Q1 2024 Armstrong World Industries Inc Earnings Call

Operator: Thank you for standing by, and welcome to the first quarter 2024 Armstrong World Industries earnings conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by and welcome to the first quarter 2020 for Armstrong World Industries Earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press.

Operator: 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Theresa Womble, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Operator: <unk> followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you I would now like to turn the call over to Theresa Womble.

Theresa Womble: <unk> President of Investor Relations and corporate Communications. Please go ahead.

Theresa Womble: Thank you and welcome everyone to our call this morning. On today's call, Vic Grizzle, our CEO, and Chris Calzaretta, our CFO, will discuss Armstrong World Industries' first quarter results and the rest of your outlook. To accompany these remarks, we have provided a presentation that is available in 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 measures is included in the earnings press release and in the appendix of the presentation we issued this morning.

Theresa Womble: Thank you and welcome everyone to our call. This morning on todays call Victor it'll our CEO and Chris <unk>, Our CFO will discuss Armstrong World Industries' first quarter results and rest of year outlook to accompany these remarks, we have provided a presentation that is available on the inverse.

Theresa Womble: Esters section of the Armstrong World Industries website.

Theresa Womble: Our discussion of operating and financial performance will include non-GAAP financial measures within the meaning of SEC regulation G.

Theresa Womble: 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 of these are on our Investor Relations website.

Theresa Womble: Both of these are on our investor relations website. During this call, we will be making forward-looking statements that represent our views of our financial and operational performance as of today's date, April 30, 2024. 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 the 10Q filed earlier this morning. We undertake no obligation to update any forward-looking statement beyond what is required by applicable both securities law. Now I will turn the call to Vic.

Vic: During this call we will be making forward looking statements that represent the views we have of our financial and operational performance as of today's date April 30th Twenty-twenty for these.

Vic: These statements involve risks and uncertainties that may differ materially from those expected or implied.

Theresa Womble: We provide a detailed discussion of these risks and uncertainties in our SEC filings, including the 10-Q filed earlier. This morning, we undertake no obligation to update any forward looking statement beyond what is required by applicable both securities law now I will turn the call to Vic.

Victor D. Grizzle: Thank you, Theresa, and good morning, and thank you all for joining our call today. We're pleased to report record-setting first-quarter financial results, a continuation of the momentum from last year into 2024. We're also excited to share more about the recently announced acquisition of 3FORM within our Architectural Specialties segment, as well as the continued traction from our key growth initiatives, which continues to help offset weaker market conditions. And it's important to acknowledge our ability to execute on all of these could not be possible without the focus and dedication of our nearly 3100 employees. So, thanks to the entire Armstrong team.

Vic: Thank you Theresa and good morning, and thank you all for joining our call today. We're pleased to report record setting first quarter financial results a continuation of the momentum from last year into 2024.

Victor D. Grizzle: We're also excited to share more about the recently announced acquisition of three form within our architectural specialties segment.

Victor D. Grizzle: As well as the continued traction from our key growth initiatives, which continues to help offset weaker market conditions.

Victor D. Grizzle: And it's important to acknowledge our ability to execute on all of these could not be possible without the focus and dedication of our nearly 3100 employees. So thanks to the entire Armstrong team.

Victor D. Grizzle: Now starting at the total company level, we reported a 5% increase in net sales compared to the first quarter of 2023 and adjusted EBITDA growth of 16% with 300 basis points of adjusted EBITDA margin expansion. Adjusted diluted earnings per share increased 23 percent, and adjusted free cash flow rose 46 percent from the prior year. Each of these, net sales, adjusted EBITDA, adjusted diluted EPS, and adjusted free cash flow, all were at record levels for our first quarter.

Victor D. Grizzle: Starting at the total company level, we reported a 5% increase in net sales compared to first quarter of 2023, and adjusted EBITDA growth of 16% with 300 basis points of adjusted EBITDA margin expansion.

Victor D. Grizzle: Adjusted diluted earnings per share increased 23% and adjusted free cash flow rose, 46% from the prior year.

Victor D. Grizzle: Each of these that sales adjusted EBITDA adjusted diluted EPS and adjusted free cash flow all were at record levels for our first quarter.

Victor D. Grizzle: Within our mineral fiber segment, first quarter sales increased 5% year over year, driven by strong AUV performance that more than offset lower volume. Our solid AUV performance of 8% represented a balance between favorable like-for-like price and favorable mix. The mix improvement in the quarter was largely driven by lower volumes and our lower AUV home center channel, as compared to the build of inventory in the prior year.

Victor D. Grizzle: Within our mineral fiber segment first quarter sales increased 5% year over year, driven by strong <unk> performance.

Victor D. Grizzle: More than offset lower volumes.

Victor D. Grizzle: Our solid <unk> performance of the 8% represented a balance between favorable like for like price and favorable mix the.

Victor D. Grizzle: The mix improvement in the quarter was largely driven by lower volumes in our lower AUR The home Center channel.

Victor D. Grizzle: As compared to the build of inventory in the prior year.

Victor D. Grizzle: Mineral fiber sales also benefited from our digital growth initiatives, canopy, and project work. Canopy continued to contribute year-over-year volume growth, while Project Works continued to gain traction with architects, designers, and contractors. Sales from these growth initiatives largely offset a modest headwind from market softness. The strong mineral fiber AUV performance in the quarter, coupled with solid earnings from our wave joint venture and lower input costs, resulted in an 18% increase in mineral fiber EBITDA, an EBITDA margin of 41%, with 450 basis points of margin expansion.

Victor D. Grizzle: Mineral fiber sales also benefited from our digital growth initiatives canopy in project works canopy continue to contribute year over year volume growth. While project works continue to gain traction with architects designers and contractors.

Victor D. Grizzle: <unk> from these growth initiatives, largely offset a modest headwind from market softness.

Victor D. Grizzle: <unk> mineral fiber <unk> performance in the quarter, coupled with solid earnings from our wave joint venture and lower input costs resulted in an 18% increase in mineral fiber EBITDA and EBITDA margin of 41% with 450 basis points of margin expansion.

Victor D. Grizzle: I'm pleased with these results as they reflect a high level of performance and execution by our team. This includes our consistent and steady productivity efforts, our disciplined commercial execution, and our ongoing product and process innovation. All of these factors are critical to Armstrong consistently providing our customers with best-in-class service levels and product innovation that differentiates what we provide customers versus our competitors. Another contributing factor to our mineral fiber results that's important to call out was the continued performance of our manufacturing plant and specifically the quality and service levels we achieved in a quarter.

Victor D. Grizzle: I'm pleased with these results as they reflect the high level of performance and execution by our teams. This includes our consistent and steady productivity efforts, our disciplined commercial execution and our ongoing product and process innovation.

Victor D. Grizzle: All of these factors are critical to Armstrong consistently providing our customers with best in class service levels and product innovation that distinguish what we provide customers versus our competitors.

Victor D. Grizzle: Another contributing factor to our mineral fiber results. That's important to call out was the continued performance of our manufacturing plants and specifically the quality and service levels, we achieved in the quarter.

