ARMSTRONG WORLD INDUSTRIES INC Q3 FY2024 earnings call

• Armstrong delivered strong third quarter results with record sales and earnings growth, enabling upward revision of full-year 2024 guidance. • Teams executed well despite muted market conditions and hurricanes. • Mineral Fiber segment performed well with 3% net sales growth, 8% adjusted EBITDA growth, and 44% margin. • Architectural Specialty segment had strong growth driven by acquisitions and organic sales, with adjusted EBITDA margin above 20%. • Highlighted product innovation like TEMPLOK energy-saving ceiling products and low embodied carbon ceilings addressing energy efficiency trends.

Mineral Fiber segment: Net sales increased 3% in the quarter, driven by favorable AUV of 4%, partially offset by modestly lower sales volumes. Adjusted EBITDA rose 8% and adjusted EBITDA margin reached almost 44%, marking the seventh consecutive quarter of year-over-year adjusted EBITDA margin expansion. Architectural Specialty segment: Net sales were up 32%, accelerated by acquisitions of 3form and BOK Modern, with organic net sales growth of 7%. Adjusted EBITDA increased 27% and adjusted EBITDA margins were above 20%.

• Increased full-year 2024 guidance for adjusted EBITDA (12%-14% growth), adjusted diluted net earnings per share (16%-17% growth), and adjusted free cash flow (10%-14% growth). • Tightened full-year sales outlook range to 10%-11% growth. • Confident in finishing 2024 strong and entering 2025 with positive momentum.

• Forward-looking statements involve risks and uncertainties that may differ materially from expectations, detailed in SEC filings. • Hurricanes impacted some areas but operations were managed with minimal interruption.

Q: Thinking about Mineral Fiber volume growth, given stabilizing markets and green shoots in end markets, how to get back to longer-term volume outlook?

A: Market has stabilized, building blocks for 2% - 4% volume range are intact. Growth initiatives and energy savings products provide tailwinds. Rate and pace depend on uncertainty clearing.

Q: Input costs in Mineral Fiber, outlook for fourth quarter and 2025?

A: Fourth quarter expected to continue low single-digit deflation on inputs. In 2025, modest inflation expected on contracted raw materials, but limited variability on raw material inputs.

Q: Organic growth on Architectural Specialties, what's driving it and implication for Mineral Fiber volume?

A: Organic growth is broad-based across portfolio, not solely tied to airport projects. Mineral Fiber volume expected to be flattish in fourth quarter.

Q: AUV in Mineral Fiber, expectation for fourth quarter acceleration?

A: More contribution from mix side in fourth quarter versus third quarter, with similar like-for-like pricing but more mix contribution.

Q: SG&A in Mineral Fiber, trend into fourth quarter and 2025?

A: SG&A in fourth quarter expected to moderate versus Q3. In 2025, aim to get SG&A as percentage of sales below 20% and leverage investments for operating leverage.

Q: Mineral Fiber markets outperformed and underperformed in third quarter, and shift outlook?

A: Office market continued softness, while healthcare, education, transportation, and data centers were positive. Office market showing signs of stabilization.

Q: Mix impact in 3Q on AUV, driver and retail strength?

A: Mix impact nearly all from channel mix driven by retail. Retail strength due to being awarded new stores at big box customers based on good service.

Q: Manufacturing productivity in Mineral Fiber, expansion drivers?

A: Fundamentally due to plants running well, record plant reliability. Also due to initiatives around scrap reduction and quality.

Q: WAVE acquisition in data center space, strategy and approach?

A: Data center space is emerging with opportunity. Approach is specification driven, using ProjectWorks tool for automation.

Q: Market recovery into 2025, thoughts on second half 2025 growth?

A: New construction activity in 2024 positive, tailwind in second half 2025 from 2024 new construction starts. Discretionary renovation activity dependent on economic factors.

Q: Margin expansion in Mineral Fiber into 2025, cadence?

A: Continued pricing execution, manufacturing productivity in plants, and disciplined investment decisions to drive ongoing margin expansion.