemed products, longer to maybe well going grip a Even last it hang we I at. as products,

Kathryn Thompson

see those mean you your I for as are some projects, seeing match, recovery but those any in bigger just patch everyday for And and trends? recovery, are basic of you

Vic Grizzle

about no any Again, say just same. additional downturn, softness, recovery, the but no wouldn't would I recovery. say no again I additional certainly

Kathryn Thompson

that pricing, a you you price still I the just Are back final that when lot Thanks been full-year, And guidance the in do with and of acute you price-cost very on in about seen Okay. the each increases track year. industries, for hop balance? how follow-up much. for regular queue, just industry beating think feel terms before on of you've you fairly

Vic Grizzle

sure, Kathryn. Yes,

a As price we wanted we get our to increases. cadence look, regular back on all to

track price We that, environment. twice-a-year. to price on normal which environment, good an We've nevertheless do hyperinflationary are in continue be that increase. implemented to cadence. but inflationary We our as of inflationary is traction our the not price it'd years, two our increase anticipate been in obviously an February continue We've gotten per to last on as

So, it's we increases, doing important execute teams on that are our price these and that.

of increases initiatives closer cadence that We're sure of to price get on we're in with the that our that. environment dates will on we sizing we to expand twice-a-year, inflationary that to inflation normal for as as we're be and to outlooked. track the increase pricing So, those cover sized track we've still that the make these reflect of margins

Kathryn Thompson

Okay, thank you.

Vic Grizzle

Thank you.

Operator

Maklari The Sachs. question from comes Instructions] next with [Operator Goldman Susan

Your is open. line

Susan Maklari

morning you everyone. Thank good and

Vic Grizzle

Morning.

Chris Calzaretta

Morning.

Susan Maklari

some your of said comments, office the some and activity area geographically? In in made that of that lower-margin shifts of the growth first up in that office My to question following seeing relate population on country? that markets some markets. your Vic, job that the you're across of are seeing Are you the some happening broader the any you you terms differences greater and there's in there. end is commentary Does

Vic Grizzle

I Yes, think so.

in were of regions quarter. positive All the our

have back-to-office, are Kastle continue to Those all region if And XXXX, those index look have that see in activity I we we're year. saw including across you that every we So, ongoing. the Back-to-Office there differences more that tenant at country. watch, have levels improvement higher the that, and grew, that of to think, back-to-office this markets going

of lot were base think these some regions to as I but some of is Susan, So, period timing other the for that stronger there the timing, really than is do regions there relationship of well. sure, -- with a had a as comparison

last quarter or destocking first were you as The levels know, down. their year, distributors taking inventory

you regions will, that had against also being performances, irregular some We backdrop, really as some strong. if

them. were AUV destocking In strongest, on the fact, in year, quarter, while of last our highest regions was lot a first going around

as on of disparity just think on. I So, on the will goes by regions work or we territory this as here. is And reported largely through year way the its on timing geographic some that sales out

Susan Maklari

right, result that's have And you Okay, larger as in of areas especially been the there. bills also that of that some projects, infrastructure all mentioned then you're a helpful. seeing passed

ability that years about your in think there does that after you of projects? Architectural product in done changing to get last the terms As to you've the now, Specialties, targeted that and the range you go Architectural Specialties, margins mean of to couple how those your for the the longer-term visibility that acquisitions in that offerings have is what And ability range there?

Vic Grizzle

to Yes, step question, last connection it's transportation and I months. in in quoted a XXX transportation really months, a XXX the six here think strong real to a take over jobs; just the we've good I jobs mean, back, last participation. over our six there's

last through but the the capabilities on our the bids we've Architectural lot really work expanded fact experienced several that in to we're we Specialties on that the to have directly acquisitions. noteworthy, what segment so, a is and front than the there's That's connected And in this more these years. transportation added activity quoting we're

a be business, do the the in because business. that last now Our talked wood wood and we're wood, to ability Airport, Kansas those the requirements and unique in about as meet to with City we had innovation with able and our metal in things marketplace purchased we was call, around

and be large an don't Armstrong. only projects, there's versus in before, niche real breadth our strong the to breadth also which projects, large who participate think these couldn't portfolio not connection. in we platform players us of these allowing competitive have I the of The but a more So, is and competitive have uniquely

to advantage, to we've bringing to some be these now strong play projects. I what projects. to last the think, several competitive connection so, a able larger over these And Definitely years, done real we're in

Susan Maklari

you, Thank that's Okay, good luck. and helpful.

