Armstrong World Industries Inc

At this time, I would like to welcome everyone to the Q1 2025 Armstrong World Industries Incorporated earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star and the number one on your keypad. If you would like to withdraw your question, again, press star. star and the number one. It is now my pleasure to turn the call over to Theresa Womble, VP of Investor Relations and Corporate Communication. You may begin.

Thank you, Amy, and good morning, everyone. On today's call, Vic Grizzle, our CEO, and Chris Calzaretta, our CFO, will discuss Armstrong World Industries' first quarter 2025 results and rest of year outlook. We have provided a presentation to accompany these results that is available on the investors section of the Armstrong World Industries website. 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 the earnings press release and in the appendix of the presentation, both of which were issued this morning. During this 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, April 29, 2025. These statements involve risks and uncertainties that may differ materially from those implied or expected. We provide a detailed discussion of the risks and uncertainties in our SEC filings including the 10-K filed earlier this year. We undertake no obligation to update any forward-looking statement beyond what is required by applicable securities law. Now, I will turn the call to Vic.

Thank you, Theresa, and good morning, everyone, and thank you for joining our call today to discuss our first quarter 2025 results and our expectations for the rest of the year. Our first quarter was another quarter of record-setting sales and adjusted EBITDA for Armstrong, as we continue to execute our growth strategy well and improve our productivity and expand our capabilities into new market opportunities. In the first quarter, total company net sales increased 17% and adjusted EBITDA increased 16% with meaningful margin expansion in both of our segments. And in fact, it was the best Q1 margin performance in both segments since 2020. These results were a clear demonstration of the strength of our business model, the diversity of our end markets, as well as the strong execution culture we have here at Armstrong. Delivering these financial results in an environment of elevated uncertainty requires focus and agility to adjust to changing operating conditions and customer needs. And doing this while continuing to deliver industry-leading quality and service levels our customers have come to expect. Again, the agility and commitment to execution by our teams was on full display in the quarter. And as many of you have come to know, this is a hallmark of the organization we have here at Armstrong. So I want to take this opportunity and thank all of our employees for their tremendous efforts and their commitment to execution. Now, taking a closer look at the first quarter results in our mineral fiber segment, net sales increased 2%, while EPIDOT increased 7%. Sales growth for the segment was driven by a 7% increase in average unit value, or AUV, versus the prior year, which included favorability in both like-for-like pricing and product mix. This increase in AUV more than offset lower sales volumes, primarily driven by weather and lower foot traffic in our home center channel and predominantly in the southeast, where winter weather was particularly severe. In the mineral fiber segment, I'm pleased with the EBITDA margin performance, which expanded 180 basis points to 43%. This was the strongest first quarter margin performance since 2020 and our ninth consecutive quarter of year-over-year margin expansion. Again, AUV was a key driver of EBITDA growth and margin expansion in the quarter. Also notably in the quarter and a contributor to margin expansion was our manufacturing productivity, despite the softer volumes. This outcome reflects the multi-year long-term approach to investing in productivity that we practice here at Armstrong. This not only helps with our direct productivity, but it also enhances our consistency of our service and quality levels that distinguish us in the marketplace. One of the key indicators we track internally is what we call our perfect order measure that you have heard me mention in the past. This measure includes five areas of service and quality that represent a perfect order. from order to entry, order entry to customer receipt. And again, representing what a perfect order looks like in the eyes of our customer. This quarter, the measure was solidly ahead of our target and near historic highs. This has been a passion of ours and in times like these with high levels of uncertainty and risk for supply chain disruption, this is and will continue to be a critical differentiator for Armstrong. Overall, I'm pleased with the performance of the mineral fiber segment quarter. despite softer volume, delivering EBITDA growth, margin expansion, AUV growth, and manufacturing productivity, all while maintaining our high levels of quality and customer service. Now turning to the architectural specialty segment, where our results in the quarter were particularly strong and broad-based in both the organic and the inorganic sides of the business. This is clearly a demonstration of the advantage of having the broadest portfolio of solutions where we continue to leverage our scale and specification strength to sell more products into more spaces and drive profitable top line growth. For a