Armstrong World Industries, Inc. Q2 FY2026 earnings call

Overall Company Performance

• Record net sales and adjusted EBITDA in Q2 2026, with 11% total net sales growth, 8% adjusted EBITDA growth, and 13% adjusted diluted earnings per share growth versus prior year. Results were modestly ahead of management expectations, achieved in continued flattish market conditions similar to Q1 2026.
• Consolidated organic adjusted EBITDA margin was 35.9% in Q2 2026, reflecting strong profitability while continuing to invest in growth initiatives.

Growth Initiatives

• Digital platforms: Canopy online selling platform continues to scale, serve underserved small business and multi-facility enterprise customers, and improve profitability. Project Works automated design service strengthens specification win rates, addresses customer needs for efficiency amid constrained labor and compressed project timelines, and grows AUV and sales volume.
• Product innovation focused on built environment megatrends: TempLock energy-saving ceiling tiles have more than doubled their project pipeline since the end of Q1, driven by growing demand for energy efficiency amid rising electricity costs and grid reliability concerns. Expanded data center product portfolio (including structural grid and containment solutions from the Wave joint venture) saw year-to-date 2026 wins grow more than 50% versus 2025.

Acquisition and Portfolio Strategy

• 15 acquisitions have been completed in the AS segment, expanding the addressable market beyond traditional ceiling products. The first combined Armstrong-branded showroom at Neocon 2026 showcased the full breadth of mineral fiber and AS solutions, receiving positive feedback from architects and designers and highlighting the synergies between the two segments.
• Integration of recent acquisitions is progressing as planned, with a focus on leveraging early project access from acquired design-focused businesses to drive pull-through of the full Armstrong product portfolio.

Capital Allocation

• The board approved an $800 million expansion of the share repurchase program, extending it through 2029. Year-to-date 2026, the company has paid $30 million in dividends and repurchased $135 million in shares, executing on its core capital priorities: organic business investment, strategic acquisitions, and returning value to shareholders.

1. Mineral Fiber Segment: Net sales increased 8% year-over-year, driven by 6% average unit value (AUV) growth from both price and product mix, and 2% volume growth. Adjusted EBITDA grew 7% year-over-year, with an adjusted EBITDA margin of 44.7%, contributing approximately 55% of total company net sales (calculated based on total 11% overall sales growth). Volume growth was positive for the fourth quarter out of the last five, marking the highest quarterly growth rate since early 2023. 2. Architectural Specialties (AS) Segment: Net sales grew 17% year-over-year, consisting of 9% organic growth across most product categories plus incremental contributions from recent acquisitions (Eventscape, Parallel, Geometric). Adjusted EBITDA increased 10% year-over-year, with an adjusted EBITDA margin of 20.4% (21.4% on an organic basis), which is a meaningful sequential improvement over Q1 2026 and exceeded the full-year 20% margin target. The segment contributed approximately 45% of total company net sales. Q2 2026 order intake grew at a double-digit rate for the fourth consecutive quarter, with particular strength in transportation and education verticals.

• Total company full-year 2026 net sales growth guidance raised to 9-11%, up from the prior 8-10% range. Approximately two-thirds of the midpoint increase comes from stronger-than-expected AS performance, with the remaining one-third from better mineral fiber results. Market conditions are expected to remain consistent with the first half of the year.
• Mineral fiber full-year net sales growth guidance raised to approximately 7%, consisting of ~1% volume growth and ~6% AUV growth. The full-year adjusted EBITDA margin guidance remains approximately 44%, which would be a segment record and the fourth consecutive year of margin expansion.
• AS full-year net sales growth guidance raised to 15-17% year-over-year. Full-year adjusted EBITDA margin guidance is approximately 19% for the total segment, with organic AS adjusted EBITDA margin guidance raised slightly to approximately 20%.
• Total company adjusted EBITDA growth guidance midpoint raised to 9-12%, up from the prior 8-12% range. Adjusted diluted net earnings per share growth guidance raised to 12-15%, up from the prior 10-14% range.
• Adjusted free cash flow growth guidance raised to 10-14%, up from the prior 9-14% range. Guidance for total company SG&A margin remains ~20% for the full year, in line with initial expectations, with recent acquisitions temporarily pressuring the margin during integration.

• Ongoing macroeconomic uncertainty has kept overall underlying market conditions muted, despite slight improvement from 2025.
• Input cost inflation headwinds persist, with higher-than-expected freight inflation (driven by carrier labor shortages and industry consolidation) expected to reach mid-teens for the full year. Raw material and energy inflation are expected to be low single-digit, putting full-year total input cost inflation at mid-single digits.
• Recent acquisitions are expected to be dilutive to the AS segment's full-year adjusted EBITDA margin as integration progresses, consistent with prior expectations.

Q: Susan McClary (Goldman Sachs) asked for more detail on strong double-digit order intake in the AS segment, how it breaks down across verticals, and what it implies for H2 2026 and beyond. / A: Mark Hershey confirmed this is the fourth consecutive quarter of double-digit order intake for AS, building a strong project pipeline that supports the H2 2026 outlook and provides early visibility into 2027. The growth is broad-based across new construction, renovation projects, multiple verticals (including transportation, office, healthcare, education) and all AS product categories, with no overconcentration in any single area.

Q: Tomo Sano (JP Morgan) asked what synergy levers and integration KPIs drive the strategic value of adding recent AS acquisitions like Eventscape to the Armstrong platform. / A: Mark Hershey explained that acquired businesses like Eventscape and Zainer gain early access to projects at the design stage, earlier than Armstrong's traditional access. The core synergy KPI is transferring that early project insight to the rest of the Armstrong portfolio, enabling pull-through of multiple additional solutions (including mineral fiber) that would not have been captured otherwise. Chris Calzaretta added that the company also monitors monthly performance against the original financial business case for each acquisition.

Q: Keith Hughes (Truist) asked what products Armstrong offers for data centers and if TempLock has applications in this vertical. / A: Mark Hershey explained that Armstrong serves both front-of-house (office/administrative space) and back-of-house (compute space) in data centers. Front-of-house uses traditional mineral fiber tiles (including high-end SWAT products) and acoustical grid. Back-of-house uses new heavy-duty structural grid and containment solutions from the Wave joint venture, plus gasketed or custom DataZone mineral fiber tiles. He confirmed that TempLock is actively being marketed to data center clients, as its energy-saving properties align with the high cooling demand of these facilities, and it carries additional value propositions like tax incentive eligibility.

Q: Rafe Jadrusich (Bank of America) asked what drove the upward guidance revision, how much came from Q2 outperformance versus stronger H2 trends, and what is driving SG&A increases. / A: Mark Hershey stated the guidance increase is almost entirely driven by better-than-expected Q2 performance, with H2 market conditions expected to remain consistent with prior forecasts. Chris Calzaretta added that two-thirds of the sales midpoint increase comes from AS, one-third from mineral fiber. Half of the Q2 SG&A increase came from recent acquisitions, with the remainder from growth-focused sales and innovation investments and higher incentive comp from outperforming internal targets. Full-year SG&A margin is still expected to hit the initial 20% target, consistent with prior plans.