Vic Grizzle

Thank you.

Chris Calzaretta

Thank you.

Operator

[Operator next comes with from Keith The Instructions] Truist. question Hughes

line now open. is Your

Keith Hughes

Thank is inventory specifically quarter? the inventory, you. the costs, with what Fiber that write-up that Question on in $X to or Mineral an is million effect

Chris Calzaretta

It's terms about Hey, of valuations. inflation inventory the it basically Chris. inventory as a in inflation of Think the it's inflation. Keith, of P&L the and it's It's timing write-off; through sold. not just timing rolling

Keith Hughes

Okay, same just that all question the this on other parts AUV, to function to than the perfect. a the think I right, next expect weaker consistently be to And at AUV it's we're of your pressured over which the year? going something is with be country. tends do geography, being northeast, of the see And highest

Vic Grizzle

No, I it's think timing.

is Keith, think timing. grew The quarter, growth first southern year-over-year we in It the of the country, it didn't X% part in So, grow it's year. the earlier, last last I first of the were northeast comparison had again while the but double-digit volumes said fast year, I as quarter. regions, down as northeast the in as some overall

in of stronger underperformed growth I higher of that, though there some they say, areas was AUV outsized participation our some are positive, territories. So, by would even those comparison two

seen month April, in the reverse already I've this So, of Keith, itself.

normalize a throughout that is phenomena will the timing, this So, year. think, I

Keith Hughes

you. Thank perfect. Okay,

Chris Calzaretta

Thanks.

Operator

question next Loop from The Instructions] [Operator Capital. Garik Shmois with comes

open. Your line is now

Garik Shmois

your expected the outlook mid-single on at Hi, of much on any duration up be if hedges? all? color hedged And your and color new little program digits to wondering costs are was more nat I hedges. provide the How year, you gas does thanks. I now, could you think just a hedging this that you impact bit

Vic Grizzle

Garik. Hey,

as that overall pretty I it contemplated cost about thinking but inputs, not as that wouldn't natural portion. the our it's Duration expect needle we guided gas to we a and the And year. for year. to exposure there, earlier with move and just about guide really of initial yes, materially said, relative terms is of hedged to our So, -- was nat this exposure. Be I in associated input for our half gas

Garik Shmois

just Great, volume could little thank follow just volume progress you the expect performance up quarter, you. first three the cadence the a if Wanted don't provide I in on on and with how Fiber of Mineral quarters? to the reported strong handholding to conjunction over you growth in more bit know next the outlook,

Vic Grizzle

Yes.

of deceleration second we we So, do think remainder the volume uncertainty of in with we it quarter, the terms don't of quarterly volume, consistent of we've year, comes volumes year. expect the our talked and level of what associated the in recession February, continued really in while the guidance, the about about for incorporated mild the negative with the provide and progression the year remainder that cloudiness Again, back back-half and of to into guidance. really

Garik Shmois

for Understood. your help. Thanks

Vic Grizzle

Sure.

Operator

Phil Ng [Operator The question Jefferies. comes Instructions] from with next

Your now line is open.

Phil Ng

Hey guys.

color about I on you be type little major your your would that business base helpful? in regional really see see business help more, could [rene] you With any would suspect then, customer Vic, lending guess think Thanks be potentially timing? helpful I would us the bank do would that how if And impacting your being failures color and tighter and how likely conditions segment on be impacted. but loans, it any could lot. work versus of that you patch-and-match new (ph) to impacted construction on a a CRE

Vic Grizzle

we're in any impact things about so reading and different the Phil, ramifications. have not the about the we quarter Yes, really that all first from seen possibilities

about us is side really you reflects though think understand have what of back-half of And high and this renovation for that I A That think out to it; is the going and and things seeing it. work that this guidance keep doing likely the trophy, activity to that there is where level the of and additional could drives we're to to play competitive in space, think office-based one about I uncertainty balanced amenities read not buildings Class to for this ramifications adds full. be. and those demand that's our full to when that on is activity that the It really you stop.

new back-half some the things this More be construction overall and haven't versus already This the additional renovation match this are have new where those going you will of discretionary work, year. cost So, the out impacting going look if those said have at in are you where like renovation, the patch step pullback of play to that levels think year. started in The have back before, work. we back-half you major the renovation. of going would and see to is construction, I I've primarily think I in that's and on of softness you

in reflecting are in we that's could lending conditions outlook. happen in think what our balanced outlook tighter our appropriately I back-half

