Armstrong World Industries Inc

Good day and thank you for standing by. Welcome to the Q3 2021 Armstrong World Industries, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. And if you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Teresa Womble, Director of Investor Relations. Please go ahead.

Thank you, and welcome everyone to our call this morning. Today we have Vic Grizzle, our CEO, Brian McNeil, our CFO, to discuss Armstrong World Industries' third quarter 2021 results, our rest of your outlook and progress on our growth initiatives. Our discussion of operating and financial performance will include non-GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of these measures with the most directly comparable GAAP measure is included in our press release and in the appendix of the presentation we issued this morning. Both are available on our investor relations website. During the call, we will be making forward-looking statements that represent the view we have of our financial and operational performance as of today's date, October 26, 2021. These statements involve risks and uncertainties that may differ materially from those expected or implied. We provide a detailed discussion of the risks and uncertainties in our SEC filings, including the 10Q filed earlier this morning. We take no obligation to update any forward-looking statement beyond what is required by applicable securities law. Now, for those of you following along with our presentation, please turn to slide four as I turn the call over to Vic.

Thanks, Theresa. Good morning, everyone, and thank you for joining our call today. This morning, we announced another quarter of recovery from the COVID impact and results of 2020. We delivered strong third-quarter top-line growth, up 19% versus 2020 results, with mineral fiber sales increasing 15% and architectural specialty sales improving 31%. Adjusted EBITDA of $99 million was 8% ahead of prior year results. We are pleased to have achieved these results against the backdrop of a choppy market recovery, increasing inflation, and supply chain disruptions throughout the construction industry. Unrelated to these challenges, We also experienced a rare manufacturing equipment failure causing lower than expected production rates in September, which Brian will discuss in greater detail in a moment. Despite these challenges and the rare production issue, we reaffirmed the midpoints of our full year 2021 guidance and expect to have a strong finish to the year. To that point, these continue to be unprecedented times. Inflation remains a strain on raw material, freight, labor, and energy costs throughout the construction industry. At AWI, we have moved proactively throughout the year to increase prices and stay ahead of these inflationary pressures. And consistent with our performance over the past decade, we have successfully stayed ahead of inflation. We recognize this is unique, and it's a testament to the strength of our industry-leading service model and the high-quality, innovative products we manufacture that allows us to earn those price increases in the marketplace. Specifically, within our mineral fiber segment, we reported third quarter AUV growth of 14%, which is the highest level we've achieved since we separated from the flooring business in 2016. And this growth was largely driven by like-for-like pricing improvements. And not unrelated to inflationary pressures, supply chains throughout the economy have also been under unprecedented pressure. Again, our teams throughout the organization have been on top of their game. They have remained agile and dedicated to limiting disruptions to our customers and partners. This is critical because of our best-in-class service model is an important component of our value proposition to our distributors and to the contractors who depend on them. Because of this importance, we set a high bar for our service performance. While many companies may track two or three service performance metrics, we track six as part of what we call our perfect order measure. These include order fill accuracy, on-time delivery, shipping damage, billing accuracy, product defects, and returns. And I can share with you with great satisfaction that this measure not only remained above our 90% threshold throughout 2021 for the mineral fiber segment in particular, but it has improved in the third quarter. So I'm proud of how our teams have executed to handle these unprecedented challenges internally to meet our customers' needs. Now, externally, these challenges have impacted our business in the form of project delays impacting both our mineral fiber and architectural specialty segments. Despite these challenges, mineral fiber sales volumes increased in the third quarter versus prior year on the strength of the R&R part of our business. That has more than offset the impact of these project delays and the lower new construction activity. Our sales rate per shipping day also showed sequential improvement in the quarter. In fact, September's sales rate per day eclipsed that of 2019, and the quarterly results for this metric has now improved sequentially for the last five quarters. From a profitability perspective, the mineral fiber segment generated strong gross margins compared to prior year reflecting positive like-for-like pricing, improved mix, and our ability to overcome the production headwind I mentioned earlier with other productivity efforts. And in fact, this was the best gross margin level since 3Q of 2019. Our wave joint venture delivered another strong quarter as they have maintained excellent pricing discipline to stay ahead of inflationary pressures. We're also pleased with the performance of one of the group's newest innovation called Simple Soffits. Now, like many of our innovations we've introduced, Simple Soffits drive efficiencies for our customers and for those who ultimately install our products. Soffit framing is a common design feature that requires a significant use of labor and materials on commercial construction jobs and has a variety of complexities based on interior design and the accommodation of HVAC systems. Now, given the pressures on labor, we realized creating savings in this area could be a significant value generator for our customers. What the team at Wave introduced are prefabricated soffit framing systems that are engineered using our automated design software to match the design specs and come prepackaged and easy to handle flat boxes. Because of their design, our simple soffit systems can be installed up to three times faster than traditional methods with less material and labor hours. Simple soffits are making a significant difference in terms of speed and costs on the sites where they have been used, including some high-profile projects such as the new PG&E headquarters in California, the Kansas City International Airport, And for hockey fans out there, the UBS Arena at Belmark Park, where the New York Islanders will drop the puck for the first time in mid-November. We're very excited about how this new innovative product has gained traction and the value it's creating for our customers. And the architectural specialty segment had a strong top-line quarter as well, and improving margin performance. In addition to the contributions from our 2020 acquisitions, sales and earnings from the organic business rebounded nicely from prior year lows. We've also successfully introduced price increases for these products, and that is helping address some of the inflationary pressures on this segment as well. New construction and major renovation activity improved, but was uneven due to project delays. Even with those challenges and our continued growth investments in this segment, architectural specialties EBITDA margin improved 350 basis points sequentially, and I expect these improvements to continue back above the 20% level. We remain optimistic about the 2022 and 2023 outlook for architectural specialties. Given the fact that we are on track to exit 2021 with a very strong water backlog and bidding activity remains robust. As new construction activity regains momentum, we expect sales growth to further accelerate in this segment. The broader industry indicators that we track also support our growing optimism for both the AS and the mineral fiber segments. as many of these have continued to improve or remained in positive territory in the third quarter. GDP forecasts remain above 5%. The architectural billing index ended September well into expansionary territory at 56.6, up from August reading of 55.6. Similar to the second quarter, Dodge data for both bidding and construction starts improved double digits. These are strong indicators for growth in 2022 and 2023, and with our recent investments, we are well positioned to capture additional growth as the market recovers. Now, with that, I'll turn the call over to Brian for a more detailed look at our financial performance. Brian?