Victor D. Grizzle: As I've mentioned before, we track an index of five key measures of service and quality that are critically important to our customers, which feeds a single metric we call the perfect order measure. This is a tough measure to hold ourselves to as we strive for perfection on every single order to our customers. This measure includes order accuracy, on-time delivery, and shipping damage.

Victor D. Grizzle: As I've mentioned before we track an index of five key measures of service and quality that are critically important to our customer which feeds a single metric we call the perfect order measure.

Victor D. Grizzle: This was a tough measure to hold ourselves to as we strive for perfection on every single order to our customers.

Victor D. Grizzle: This measure includes order accuracy on time delivery shipping damage.

Victor D. Grizzle: Product defect and billing accuracy and this quarter. The measure was near record levels and is just another piece of the total customer experience, serving as an important differentiator versus our competition.

Victor D. Grizzle: And this quarter, the measure was near record levels and is just another piece of the total customer experience serving as an important differentiator versus our competition. So overall, an outstanding quarter on our mineral fiber cycle. Now turning to our architectural specialty segment, net sales increased 6%, and EBITDA grew by 4%. In the quarter, we experienced some choppiness in the demand pattern, which can happen from time to time given the project nature of this business.

Victor D. Grizzle: So overall, an outstanding quarter on our mineral fiber segment.

Victor D. Grizzle: Now turning to our architectural specialty segment net sales increased 6% and EBITDA grew by 4%.

Victor D. Grizzle: In the quarter, we experienced some choppiness in the demand pattern, which can happen from time to time, given the project nature of this business.

Victor D. Grizzle: However, we continue to see an increase in activity related to transportation projects as a result of the government infrastructure bill. We expect this activity to continue in the coming quarters and possibly provide a three to five-year tailwind to demand for our specialties business. However, shifting project timelines for these large, complex projects can lead to choppy sales patterns quarter to quarter, as we experienced in the first quarter.

Victor D. Grizzle: However, we continue to see an increase in activity related to transportation projects as a result of the government infrastructure Bill.

Victor D. Grizzle: We expect this activity to continue in the coming quarters, and possibly provide a three to five year tailwind to demand for our specialties business.

Victor D. Grizzle: Shifting project timelines for these large complex projects, however, can lead to choppy sales patterns quarter to quarter as we experienced in the first quarter.

Victor D. Grizzle: Our order intake continued to be positive in the quarter, and we remain confident in our ability to grow faster than the market in the specialties category. Now, let me turn to the exciting news that we announced yesterday, the acquisition of three... 3FORM is a well-established category leader and represents the largest business we've acquired to date. And we're excited to welcome 3FORM's almost 400 employees to Armstrong. 3FORM is a highly respected brand and design leader in translucent resins and glass used in a wide range of interior applications. Their products are highly specified and can be found in almost any building across a wide range of market verticals. Freeform has deep expertise using color, texture, and light to truly elevate the design of a space.

Victor D. Grizzle: Our order intake continued to be positive in the quarter and we remain confident in our ability to grow faster than the market and the specialties category.

Victor D. Grizzle: Now, let me turn to the exciting news that we announced yesterday the acquisition of three for three.

Victor D. Grizzle: <unk> is a well established category leader and represents the largest business. We've acquired to date and we're excited to welcome three forms almost 400 employees to Armstrong.

Victor D. Grizzle: <unk> is a highly respected brand and design leader and translucent resins and glass used in a wide range of interior applications. Their products are highly specified and can be found at almost any building across a wide range of market verticals.

Victor D. Grizzle: <unk> has deep expertise using color texture and light to truly elevate the design of our space. Their products are an important design trends centered on occupant wellbeing and bringing the natural light indoors.

Victor D. Grizzle: Their products are on important design trends, centered on occupant well-being and bringing natural light indoors. With 3FORM and the multiple acquisitions we've completed, we continue to strengthen our position in the architectural specialties category, enabling access to more designers, broadening our specifiable product offering, and ultimately selling it to more spaces within commercial buildings. As we've proven, we have a unique ability to use the strength of the Armstrong platform to grow and unlock additional value from the companies we acquire. And we're excited to do the same with 3FORM.

Victor D. Grizzle: With reform and the multiple acquisitions, we've completed we continue to strengthen our position in the architectural specialties category, enabling access to more designers broadening our specifiable product offering and ultimately selling into more spaces within commercial buildings as we've proven we have a unique.

Victor D. Grizzle: Ability to use the strength of the Armstrong platform to grow and unlock additional value from the companies, we acquire and we're excited to do the same with three form.

Victor D. Grizzle: With this acquisition and coupled with our successful organic penetration within this category, we're well on our way to growing this segment to over a half a billion dollars in sales. Now I'll pause and turn the call over to Chris for a closer look at the financial results. Thanks, Bec, and good morning to everyone on the call.

Victor D. Grizzle: With this acquisition and coupled with our successful organic penetration within this category, we are well on our way to grow this segment to over a half a billion dollars in sales.

Victor D. Grizzle: Now I'll pause and turn the call over to Chris for a closer look at the financial results.

Chris: Thanks, Vic and good morning to everyone on the call as a reminder, throughout my remarks, I'll be referring to the slides available on our website and slide three which details our basis of presentation.

Christopher P. Calzaretta: As a reminder, throughout my remarks, I'll be referring to the slides available on our website and slide three, which details our basis of presentation. Beginning on slide seven, we discuss our first quarter mineral fiber segment. Mineral fiber sales grew 5% in the quarter, driven by AUV of 8%, partially offset by lower volumes of 3%.

Christopher P. Calzaretta: Beginning on slide seven we discuss our first quarter mineral fiber segment results mineral fiber sales grew 5% in the quarter driven by <unk> of 8%, partially offset by lower volumes of 3%.

Christopher P. Calzaretta: First quarter AUV was driven by both favorable like-for-like pricing and favorable mix. We continued to realize prices in line with our expectations in the quarter, and the favorable mix was largely driven by channel mix dynamics, as we lapped prior year inventory level increases in our home center channel that did not repeat in the current year quarter. This also drove the decrease in mineral fiber volume.

Christopher P. Calzaretta: First quarter AEP was driven by both favorable like for like pricing and favorable mix. We continued to realize price in line with our expectations in the quarter and the favorable mix was largely driven by channel mix dynamics as we lapped prior year inventory level increases in our home center channel that did not repeat in the current year quarter.

Christopher P. Calzaretta: Also drove the decrease in mineral fiber volumes.

Christopher P. Calzaretta: In addition, in the quarter, our initiatives delivered positive volume, which largely offset soft market conditions as compared to the prior year quarter. Mineral fiber segment adjusted EBITDA grew by $15 million, or 18%, and adjusted EBITDA margin expanded by 450 basis points to 41%. The main drivers of adjusted EBITDA margin expansion were the fall through of AUV and a solid contribution from way of equity earnings. Wave equity earnings grew $7 million versus the prior year, driven by higher volumes and margin improvements.