I this think understand us And, to there, out to ramification. play I'll for fully full leave Phil. the has

Philip Ng

the Okay, guess than this to a the free different it the would look us I how San cash mix the the of mix and holdup and I fall going how knew are volumes time durability and you am helpful seeing up and potentially of play given assume weakness retail in kind Does that's fair. mix some us and AUV. hold think would New the like you on and of This standpoint, flow in Francisco, you time places would which some think around challenges through I help Vic, about was any around? the in curious past color gross pricing dynamic cycle falling. forward. from York, mix more really office higher real does

Vic Grizzle

Yes.

'XX. on we see that. proxy get case, And don't I XXXX, back is the at think it what to happened I 'XX, go that didn't think mix. in and and than any look in the worse down best trade can

of that So, demand the to a not on highest we space people that reading am trade in mix. are of is same kind be or activity and are a different older. down everything the see the A kind continues as Again, lowest I through anticipating the office from trophy and And buildings those vacancy to buildings. class buildings rates the trade up older years

appropriately major for that our outlook. not And country think keep mix offices. the to the is across in just I dynamic us going cities where the mix is again, happens sized there in

a year products add of and XXXX that technology. positive higher 'XX. the construction final was the nature and new is the tailwind on in based of tends make new QX again this and and construction 'XX to AUV all of latest positive the is point then, And could putting in back-half into the on the I'll the in construction of new And greatest what

innovating a Phil, don't longwinded on mixes. even longer that answer, change And dynamic should higher driving and when longwinded have international products now division, I'll market really faster. the this AUVs of answer an talk business tremendous have even to this but kind where amount our on of that's we expectation see I here So, we make that focus bringing I a of and market higher Americas focus this are by a just we maybe, about

have you. lot a with talked about We those

are spaces, bringing are around are into products I the we even these we sustainability, AUV that higher work work the the marketplace of healthy think all around doing faster.

So, think there lot AUV growth I those of are that minor to. that through to a of innovation is any offsets alluding tailwind you dynamics just the

a have I into answer, but future do story positive AUV the longwinded again, we here. such believe So, a well

Philip Ng

I color Okay, appreciate it. super. Great and

Chris Calzaretta

Thanks.

Vic Grizzle

You bet, thank you.

Operator

the next instructions] question comes Kim from Stephen with Evercore. [Operator

is now line open. Your

Stephen Kim

so very the help I Thanks appreciate far. guys. much

Mineral touch had day actually volume to extra wanted guess something I Fiber was first, first shipping all, on not the we the expected. Just of that

just understand year? us should thinking -- future foresee, help other about are later you day can there we adjustments be any this So,

guess any about about. you previously shape And single think that previously like And digit of then, of think back-half kind I is I outlook digit half. shipping the your your you of day single down what to year-over-year front year respect low inclusive had had kind changes of the the have talked high with down issues, for being in volume talked in I

obviously. now, XQ you You had but guidance a your strong changing very are not

of help of am is can And any year-over-year there so, you give terms in the a us of curious in that second-half kind maybe sort of first-half, I change comparison? shape

Chris Calzaretta

Stephen. Hey,

ship ship day for QX this overall, first basis So, we day, obviously so, the day only a have down is for the one, flat full-year. up dynamic the ship one we quarter on where other year are

we kind for In that outlooked day our that And year. of terms again, shipping we being guide. in single volume volume, Mineral dynamic mid digit Fiber incorporate the do of into range

for pronounced the outlook. to with high and in in back-half our really due single the in First-half, you positive again, back-half volume And is Fiber, year-over-year the digit have that's right, in terms that second-half there expecting earlier are sequential first-half that are we but of range Mineral comp. dynamic, the incorporated due second just we that quarter, progression I the mentioned again, deceleration into expected to starting recession

Stephen Kim

single down I maybe single and thought? more sounds going digit first-half your guess? high be digit like positive, is than That fair high not is it previously So, the am second-half would guessing because a still to outlook

Chris Calzaretta

single that's think digit back-half in I is Yes, the High fair. fair.

