Armstrong World Industries, Inc. 2026 Q3 Earnings Call

Please go ahead. Thank you, and welcome everyone to our call this morning.

On today's call, Mark Hershey, our CEO, and Chris Calzaretta, our CFO, will discuss Armstrong World Industries' third quarter 2026 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 includes non-GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of these measures with the most directly comparable GAAP measures is included in the earnings press release and in the appendix of the presentation we issued this morning. Both are available on our investor relations website. During this call, we will be making forward-looking statements that represent the view we have of our financial and operational performance and our expectations as of today's date, October 27, 2026.

These statements involve risks and uncertainties that may differ materially from those expected or implied. We provide a detailed discussion of these risks and uncertainties in our SEC filings, including those related to market conditions, inflationary pressures, and tariffs. We undertake no obligation to update any forward-looking statement beyond what is required by applicable securities law. Now, I will turn the call over to Mark.

Thank you, Theresa. Good morning, everyone, and thank you for joining us. We delivered another solid quarter at Armstrong, demonstrating the resilience of our businesses and continued progress in our growth platforms. I was particularly impressed by how our people, across a broad range of roles and responsibilities, united to respond to a rapidly changing cost environment while continuing to serve our customers and advance our growth initiatives. In the quarter, we delivered record third quarter sales and double-digit growth in both adjusted EBITDA and adjusted diluted EPS. Net sales increased 12%, adjusted EBITDA increased 11%, and adjusted diluted EPS increased 10%. This is strong revenue growth against a largely flat overall market, and importantly, both of our operating segments contributed to that performance and expanded adjusted EBITDA margins year-over-year.

I believe these results demonstrate two things clearly: Our growth strategy is working, and the underlying value creation model that has distinguished Armstrong for many years remains firmly intact. Mineral Fiber delivered solid AUV and positive volume growth, while Architectural Specialties produced exceptional organic growth across a broad range of offerings and product categories. At the same time, input costs accelerated rapidly during the quarter, particularly freight and raw materials. We also saw timing-related mix pressure in Mineral Fiber, as can occur from time to time in some of our lower AUV channels. Together, those factors dampened the margin expansion we would otherwise have expected from this level of revenue growth. Accordingly, we responded to the recent cost headwinds with the same discipline that has served Armstrong well through previous inflationary cycles: enhanced productivity, swift spending controls, optimized transportation, and market-based pricing.

Some of those benefits take time to flow through, particularly in our custom project-based Architectural Specialties businesses. We expect the impact of these dynamics to moderate as timing-related mix pressure normalizes and our mitigating actions take fuller effect. Our updated guidance now reflects these impacts. Taken together, the quarter showcases the resilience of our businesses, underlying strength of demand, and a continued traction of our strategic growth initiatives as we enter the final quarter of the year. Turning first to Mineral Fiber. Net sales increased 7%. AUV was the primary contributor to growth, driven principally by price together with a positive volume contribution. Notably, this was our third consecutive quarter of Mineral Fiber volume growth and the fifth of the past six quarters. While demand for our higher value WAVE products remained healthy and again outpaced other product categories, volume was particularly strong in several of our lower AUV channels.

Most notably in Canada, where customers accelerated purchases ahead of anticipated tariff actions affecting grid pricing. Because we sell a complete ceiling system, that grid activity in Canada also pulled through additional Mineral Fiber volume. We benefited from that timing-related grid activity in the quarter, as well as from strong data center growth to deliver a solid earnings performance, while at the same time responding appropriately to continued steel and tariff cost headwinds. Overall, we view the lower AUV channel strength in the quarter as a timing-related mix dynamic that reduced the margin benefit we would normally expect from this level of sales growth. That said, even with the unusual mix dynamic and the swift rise in freight and raw material costs, Mineral Fiber delivered 8% adjusted EBITDA growth and expanded adjusted EBITDA margin by 40 basis points to 44%.