Christopher P. Calzaretta: In addition in the quarter, our initiatives delivered positive volume, which largely offset soft market conditions as compared to the prior year quarter.

Christopher P. Calzaretta: Mineral fiber segment, adjusted EBITDA grew by $15 million or 18% and adjusted EBITDA margin expanded by 450 basis points to 41%.

Christopher P. Calzaretta: The main drivers of adjusted EBITA margin expansion, where the fall through of AAV and a solid contribution from wave equity earnings.

Christopher P. Calzaretta: Wave equity earnings grew $7 million versus the prior year, driven by higher volumes and margin improvement.

Christopher P. Calzaretta: We also saw lower mineral fiber input costs, driven primarily by freight and energy, specifically natural gas, and to a lesser extent favorable inventory valuation timing versus the prior year period. However, these lower input costs were offset by an increase in SG&A expenses.

Christopher P. Calzaretta: We also saw lower mineral fiber input costs, driven primarily by frightened energy, specifically natural gas and to a lesser extent favorable inventory valuation timing versus the prior year period.

Christopher P. Calzaretta: These lower input costs were offset by an increase in SG&A expenses.

Christopher P. Calzaretta: On slide 8, we discussed our Architectural Specialties, or AS, segment results. Sales growth of 6% in the quarter was driven primarily by contributions from our 2023 acquisition of Boke Modern and continued strength in our metal category. However, despite contributions from some larger transportation projects that helped support mid-single-digit sales growth, shifting project timelines and delays drove uneven demand in the segment during the quarter.

Christopher P. Calzaretta: On slide eight we discuss our architectural specialties or segment results sales growth of 6% in the quarter was driven primarily by contributions from our 2023 acquisition of both modern and continued strength of our metal category.

Christopher P. Calzaretta: Despite contributions from some larger transportation projects that helps support mid single digit sales growth shifting project timelines and delays drove uneven demand in this segment during the quarter. This choppiness is not unusual for the project based businesses and a S.

Christopher P. Calzaretta: This choppiness is not unusual for the project-based businesses in AF. Adjusted EBITDA margin compressed by 20 basis points in the quarter while margins were pressured due to lumpy manufacturing costs and selling investment. We remain focused on margin expansion in the segment, and as we have previously mentioned, we remain committed to returning to our goal of a greater than 20% EBITDA margin level in the AS business. In fact, on an organic basis for the full year 2024, we still expect to expand EBITDA margins in this segment.

Christopher P. Calzaretta: Adjusted EBITDA margin compressed by 20 basis points in the quarter, while margins were pressured due to lumpy manufacturing costs and selling investments. We remain focused on margin expansion in this segment and as we have previously mentioned, we remain committed to returning to our goal of a greater than 20% EBITDA margin level in the us business.

Christopher P. Calzaretta: In fact on an organic basis for the full year 2024, we still expect to expand EBITDA margins in this segment.

Christopher P. Calzaretta: As we continue to monitor project timelines and backlog, we remain encouraged by the activities surrounding the transportation vertical. And, as Vic noted, we're excited to add three forms to the AIS segment. Their financials will be included in our consolidated results beginning in the second quarter of 2024. I'll comment on the three forms' impact on our 2024 outlook in just a few minutes.

Christopher P. Calzaretta: As we continue to monitor project timeline timelines in backlog, we remain encouraged by the activity surrounding the transportation vertical.

Christopher P. Calzaretta: And as Vic noted we're excited to add three forms of the <unk> segment. Their financials will be included in our consolidated results beginning in the second quarter of 2024.

Christopher P. Calzaretta: I'll comment on three forms impacts to our 2024 outlook in just a few minutes.

Christopher P. Calzaretta: Slide nine highlights our first quarter consolidated company metrics. We grew adjusted EBITDA by 16% and expanded margins 300 basis points versus the prior year period, driven by AUV fall through to EBITDA and solid wave equity earnings. Adjusted diluted earnings per share increased 23% and adjusted free cash flow increased 46% versus the prior year period.

Christopher P. Calzaretta: Slide nine highlights our first quarter consolidated company metrics, we grew adjusted EBITDA by 16% and expanded margins 300 basis points versus the prior year period, driven by AAV fall through to EBITDA and solid wave equity earnings.

Christopher P. Calzaretta: Adjusted diluted earnings per share increased 23% and adjusted free cash flow increased 46% versus the prior year period.

Christopher P. Calzaretta: Our total company adjusted EBITDA margin of 33.9% marks a solid start to the year and, in fact, was our best first quarter margin performance since Q1 of 2020 prior to any significant pandemic-related impacts. I-10 shows our year-to-date adjusted free cash flow performance versus the prior year. The 46% increase was driven primarily by higher cash earnings and lower CapEx, which was partially offset by unfavorable working capital impacts.

Christopher P. Calzaretta: Our total company adjusted EBITDA margin of 33, 9% Mark a solid start to the year and in fact was our best first quarter margin performance since Q1 of 2020 prior to any significant pandemic related impacts.

Christopher P. Calzaretta: Slide 10 shows our year to date adjusted free cash flow performance versus the prior year.

Christopher P. Calzaretta: The 46% increase was driven primarily by higher cash earnings and lower Capex, which was partially offset by unfavorable working capital impacts.

Christopher P. Calzaretta: We continue to be pleased with our ability to deliver strong, adjusted, free cash flow growth and remain focused on driving profitability, which fuels our cash generation. As we mentioned on our February call, earlier this year, we entered into a strategic partnership and made a $6 million equity investment in Overcast Innovations with McKinstry, an innovative, leading construction and energy services company for a 19.5% ownership interest. Our portion of Overcast's results is recorded within our unallocated corporate segment.

Christopher P. Calzaretta: We continue to be pleased with our ability to deliver strong adjusted free cash flow growth and remain focused on driving profitability, which fuels our cash generation.

Christopher P. Calzaretta: As we mentioned on our February call earlier. This year, we entered into a strategic partnership and made a $6 million equity investment and overcast innovations with mckinstry and innovative leading construction and energy services company for a 19, 5% ownership interest.

Christopher P. Calzaretta: Our portion of <unk> results are recorded within our unallocated corporate segment.

Christopher P. Calzaretta: And just yesterday, we announced our acquisition of 3FORM for a purchase price of $95 million, which reflects a multiple that is in line with our historic pre-Synergy EBITDA multiple of 8 to 10 times. We expect that this acquisition will be a positive contributor to all of our key metrics in 2024. Recall that our capital allocation priorities are reinvesting back into the business first, where we see the highest returns. Second, we pursue strategic partnerships and bolt-on acquisitions.

Christopher P. Calzaretta: And just yesterday, we announced our acquisition of three form for a purchase price of $95 million, which reflects a multiple that is in line with our historic pre synergy EBITDA multiple of eight to 10 times.

Christopher P. Calzaretta: We expect that this acquisition will be a positive contributor to all of our key metrics in 2024.

Christopher P. Calzaretta: Recall that our capital allocation priorities are reinvesting back into the business first where we see the highest returns.

Christopher P. Calzaretta: Second we pursue strategic partnerships and bolt on acquisitions, and lastly, creating value for shareholders through our share repurchase program and dividends.