Stephen Kim

about stronger seasonally think when then XQ. I and XQ why seasonality reason might we think Any be year? in different And WAVE, this the typically Okay. it's

Vic Grizzle

WAVE Armstrong third pattern activities backlog our right, third uncertainty quarter the -- going enough in part change not third construction the Again, there and the is quarter the in While quarter, of no that think seasonality because the so clarity there. back-half seasonality most around customer's back-half. where of second broadly, is the follows I into

see So, with talked completed of for or we the last carry seeing, this, that of Stephen, change some back-half, project kind delayed some favorable certainly this of first-half base pattern second didn't addition the a of Again, over that and outlook period first-half are dampening That's our in get or year. think in quarter got the that eating last is about. comp to lot could year the the we volume of seasonal probably a uncertainty year. the I we the given in the a

something quarter dampens back-half. our could is So, in I that which back the the the think, quarter be of macro strongest quarter third course, in there -- the

Stephen Kim

sure. for Yes,

so That's very much. Thanks great. helpful. Okay,

Vic Grizzle

Great.

Chris Calzaretta

you. Thank

Operator

question Bank next The from Jadrosich America. instructions] comes with of Rafe [Operator

Your now line is open.

Rafe Jadrosich

for Thanks It's morning. question. my good Rafe. taking Hi,

Could like-for-like announcement? normal mix up to for are break And on on sort expectations year? pricing follow price the quarter. Just year-over-year, realization wanted of the did the either like-for-like for you up February then, the you impact What see quarter-over-quarter? the was and what pricing the

Vic Grizzle

Yes.

that quarter. pricing the we increase February I in mentioned our as was like-for-like well. earlier price Our expected got on good traction

related think we timing we it I first overall AUV and I on the in think is some or it be like-for-like that be where the where but our are quarter we comfortable. the expect to dampened to like-for-like, mix offset pricing objectives, that growth, So, where it want pricing was headwinds we where expect be of where by obviously again to

Rafe Jadrosich

just think mix second because we AUV And Should we that of some quarter we you year in the reverse second expect expect mentioned about the positive headwind as the to AUV the cadence that? through quarter. outsized, in of and

Vic Grizzle

Rafe? what, to relative Outsized

Rafe Jadrosich

the To guidance? full-year

Vic Grizzle

sitting at today. couldn't say I

Chris Calzaretta

to on to in year, of the and about obviously our the we positive Yes, it's assume still rest back February of quarter first back I timing in kind at hard the expect the in it this call. just mix mean positive got mix really and guide you go the for we saw we as I have looking to related itself mix to for reverse was think side, again, for that XXXX. year, mix.

Rafe Jadrosich

you're tile quarter, on right. I ceiling the just first Has sellout think the improved that to to on then hear and that the interested seeing side some some of was And -- you the what drove color give the can that? you All retail of very home the center in on one a channel? think that quickly, restocking volume big saw, upside what you drivers in at channels?

Vic Grizzle

resetting big-box on of Well, retailers. one some going there's the at

then down they quickly. their bit then do on it's build a a Sometimes as of far levels as mystery why take up and so inventory they

that in reported particular dynamic a we've say big-box more retailer. with I occur. that's of one number activity first the the times, does As quarter would

with This throughout retail I inventory year rebuild example, pretty some again, on levels normally sale right customers do of of wouldn't then data, really behind our point activity outsized some for the getting a So, and resetting inventory we that. to large there, which that drove low, that. going on, is point work and

more practical I for answer application -- or about. activity think what of is that that's and the actual

Rafe Jadrosich

Good luck. thank Okay, you.

Vic Grizzle

Yes.

Operator

[Operator Adam & Associates. from Instructions] Baumgarten Zelman The next question comes from

Your line is now open.

Adam Baumgarten

quarter. Hey, for into April? Vic, you'd everyone. mentioned Did activity good continue that turned the bidding positive that morning

Vic Grizzle

we don't that I month. April have data until next won't get yet,

on to quarter. quarter, close we're but I much the answer not weight specifically. that it an to it So, going Again, We're going we're too keep eye it. on on keep a first the couldn't in eye putting second for

Adam Baumgarten

And on of total of you it. could what guys then program, COGS is put the gas, natural percentage topic got natural if just Okay, and us curious remind just in hedging your you the gas? when