I want to emphasize that point. In the face of the highest input cost inflation we've experienced since 2022, Mineral Fiber delivered a 44% adjusted EBITDA margin and expanded margin year over year. That is strong evidence of the durability of this business and the ability of our teams to respond to escalating inflation through productivity, cost controls, and other near-term mitigation actions. Our Mineral Fiber manufacturing teams were part of that effort and continued to execute well this quarter, setting an all-time record in plant reliability for the network and topping their record Q2 performance, while also keeping our perfect order fulfillment measure at high levels. Plant reliability, product quality, and dependable customer service are key enablers of our commercial performance and meaningful differentiators for Armstrong in the market, as we strive to support our loyal distributor and contractor customers with exceptional quality and service.

Turning to Architectural Specialties, net sales increased 22%, including impressive organic growth of 16%, the highest quarterly organic growth rate in the segment's history. Growth was broad-based across the AS portfolio, supported by multiple consecutive quarters of healthy demand and strong project activity in transportation, healthcare, education, and other commercial applications. I continue to be encouraged by our quoting and order intake rates and by the ability of our commercial teams to drive penetration broadly across the Architectural Specialties categories. Order intake in the quarter again increased at a double-digit rate, reflecting recent strong bidding activity and providing a healthy foundation as we finish 2026 and move into 2027. Adjusted EBITDA in this segment increased 25%, and adjusted EBITDA margin expanded 60 basis points to 19.4%.

That's a strong result given the rapid acceleration of freight costs during the quarter, together with heightened aluminum and steel inflation and tariffs affecting portions of the AS portfolio. As a reminder, particularly with respect to our custom Architectural Specialties work, project pricing remains in place until quotes expire or price escalators take effect. This can create a mitigation lag when inflation and input cost pressures accelerate rapidly. Across the AS portfolio, as we have done across the enterprise, disciplined mitigation measures are in place to reflect the new cost environment, including pricing and cost control actions initiated earlier this year. These efforts help to support the record organic growth and margin expansion achieved this quarter. This performance gives us even greater confidence in the segment's earnings potential as our actions become more fully reflected in the economics of recently quoted and future projects.

Recent acquisitions also contributed to revenue growth in the quarter. We remain focused on accelerating commercial adoption, realizing integration benefits, and using the Armstrong platform to help these businesses scale. The strategic rationale remains compelling. Each portfolio addition expands the range of materials and capabilities we can bring to a project, increases the number of specifications we can pursue, and allows us to capture more value by solving a broader set of customer needs. We continue to see a clear path toward our 20% Architectural Specialties adjusted EBITDA margin target as we further integrate and scale these recent acquisitions. The performance of Architectural Specialties this quarter also illustrates the broader evolution underway at Armstrong. We are increasingly bringing Mineral Fiber, metal, wood, felt, structural systems, and design capabilities together to help architects, designers, and contractors execute more complex projects. That breadth matters. It allows us to engage earlier, compete for more specifications, and offer customers a more integrated solution from design through installation.

Especially in a market where complexity, schedule certainty, and execution matter, our combination of portfolio breadth, technical expertise, project management, and service is increasingly differentiated within our industry. Our recently completed work at Seattle Tacoma International Airport's Terminal C showcases our expanding ability to bring complex, high-design spaces to life. Working hand-in-hand with the architects over several years, our design team helped realize a striking timber-clad canopy and column structure inspired by Pacific Northwest forests, anchoring a four-story marketplace and grand staircase.

The tree at Terminal C, which is pictured on the cover page of our earnings presentation today, combines four distinct wood products with metal ceiling and Mineral Fiber solutions and demonstrates how our broad portfolio and collaborative design expertise uniquely position Armstrong to deliver on ambitious architectural visions. This is exactly the kind of opportunity our expanded portfolio is creating. We are not simply participating in more categories. We are helping customers solve more of the ceiling and wall scope through one trusted partner. With that, I will turn the call over to Chris for a closer look at our financial results and updated full-year outlook.