Christopher P. Calzaretta: And lastly, creating value for shareholders through our share repurchase program and dividend. Strategic investments like Overcast and 3FORM are examples of how we're executing on our second capital allocation priority to create value for shareholders. Given our healthy balance sheet and our proven ability to consistently generate strong cash flow, we remain well-positioned to execute on all of our capital allocation priorities. In the first quarter, we repurchased $15 million of shares and distributed $10 million of dividends.

Christopher P. Calzaretta: Strategic investments like overcast and three form are examples of how we're executing on our second capital allocation priority to create value for shareholders.

Christopher P. Calzaretta: Given our healthy balance sheet, and our proven ability to consistently generate strong cash flow, we remain well positioned to execute on all of our capital allocation priorities.

Christopher P. Calzaretta: In the first quarter, we repurchased $15 million of shares and distributed $10 million of dividends.

Christopher P. Calzaretta: As of March 31st, 2024, we have over $700 million remaining under the existing share repurchase authorization. Recall that in July of last year, this authorization was increased by $500 million and extended through 2026 and remains an important component of our capital allocation priorities in support of our strategy moving forward. Slide 11 shows our updated full-year guidance for 2024. We have raised our guidance for the year to reflect improved mineral fiber profitability and the contribution from the acquisition of three forms.

Christopher P. Calzaretta: As of March 31, 2024, we have over $700 million remaining under the existing share repurchase authorization.

Christopher P. Calzaretta: Call in July of last year. This authorization was increased by $500 million and extended through 2026 and remains an important component of our capital allocation priorities in support of our strategy moving forward.

Christopher P. Calzaretta: Slide 11 shows our updated full year guidance for 2024.

Christopher P. Calzaretta: We have raised our guidance for the year to reflect improved mineral fiber profitability and the contribution from the acquisition of <unk>.

Christopher P. Calzaretta: Including this acquisition, we now expect total company net sales growth in the 8 to 11 percent range, an increase from our prior guidance of 3 to 6 percent growth. The increase in our net sales guidance for the year is primarily driven by three factors. As mentioned in our February call, we still expect slower economic growth in the back half of 2024, and we continue to expect our growth initiatives to partially offset modestly lower market demand, resulting in mineral fiber volume to be down in the low single-digit range.

Christopher P. Calzaretta: Including this acquisition, we now expect total company net sales growth in the 8% to 11% range an increase from our prior guidance of 3% to 6% growth.

Christopher P. Calzaretta: The increase in our net sales guidance for the year is primarily driven by three for them.

Christopher P. Calzaretta: As mentioned in our February call, we still expect slower economic growth in the back half of 2024, and we continue to expect our growth initiatives to partially offset modestly lower market demand, resulting in mineral fiber volume to be down in the low single digit range. We.

Christopher P. Calzaretta: We expect mineral fiber AUV to be in line with our historical average of mid single digits, returning to a more balanced split of price and mix, and along with solid contributions from WAVE Equity Earnings to continue to drive mineral fiber EBITDA margin expansion. We now expect total company-adjusted EBITDA growth in the 8 to 13 percent range, an increase from our prior expectations of 5 to 9 percent growth. The increase in our adjusted EBITDA guidance versus our February outlook is roughly evenly split between contributions from 3FORM and improved mineral fiber profitability.

Christopher P. Calzaretta: We expect mineral fiber AAV to be in line with our historical average of mid single digits, returning to a more balanced split of price and mix and along with solid contributions from wave equity earnings to continue to drive mineral fiber EBITDA margin expansion.

Christopher P. Calzaretta: We now expect total company adjusted EBITDA growth in the 8% to 13% range, an increase from our prior expectations of 5% to 9% growth.

Christopher P. Calzaretta: The increase in our adjusted EBITDA guidance versus our February outlook is roughly evenly split between contributions from three form and improves mineral fiber profitability.

Christopher P. Calzaretta: The improved mineral fiber profitability is driven primarily by lower-than-expected input costs that we now expect to be closer to flat for the full year compared to the prior year and better-than-expected contributions from WAVE based on their first quarter performance. We still expect adjusted diluted EPS and adjusted free cash flow to grow at a rate similar to adjusted EBITDA, with three form accounting for about half of the increase in adjusted diluted EPS compared to our prior guidance. Please note that additional assumptions are in the appendix of this presentation.

Christopher P. Calzaretta: The improved mineral fiber profitability is driven primarily by lower than expected input costs that we now expect to be closer to flat for the full year compared to the prior year and better than expected contributions from wave based on their first our first quarter performance.

Christopher P. Calzaretta: We still expect adjusted diluted EPS and adjusted free cash flow to grow at a rate similar to adjusted EBITDA.

Christopher P. Calzaretta: With three form accounting for about half of the increase in adjusted diluted EPS compared to our prior guidance.

Christopher P. Calzaretta: Please note that additional assumptions are in the appendix of this presentation.

Victor D. Grizzle: As we look forward, despite lingering macroeconomic uncertainty in the back half of the year, our focus remains on solid execution and EBITDA margin expansion in 2024. We remain committed to driving consistent profitability and free cash flow generation to support our capital allocation priorities and to continue to create value for shareholders. Now, I'll turn it back to Vic for further comments before we take your questions.

Christopher P. Calzaretta: As we look forward despite lingering macroeconomic uncertainty in the back half of the year. Our focus remains on solid execution and EBITDA margin expansion in 2024, we remain committed to driving consistent profitability and free cash flow generation to support our capital allocation priorities and to continue to create.

Vic: Value for shareholders.

Victor D. Grizzle: And now I will turn it back to Vic for further comments before we take your questions.

Vic: Chris Let me take a minute and talk about the market backdrop and what we're currently seeing in commercial markets or.

Victor D. Grizzle: Let me take a minute and talk about the market backdrop and what we're currently seeing in commercial markets. Overall, the market appears to be stable at a low, low single-digit level, and consistent with what we've been seeing over the past several quarters. There continue to be pockets of strength in verticals like transportation, education, healthcare, and data centers, with retail and office appearing to be more stable. Looking ahead to the back half, there remains a level of uncertainty around the direction of interest rates, inflation, and their overall impact on economic activity.

Victor D. Grizzle: Overall, the market appears to be stable at a low down low single digit level and consistent with what we've been seeing over the past several quarters.

Victor D. Grizzle: There continues to be pockets of strength in verticals like transportation education health care and data centers.

Victor D. Grizzle: With retail and office appearing to be more stable.

Victor D. Grizzle: Looking ahead to the back half there remains a level of uncertainty around the direction of interest rates inflation and the overall impact on economic activity.

Victor D. Grizzle: We also hear this level of uncertainty from customers as it relates to the build and their backlogs and what they are seeing in the market. With this uncertainty and its likely impact on discretionary renovation activity, we're still expecting a modest softening in the back half of the year. Now, regardless of market softness, our business model provides resilience. This resilience allows us to deliver profitable growth and create value despite soft market conditions.