decade now, we have averaged 20% top line growth in this segment. And with our strong start to the year, we expect to continue this pace of growth in 2025. Organically, the first quarter architectural specialty sales grew 11% from prior year's results. And our 2024 acquisitions, 3Form and Zaner, contributed another 47 percentage points of sales growth. Additionally, our order intake grew in the first quarter. Notably, both our sales and order intake spanned a wide range of product types and broad-based set of market verticals. In addition to the transportation vertical, we saw good project activity in office, retail, and education. And because of our industry-leading product portfolio, strong service levels and mostly U.S. manufacturing footprint, we believe we are well-positioned to continue to win. Along with strong top-line growth in the quarter, I am particularly pleased with the strong adjusted EBITDA growth and margin expansion performance in this segment as well. Architectural specialties adjusted EBITDA increased 94%, including organic EBITDA growth of 34%. And as important, the EBITDA margin for the segment expanded at both the organic and total segment level as we continue to improve our operating leverage. And in fact, this was the strongest first quarter architectural specialties adjusted EBITDA margin performance since 2020 and marks continued progress toward our goal of 20% EBITDA margin for this segment. It's also worth noting in the quarter the solid performance of our 2024 acquisitions. We are very pleased with how both 3Form and Zainer are performing and the mutual benefits we are seeing developing as we increase our collaboration and knowledge sharing. And frankly, I'm not surprised at how well this is going given that both these companies come with highly professional and skilled management teams who have the right mindset to collaborate and innovate with Armstrong to accelerate their growth. With 3Form, the collaboration across our sales teams has uncovered many opportunities to sell more products into more spaces, given ThreeForm's unique ability to create translucent solutions that use light and texture to enhance design opportunities for architects. And in addition, we have worked together with their teams to increase ThreeForm's operational efficiency and are already seeing benefits from these efforts. And at Zaner, as we noted last quarter, we significantly expanded our exterior metal design and fabrication capabilities and further deepened our presence in an attractive adjacency that complements our existing interior metal business. The strong market reputation of Zaner gives us early access to large complex projects, and we expect this will enhance our visibility to more selling opportunities for the interior spaces of these large projects, in addition to the new business opportunities on the exterior. And as we have stated, we estimate that this exterior metal adjacency Will add another billion dollars to the addressable market for our architectural specialty segment bringing its total addressable market to more than two and a half billion dollars we're excited to expand our presence in this adjacency and to continue our above market growth rate for years to come. Now, before turning the call over to Chris, let me take a moment to share how we're thinking about the market in light of the current and evolving tariff landscape. As we all know, this is a very fluid and uncertain set of dynamics that we will all have to navigate. First, it's worth repeating that our production and supply chain is predominantly U.S.-based, and the majority of our products sold into Canada and Mexico are covered under the USMCA trade agreement. In the limited areas where we see a direct impact on our costs, we expect to mitigate those impacts through negotiations, price actions, and through supply chain adjustments within our U.S. footprint. So for direct impacts of tariffs here at Armstrong, the impact is both minor and manageable. Beyond these minor impacts, we do believe the indirect benefit effects from high levels of uncertainty around these tariffs has the potential to dampen in-market activity. This, of course, is much more difficult to call given the varying impacts throughout the value chain. For Armstrong, the market impact is likely to come in the form of holding back and pausing on discretionary renovation work until there is more clarity on the way forward, much like we have seen in prior periods of market disruption and uncertainty. There may also be some disruptions in the construction supply chain that could impact project timelines. That said, in total, we don't see a meaningful impact from disruption in new construction activity in 2025 given the lag time on new construction projects. The ground level bidding activity in the market remains supportive at this time, as do the order rates through April. And the sentiment from our customer survey work remains positive, but understandably cautious given the uncertainty. Of course, we will remain vigilant as further disruptions from policy changes could create more project delays than we are seeing at the moment. Given what we know and its expected impacts, and with our controllables, namely pricing, productivity, and good cost management, we remain confident in our ability to navigate these conditions, and therefore, we are reaffirming our full-year guidance for 2025. So with that, let me pause and turn it over to Chris for more on our financials.