Chris Calzaretta

sure. Yes,

our Mineral hopefully locks Fiber feel to Again, we entered quarter, Fiber. you into Mineral it energy XX% break we sorry, gas look mentioned so way part any nat the of out price that, exposure and XX% you're helpful COGS by costs that natural the our of about energy, as inputs a more pricing And the at settlements COGS total the than gas for Kind about. hedging So, the NYMEX of but we're locking. and of earlier there. don't talked -- towards the is can thinking that's of of get I about through our

Adam Baumgarten

assumed then the as And to question about cost input just in Is quarter. roughly overall way the there think still? on think I to it. that was same digits just inflation Got confirm, a last was the earlier guide. mid-single It

Chris Calzaretta

on year with nat year, costs. associated mid the single-digits bit how of our obviously, towards upon dynamics rest of inflation. out, lion's shakes heavily we inputs a weighted little depending Yes, Again, that share for but obviously, inputs material more on certainly see a the gas, the raw of there where variability,

Adam Baumgarten

Okay, got it. Thank you.

Chris Calzaretta

welcome. You're

Operator

Instructions] with Deutsche next [Operator from Ahlersmeyer comes question Joe The Bank.

now open. line is Your

Joe Ahlersmeyer

the Yes, thanks very much for question.

quarter early Just of last to of about the part you've the early talking the in think wanted it or last it? that part hedging, you're started on that point this quarter enough part it to clarify of this mentioned the Is quarter. was about starting you the earlier simplistic

Chris Calzaretta

QX. sorry. question, part Yes, Good early of

Joe Ahlersmeyer

year? a on mix channel there to But was a the And point. mix, Okay, death out at the to mix just looks it. like channel last unfavorable destocking this but mix beaten related favorable got know geographic lapping called year. think of you call out, did from in the prior I it's clarification I then don't quick unfavorable the saw kind a benefit been

Vic Grizzle

wouldn't year, But on the sold our particular. AUV don't on others. put last I say areas of that was was where destocking. would highest what first recall but Well, a were all stronger had year, I this we right, it quarter the based I that, particularly than last destocking, I the last disclosed in down products mean, were in quarter year

this of go period believe we comparisons as in its is driving is part is, and through so, transitory just of again, base we why will way mix, this work this And which year. the some

Joe Ahlersmeyer

Okay, much. thanks very

Operator

[Operator The with question comes John Instructions] UBS. Lovallo from next

Your line is now open.

John Lovallo

taking questions. for morning my and Good thank guys, you

volume, one, seem first it just Mineral that and question expectation go has to the the would outlook little mean, gotten a worse. quarter back-half Stephen's first being same. The I to on the the incrementally that Fiber imply remaining the expected wanted full-year than to I back better in bit

to So, that. And seeing if clarify that you mind are I wanted on changed just has so, that? what your

Vic Grizzle

we out, didn't with question the this the So, thing goodness in the Stephen's expect we right? retail point that that of come mention that's one year. to channel, that saw in is a we some which to and timing-related, will inventory first we John, quarter, for hold build is, whole the the wouldn't

the we quarter some in overall is So, that another question, Stephen's goodness mention inventory in timing-related build. first but is of its factor in equation, that's that didn't

John Lovallo

Got you.

more And digital that right. to initiative in a Fiber, soften for is potentially growth on guys all lever Okay, pull back than to expected? end Mineral were your on spending you then the if markets

Vic Grizzle

is room Well, tremendous investment. continue amount business. so and the that a growth getting we I of making a done that digital think contribution The to making traction there we're effort our around could work meaningful of the we've

structure balanced back-half the additional year so pull of don't we've we're, that. I cost appropriately have that. our rest So, in our could think, in continue for we made levers do uncertainty room the to that to we given the the like And that so outlook in again,

John Lovallo

Vic. you, thank it, Got

Vic Grizzle

bet. You

Operator

further no turn questions Grizzle like I to I at now remarks. time. would this to back Vic for conference closing show the

Vic Grizzle

today. we you very thank for end position of the At first were the say joining to we're a everybody into want different just we I you. the in conditions Thank ready last feel feel we're we're like the than tougher in we economic we're good in that that outlooking. quarter tougher conditions for And year. well-positioned and market We're position that to about outlooking. first perform quarter,

next you joining So, again to and today, for we'll look thank you quarter. talking forward to

Operator

today's for you Thank conference This concludes participating. call.

disconnect. now You Goodbye. may

Armstrong World Industries (AWI) 25 Apr 232023 Q1 Earnings call transcript