Victor D. Grizzle: We also hear this level of uncertainty from customers as it pertains to the build in their backlogs and what they are seeing in the market.

Victor D. Grizzle: With this uncertainty and its likely impact on discretionary renovation activity, we're still expecting a modest softening in the back half of the year.

Victor D. Grizzle: Now regardless of market softness our business model provides a resilience. This resilience allows us to deliver profitable growth and create value. Despite soft market conditions. We demonstrated this unique brazilians in 2023, delivering profitable growth expanding margins and what was overall a challenging market.

Victor D. Grizzle: We demonstrated this unique resilience in 2023, delivering profitable growth, expanding margins, and in what was overall a challenging market, and we are well positioned to do more of the same this year. The resilience of this business has been a hallmark for many years, and the uniqueness of the ceilings category, along with our unique position in it as an innovation leader, has and will continue to add value and new attributes to the ceiling category.

Victor D. Grizzle: And we are well positioned to do more of the same this year. The resilience of this business has been a hallmark for many years and the uniqueness of the ceilings category.

Victor D. Grizzle: Along with our unique position in it as a innovation leader has and will continue to add value in new attributes to the ceiling category. It's the innovation that is provide that.

Victor D. Grizzle: It's the innovation that provides these new attributes and a unique value proposition to our customers and ultimately positions us to consistently grow AUV year after year. Now, an area of innovation that we believe is important to our customers involves products and solutions that address energy efficiency and carbon reduction. As we noted in our February call, late in 2023, we introduced Ultima Templock ceiling, the industry's first ceiling tile that can help regulate temperatures within buildings and reduce energy costs, the first ceilings that paid for themselves over time.

Victor D. Grizzle: That provides these new attributes and a unique value proposition to our customers and ultimately positioning us to consistently grow.

Victor D. Grizzle: Year after year.

Victor D. Grizzle: Now an area of innovation that we believe is important to our customers involves products and solutions that address energy efficiency and carbon reduction as we noted in our February call late in 2023, we introduced ultimate temp lock ceilings. The industry's first ceiling tile that can help regulate temperatures, but then build.

Victor D. Grizzle: <unk> and reduced energy costs, the first ceilings that pay for themselves over time.

Victor D. Grizzle: This is increasingly important because we know buildings generate about 40 percent of all carbon emissions generated annually in the U.S., and two-thirds of that is related to powering, heating, and cooling a building. Our most recent product launched this year. Ultima Low Embodied Carbon, or LEC, ceiling tiles tackle the challenge of embodied carbon. The impacts from embodied carbon account for the remaining one-third of a building's carbon generation. The new Ultima LEC ceiling tiles are the lowest embodied carbon mineral fiber tiles on the market today, while maintaining their typical acoustical and aesthetically appealing attributes.

Victor D. Grizzle: This is an increasingly important because we know buildings generate about 40% of all carbon emissions generated annually in the U S and two thirds of that is related to powering heating and cooling of building.

Victor D. Grizzle: Our most recent product launch this year.

Victor D. Grizzle: Ultimate low embodied carbon or lisi ceiling tiles tackles, the challenge of embodied carbon the impacts from our body carbon account for the remaining one third of our buildings carbon generation.

Victor D. Grizzle: The new ultimate LDC ceiling tiles are the lowest embodied carbon mineral fiber tiles on the market today, while maintaining its typical acoustical and <unk>.

Victor D. Grizzle: Statically appealing attributes these.

Operator: These products are part of innovative solutions to help address the building industry's challenges, thus making the ceilings category increasingly relevant. And again, as important, these innovations come in the form of products that deliver overall AUV growth for Armstrong. So let me close by recapping our proven long-term earnings growth model that positions us well to deliver consistent growth in all parts of the economic cycle. Our growth model begins with investing organically back into our business in innovation and initiatives that create new value-added products like the energy saving and low embodied carbon products just mentioned, and design services like ProjectWorks that respond to the current and evolving market needs that strengthen our competitive position and ultimately drive long-term AUV growth.

Victor D. Grizzle: These products are part of an innovative solutions to help address the building industry has challenges, thus, making the ceilings category increasingly more relevant and.

Operator: And again as important these innovations come in the form of products that deliver overall AUR growth for Armstrong.

Operator: So let me close by recapping, our proven long term earnings growth model that positions us well to deliver consistent growth in all parts of the economic cycle.

Operator: Our growth model begins with investing organically back into our business on innovation and initiatives that create new value added products like the energy saving and low embodied carbon products just mentioned and.

Operator: And design services like project works that respond to the current and evolving market needs that strengthen our competitive position and ultimately drive long term growth.

Operator: In Architectural Specialties, we pursue attractive new acquisition opportunities that add to our existing industry-leading portfolio, providing the broadest offering of products and services in this attractive, growing category. And we have a proven track record of acquiring specialty businesses that, when bolted onto the Armstrong platform, can be scaled to improve efficiencies, to deliver top-line growth and operating leverage. And lastly, we're able to make these investments because of our strong, consistent, free cash flow generation and high EBITDA margins that are among the highest in the building products industry.

Operator: In architectural specialties, we pursue attractive new acquisition opportunities that add to our existing industry, leading portfolio, providing the broadest offering of products and services in this attractive growing category.

Operator: And we have a proven track record of acquiring specialty businesses that when bolted onto the Armstrong platform can be scaled to improve efficiencies to deliver topline growth and operating leverage.

Operator: And lastly, we're able to make these investments because of our strong consistent free cash flow generation and high EBITDA margins that are among the highest in the building products industry.

Operator: This allows us to invest in our business organically and inorganically, while keeping our leverage at attractive levels.

Operator: This allows us to invest in our business organically and inorganically while keeping our leverage at attractive levels. The consistency of our cash flow generation also enables us to make these investments while also returning cash to shareholders. We believe this is an attractive long-term growth model for our company that continues to position us well, even during times of market softness and economic uncertainty. And with that, we'll be happy to take your questions.

Operator: The consistency of our cash flow generation also enables us to make these investments while also returning cash to shareholders. We believe this is an attractive long term growth model for our company that continues to position us well, even during times of market softness and economic uncertainty.

Operator: That will be happy to take your questions.

Speaker Change: Thank you.

Speaker Change: We'll now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question simply press Star. One again, if you are called upon to ask a question in our listening via loud speaker on your device to please speak up your handset and ensure that your phone is not on mute.

Susan Marie Maklari: Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We also request that you please limit your question to one and one follow-up. Your first question comes from the line of Susan Maklari from Goldman Sachs. Your line is now open.

Susan Marie Maklari: In asking your question.

Susan Marie Maklari: Also request that you please limit to one question and one follow up.

Susan Marie Maklari: Your first question comes from the line of Susan Mcclary from Goldman Sachs. Your line is now open.

Susan Marie Maklari: Thank you everyone. Good morning.

Susan Marie Maklari: Hi, Susan.

Susan Marie Maklari: My first question is I, just wanted to get a bit more color on the Choppiness that you talked about in terms of some of those architectural specialty projects coming through this quarter is there anything specific that you think caused some of the shifts in those timelines or any macro implications there and just.

