Armstrong World Industries, Inc. Q4 FY2025 earnings call

• Vic Grizzle notes it's his last earnings call as CEO, Mark Hershey to take over. 2025 was a record year with double-digit growth in key metrics. • Fourth quarter had softer results due to government shutdown impact on Mineral Fiber and project delays in Architectural Specialties. • Mineral Fiber AUV grew 6% with record EBITDA and margin. Architectural Specialties had 11% top line growth with strong order intake. • Operational excellence with perfect order measure at record high. Digital initiatives like PROJECTWORKS and Kanopi performing well. • Mark Hershey discusses innovation in energy-efficient buildings and data centers, and recent acquisitions like Eventscape.

Mineral Fiber: Fourth quarter sales grew 3% driven by 6% AUV growth but lower volumes; full year adjusted EBITDA margin was a record 43.5%. Architectural Specialties: Fourth quarter sales grew 11% but adjusted EBITDA decreased 3% due to project delays; full year organic sales grew 9% and organic adjusted EBITDA margin was ~19% with two quarters over 20%. Total company: Net sales increased 12% full year, adjusted EBITDA grew 14% with 70 basis points margin expansion.

• 2026 Mineral Fiber volume flat to up 1% with AUV growth ~6%. • AS organic growth high single-digit with inorganic contributions from acquisitions driving ~half of AS sales growth. Total company net sales growth 8%-10%. • Adjusted EBITDA growth 8%-12% with margin expansion in both segments. • Expect SG&A to increase modestly but as % of net sales to improve. • First half of 2026 expected to be more muted due to seasonality and weather events.

• Uncertainty around policy, interest rates, geopolitical events. • Potential impact of market conditions on Mineral Fiber volumes and Architectural Specialties project timings. • Integration challenges with recent acquisitions and impact on margins. • Seasonal and weather-related impacts on Mineral Fiber volume and sales.

Q: For 6% AUV growth in 2026, price and mix split and pricing power sustainability?

A: Historically AUV ranges 50-50, '25 had more price than mix, expecting to price ahead of inflation in '26.

Q: Strategic continuity under Mark's leadership?

A: Focus on innovation, growth initiatives, productivity, inorganic growth.

Q: Bids for office with higher values and product platform momentum?

A: Bids higher than inflation, breadth of product portfolio helps.

Q: Integration of recent deals and investments?

A: Continuum of integration to scale on Armstrong platform, driving revenue and operating leverage.

Q: Mineral Fiber input inflation and AUV expectation?

A: Input inflation mid-single-digit, AUV driven by innovation, service, quality.

Q: Government channel weakness recovery?

A: Saw bounce back in January, factored into outlook.

Q: Architectural Specialties organic growth pipeline and project delays impact?

A: Backlog growth with double-digit order intake, project delays in Q4 caused margin compression but expect recovery.

Q: Mineral Fiber volume growth path to 2%-4%?

A: Market recovery and growth initiatives contribution, moving towards 2%-4% range.

Q: Data centers and energy saving projects impact on growth and margins?

A: Both accretive to AUV, expect 60% incremental EBITDA contribution as they grow.

Q: Home center softness in Q4?

A: More of same destocking.

Q: Mineral Fiber volume comparison to pre-COVID and visibility?

A: Still below 2019 levels, model and triangulate for visibility.

Q: Innovation initiatives contribution growth in '25 and '26?

A: '25 had 1% contribution, '26 expects 0.5 point incremental from data centers and energy savings.

Q: AI impact on initiatives like Kanopi?

A: Positive, AI enhances functionality and specification excellence.

Q: Mineral Fiber outlook with softer first half and optimism?

A: Improved visibility, traction in growth initiatives, expected economic improvement driving renovation work.