Victor D. Grizzle: Thank you, everyone. Good morning. Hi Susan. My first question is, I just want to get a bit more color on the choppiness that you talked about in terms of some of those architectural specialty projects coming through this quarter. Is there anything specific that you think caused some of the shifts in those timelines or any macro implications there? And just, you know, any more color that you can give on that would be helpful.

Victor D. Grizzle: Any more color that you can give on that would be helpful.

Susan: Yes sure.

Speaker Change: This is this is <unk>.

Victor D. Grizzle: Not the first time, we've seen this right that we get some of this choppy quarter to quarter excuse me in.

Victor D. Grizzle: Yeah, sure. You know, the this is this is not the first time we've seen this right that we get some of this chop quarter to quarter, excuse me, and As I mentioned a couple quarters ago, as we get into more of these large airport projects and we land more of those in our backlog, then a little bit of shift in timing, month-to-month, quarter-to-quarter, and those large jobs can affect your quarter-to-quarter chop, if you will, or flow.

Victor D. Grizzle: As I mentioned, a couple of quarters ago, as we get into more of these large airport projects and we land more of those in our backlog.

Victor D. Grizzle: And then a little bit of shift in timing month to month quarter to quarter and those large jobs can affect.

Victor D. Grizzle: Quarter to quarter Chop, if you will our flow and Thats kind of what we that's what we experienced in the quarter again, I think what we saw in the quarter that.

Victor D. Grizzle: And that's kind of what we experienced in the quarter. Again, I think what we saw in the quarter that encourages us is that order intake continues to support the guidance that we have. It's continued to be positive growth versus the prior year, and the activity, the bidding, and the quoting activity from Armstrong in these categories continue to be robust. So I would just again describe it more as some of the normal moves in and out of the quarters in terms of the timing of these larger projects that we're experiencing.

Victor D. Grizzle: That encourages US is the order intake continues to support the guidance that we have it continue to be positive growth versus prior year.

Victor D. Grizzle: And the activity the bidding and quoting activity from Armstrong in these categories continue to be robust. So I would just again describe it more as some of the normal.

Victor D. Grizzle: Moves in and out of the quarters in terms of timing of these larger projects is what we're experiencing.

Victor D. Grizzle: Okay, all right. That's helpful. And then, you know, it sounds like you are getting some nice traction from the acquisitions that have come through. Can you talk a little bit more about the three forms that you just announced and maybe any thoughts on the synergies, the margin profile today, and how we should think about, you know, you getting that in line with the overall segment and maybe back towards that 20% target?

Speaker Change: Okay Alright.

Victor D. Grizzle: Helpful. And then it sounds like you are getting some nice traction from the acquisitions that have come through in there.

Victor D. Grizzle: Can you talk a little bit more about three forum that you just announced and then just maybe any thoughts on the synergies.

Victor D. Grizzle: The margin profile today, and how we should think about you getting that in line with the overall segment and maybe back towards that 20% target.

Victor D. Grizzle: Yes, absolutely. We're really excited about this acquisition. It is such a complementary product line to our existing product line with very little overlap, but it's highly specified by the same architects and industrial designers that we're working with and really opens up new spaces and new applications for these materials for Armstrong. So we're really, we're really excited about the complementary nature of the product line. And it's a very unique product line also in the fact that it's a translucent material. We don't have translucent materials in our portfolio today.

Speaker Change: Yes, absolutely we're really excited about this this acquisition.

Victor D. Grizzle: It is such a complementary product line to our existing product line with very little overlap, but as highly specified by the same architects and industrial designers that we're working with and really opens up new spaces and new applications for these these materials for Armstrong. So we're really we're really excited about.

Victor D. Grizzle: The complementary nature of the product line.

Victor D. Grizzle: And it's a very unique product line also in the fact that it's a translucent material, we don't have translucent materials in our portfolio today.

Victor D. Grizzle: For some of the gaps that we've had, we've actually purchased products from 3FORM in the past to plug some of those gaps. So we know this company really well. We know their products really well. So I think from a standpoint of strengthening our position in the offices of architects and designers, with an even broader, more complementary portfolio, we couldn't be more excited about that.

Victor D. Grizzle: For some of the gaps that we've had we've actually.

Victor D. Grizzle: Purchase products from three form in the past to plug some of those gaps. So we know this company really well we know their products really well. So I think from a standpoint of strengthening our position in the offices of architects and designers.

Victor D. Grizzle: With the with an even broader more complementary portfolio, we couldn't be more excited about that it's a similar profile that we've seen in other architectural specialty businesses. So then when you look at their their scale and their profitability, we see some really good opportunities on both sides the cost side.

Victor D. Grizzle: It's a similar profile that we've seen in other architectural specialty businesses. Susan, when you look at their scale and their profitability, we see some really good opportunities on both sides. The cost side and leveraging the back office of Armstrong and doing more things on the Armstrong platform. So we see some good cost synergies there to improve the margin profile of this business. Again, similar to what we've seen in our previous acquisitions, as well as getting them into our distribution channel, into more of the architect's offices than they can afford to do today, leveraging the go-to-market machine that Armstrong has.

Victor D. Grizzle: And leveraging the back office of Armstrong and doing more things on the Armstrong platform. So we see some good cost synergies there to improve the margin profile of this business again similar to what we've seen in our previous acquisitions as well as getting them into our distribution channel into more of the architect's offices than they can afford to.

Victor D. Grizzle: Do today.

Victor D. Grizzle: Leveraging the go to market machine that Armstrong has so we see a very similar synergy profile. Obviously this is a little bit larger deal than some of our other smaller deals, but the play that we're going to run is very similar and we expect a similar outcome in terms of getting this business to a 20% EBITDA.

Victor D. Grizzle: So we see a very similar Synergy profile. Obviously, this is a little bit larger deal than some of our other smaller deals, but the play that we're going to run is very similar, and we expect a similar outcome in terms of getting this business to a 20% EBITDA performance level. Okay, all right.

Victor D. Grizzle: Performance level.

Speaker Change: Okay, Alright, thats helpful. Thanks, Nick and good luck with everything.

Susan Marie Maklari: Okay, all right, that's helpful. Thanks, Vic, and good luck with everything.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Garik <unk> mice, we have loop capital. Your line is open.

Garik Simha Shmois: Your next question comes from the line of Garik Shmois with Loop Capital. Your line is open.

Garik Simha Shmois: Hi, Thank you.

Garik Simha Shmois: In the quarter just wanted to follow up on the transportation.

Victor D. Grizzle: Oh, hi. Thank you. Congratulations on the quarter. I just wanted to follow up on the transportation and markets that you cited and, you know, given the strong growth outlook moving forward, I was wondering if you could speak maybe just how we should think about, you know, maybe the margin mix on those projects. Do you tend to get maybe a little bit more pushback given you're dealing with government agencies or is there no real difference on the margin component, you know, especially if transportation, you know, might...

Garik Simha Shmois: End markets that you cited just given.

Victor D. Grizzle: With strong growth outlook moving forward I'm wondering if you could speak maybe just how we should think about maybe the margin mix on those projects do you tend to get maybe a little bit more pushback, given youre doing with government agencies or no real difference on the margin component, especially in transportation.

Victor D. Grizzle: Mike.

Victor D. Grizzle: B and accelerating part of the architectural specialties piece moving forward.

Speaker Change: Well I think the margin profile is really a function of the design and the material combination that the architecture trying to spec into so the more general.

Victor D. Grizzle: Well, I think the margin profile is really a function of the design and the material combination that the architects are trying to spec into. So the more general, less custom you obviously have, you're gonna have more competition in some of those areas. So, in general, I think it's a mix of both. And so there's not a big departure on the margin profile for these projects that we've experienced thus far with the ones that we've won. It's kind of right down the middle in terms of what we see across the business.

Victor D. Grizzle: Less custom you, obviously, you haven't you're going to have more competition and some of those areas. So but in general I think it's a mix of both and so it was not a big departure on the margin profile for these projects that we've experienced thus far.

Victor D. Grizzle: With the ones that we've won it's kind of right down the middle in terms of what we see across the business.

Victor D. Grizzle: They are more visible so that is true. These are more visible projects. They are larger so theres going to be more bidding there's going to be more competition.

Victor D. Grizzle: They are more visible, so that is true. These are more visible projects. They're also larger. So there's going to be more bidding. There's going to be more competition. Again, we're trying to make unique designs and bring the unique Armstrong portfolio to these designs to provide as much of an advantage as we can in these projects. So that's really. That's the opportunity, I think, for us to make sure that we have an accretive margin profile in these larger jobs.

Victor D. Grizzle: Again, we're trying to.

Victor D. Grizzle: Make the unique design and bring the unique Armstrong portfolio to these designs.

Victor D. Grizzle: To provide as much of an advantaged as we can in these projects. So that's that's really.

Victor D. Grizzle: That's the opportunity I think for us to make sure that we have an accretive margin profile in these larger jobs.

Christopher P. Calzaretta: Okay. My follow-up question is just actually a little bit more backward looking, just on the first quarter. If you can provide a little bit more color on just what the impact was from retail and the channel dynamics in Q1 of this year versus last year and what impact that had on AUV mix volume and margin.

Victor D. Grizzle: Understood.

Speaker Change: Follow up questions just show a little bit more backward. Okay. Just on the first quarter. If you could provide a little bit more color on just what the impact was.

Christopher P. Calzaretta: Retail.

Christopher P. Calzaretta: The channel dynamics in Q1 of this year versus last year, and what impact that had on.

Christopher P. Calzaretta: <unk> mix volume and margins.

Christopher P. Calzaretta: Yeah, hey, Garik, it's Chris. Yeah, so from a volume perspective, you know, the year over year comparison in the quarter was really all driven by that prior year retail dynamic in terms of the build there. And in terms of mix, I'd say mix was a little bit outsized in the quarter as a result of that too. Again, AUV up 8%, pretty fairly balanced between price and mix, but that mix benefit we saw in Q1 here this quarter was really largely driven by that year over year comp in retail. I got it.

Christopher P. Calzaretta: Yeah, Hey, Eric It's Chris So we went from a volume perspective, the year over year comparison in the quarter was really all driven by that prior year retail dynamic in terms of the build there and in terms of mix I would say if mix was a little bit outsized in the quarter as a result of that to again be up.

Christopher P. Calzaretta: 8% pretty fairly balanced between price and mix, but that mix benefit. We saw in Q1 here. This quarter was really largely driven by that year over year comp in retail.

Garik: Got it thanks for that appreciate it best of luck.

Garik Simha Shmois: Thanks for that. I appreciate it.

Speaker Change: Sure you bet.

Adam Baumgarten: Your next question comes from the line of Adam Baumgarten from Zellman & Associates. Your line is open.

Garik Simha Shmois: Your next question comes from the line of Adam Baumgarten from Zelman and Associates. Your line is now open.

Adam Baumgarten: Hey guys, good morning. Just looking at the wave on equity earnings guidance implies about $3 million or so in year-over-year growth for the balance of the year. Was there some kind of one-time benefit you saw in the first quarter that maybe isn't continuing for the rest of the year? Maybe just why that outlook, you know, seems to be a bit less expansionary from an earnings perspective for the balance of the year.

Adam Baumgarten: Hey, guys good morning.

Adam Baumgarten: Just looking at the wave equity earnings guidance implies.

Adam Baumgarten: Implies about $3 million or so in year over year growth for the balance of the year was there some kind of onetime benefit you saw in the first quarter that maybe isn't continuing for the rest of the year, maybe just why that outlook seems to be a bit less expansion area from an earnings perspective for the balance of the year.

Christopher P. Calzaretta: Yeah Adam, I don't know if you recall that the steel dynamics have been very dynamic and volatile actually over the last four or five months. We've had to raise prices twice as a result of that, and if we normally get a little buy ahead ahead of those price increases, I think we experienced a little bit more than we were expecting. So there is a little bit of timing there in terms of that volume normalizing its way out for the remainder of the year. So I'd really say we've got some good operating leverage there as a result of that as well, but I would really say it's more around a little bit of buy ahead on the volume side.

Speaker Change: Yes, Adam.

Speaker Change: I don't know.

Christopher P. Calzaretta: If you recall that the steel dynamics have been very.

Christopher P. Calzaretta: Dynamic and volatile actually over the last four or five months, we've had to raise price twice as a result of that.

Christopher P. Calzaretta: And if we normally get a little by head ahead of those price increases I think we experienced a little bit more than we were expecting so there is a little bit of timing there in terms of that volume.

Christopher P. Calzaretta: Normalizing its way out for the remainder of the year. So I'd really say, we've got some good operating leverage there as a result of that as well, but I would really say its more around a little bit of buy ahead on the volume side.

Adam Baumgarten: Okay, I got it. That's helpful.

Speaker Change: Okay got it that's helpful. And then just back to asset it looks like the organic revenue numbers come down a little bit.

Victor D. Grizzle: And then just back to AS, it looks like the organic revenue numbers have come down a little bit. Is that purely just timing, or are there some, you know, kind of more permanent delays or cancellations you're seeing? Now, certainly no cancellations. This is, they're

Victor D. Grizzle: Is that purely just timing or are there some kind of more permanent delays or even cancellations youre seeing out there.

Victor D. Grizzle: Now certainly no cancellations. This is there is definitely project delays and again back to my prior answer I run the choppiness in that organic part of the business.

Victor D. Grizzle: Now certainly no cancellations. There's definitely project delays, and again, back to my prior answer around the choppiness in that organic part of the business, based on project timing, is really the impact we saw in the first quarter.

Victor D. Grizzle: On project timing is really the.

Victor D. Grizzle: It's really the impact we saw in the first quarter.

Adam Baumgarten: Okay, got it. Thanks. Thank you. Your next question comes from the line of Keith Hughes from.

Speaker Change: Okay got it thanks.

Keith Brian Hughes: Thank you.

Adam Baumgarten: Your next question comes from the line of Keith Hughes from Tavis. Your line is open.

Keith Brian Hughes: Your next question comes from the line of Keith Hughes from TruViz. Your line is open. Uh, you know the questions on Kanopy that you kind of called out again, but...

Keith Brian Hughes: My question is on <unk>, you had kind of called out again that it was additive to growth covered up some of the.

Keith Brian Hughes: Weaker markets out there can you give us any more detail on what that's doing around how bigger role that's playing in the guidance for 2024.

Victor D. Grizzle: Yeah, Keith, we haven't really talked about that publicly in terms of the actual dollar amount. But when you look at low single-digit markets, and together with our growth initiatives, Canopy, Project Works, and some of our Healthy Spaces initiatives, offsetting a large part of that is probably the best we can do to help you size the impact of these initiatives. We're really pleased with their traction, and we continue to reinforce that we're on the right target with these initiatives.

Keith Brian Hughes: Yeah, Keith we haven't really.

Victor D. Grizzle: <unk> talked.

Victor D. Grizzle: <unk> talked about that publicly in terms of the actual dollars amount, but when you look at low single digit markets and.

Victor D. Grizzle: Together with our growth initiatives canopy project works and some of our healthy space of initiatives.

Victor D. Grizzle: Offsetting a large part of that I think is probably the best we can do to help you size. The impact of these initiatives were really pleased with our traction.

Victor D. Grizzle: And we continue to be reinforcing that we're over the right target with these initiatives.

Victor D. Grizzle: Absent those, I mean, would your volume be down in single digits for the year? For the whole year? I think that maybe the high-low single-digit area is probably as close to an answer I could give you, Keith.

Victor D. Grizzle: Absent those I mean would your volume to be down mid single digits.

Victor D. Grizzle: For the year.

Victor D. Grizzle: For the whole year I think in that.

Victor D. Grizzle: That may be it may be the high low single digit area is probably as close to an answer I could give you Keith.

Keith Brian Hughes: Okay. All right. Thank you.

Keith: Okay alright, thank you.

Speaker Change: You bet.

Stephen Kim: Your next question comes from the line of Stephen Kim with Evercore ISI. Your line is now open. Yes.

Keith Brian Hughes: Your next question comes from the line of Stephen Kim with Evercore ISI. Your line is now open.

Stephen Kim: Yeah, thanks very much, guys. Appreciate all the info. I wanted to ask you a little bit about 3FORM. Any sort of purchase accounting issues that we should be thinking about? Inventory write-ups affecting near-term profitability there? Does it have any kind of seasonality that we should be aware of?

Stephen Kim: Yes, thanks, very much guys I appreciate the all the info I wanted to ask you a little bit about three form three farm.

Stephen Kim: Any sort of purchase accounting issues that we should be thinking about inventory write ups affecting near term profitability there.

Stephen Kim: Do you have any kind of seasonality that we should be aware of.

Victor D. Grizzle: And I think you indicated that the route to market was, I guess, pretty similar to some of the other architectural specialties acquisitions. But given its size and its success, I was kind of thinking that maybe its presence in the market was superior to other acquisitions you've made. And so I just wanted to see if you could give a little more context on the degree to which your distribution and breadth and power are going to allow you to achieve, basically be a better owner of the 3FORM assets.

Stephen Kim: And.

Stephen Kim: I think you indicated that the route to market.

Victor D. Grizzle: Was.

Victor D. Grizzle: Yes.

Victor D. Grizzle: Pretty similar I am guessing to some of the other architectural specialties acquisitions, but given its size and its success I was kind of thinking that maybe it's its presence in the market was superior to other acquisitions, you've made and so just wanted to see if you could give a little more context on that.

Victor D. Grizzle: The degree to which your distribution and breadth and power.

Victor D. Grizzle: That is going to allow you to.

Victor D. Grizzle: Achieve basically would be a better owner of the three form assets.

Christopher P. Calzaretta: Would you like to take the first one? Yeah. Hey Stephen, no, no items to call out here from a purchase accounting perspective. And your second question on seasonality? Yeah. I mean, for the rest of the year, you know, kind of expecting more of a smoother pattern of contribution from three forms as it pertains to 2020, 2024. Yeah, Stephen, you're right to call out this is a well-established company. We've known this company for years.

Speaker Change: You want to take the first yes, yes, hey, Stephen.

Christopher P. Calzaretta: No items to call out here from a purchase accounting.

Christopher P. Calzaretta: Perspectives and to your second question on seasonality.

Christopher P. Calzaretta: Yes, I mean for the rest of the year kind of expecting more of a smoother pattern of contribution from.

Christopher P. Calzaretta: <unk> form as it pertains to 2000 22024.

Christopher P. Calzaretta: Yes, Stephen you're right to call out this is a well established company. We've known this company we've done business with the company for a long time, we've had our eye on this company for a long time, because it's a high quality company and a high quality set of products.

Christopher P. Calzaretta: We've done business with this company for a long time. We've had our eye on this company for a long time because it's a high quality company and a high quality set of products. They do have a well-established independent agent network that is highly respected, and we plan to continue to leverage that. But in addition to that, though, with the presence and the footprint that we have with our best-in-class distribution network, we know that we can bring some additional exposure and representation in the marketplace through that channel as well.

Christopher P. Calzaretta: They do have a well established.

Christopher P. Calzaretta: Independent agent network that is highly respected and we plan to continue to leverage but in addition to that though with the presence in the footprint that we have with our best in class distribution network. We are we know that we can bring some additional.

Christopher P. Calzaretta: Exposure and <unk>.

Christopher P. Calzaretta: <unk> in the marketplace through that channel as well, so a very complementary nature as our as our initial thoughts going into this but we definitely think we can bring something to a well established company in the marketplace.

Christopher P. Calzaretta: So a very complementary nature is our initial thoughts going into this, but we definitely think we can bring something to a well-established company in the marketplace. Stephen, maybe just one thing to highlight on my previous comment that you've got two months of contribution here in the second quarter and then obviously three full months in Q3 and Q4, as you think about modeling out the rest of the year. Yeah.

Stephen Kim: And Steve maybe just wanted to highlight.

Stephen Kim: On my previous comment that you have got two months of contribution here in the second quarter and then obviously three full months in Q3 and Q4 as you think about modeling out the rest of the year.

Stephen Kim: Yeah, that makes sense. Okay, great.

Stephen Kim: Yes that makes sense.

Stephen Kim: Okay, Great and then.

Stephen Kim: And then, lastly, on your cash flow adjustments, you call that Arctura, it's contributed about $14 million in cash flow in the past six months. I was curious if you could give a little bit of background on that. I guess the former owners left, but you know, if you could just provide a little bit of color on that.

Stephen Kim: Lastly on your cash flow adjustments you called out our Terra it's contributed about $14 million of cash flow in the past six months I was curious if you could give a little bit of background on that I guess, the former owners left but yes. If you can just provide a little bit of color on that.

Christopher P. Calzaretta: Yeah, no additional color to provide there other than what we've disclosed in that aspect of our tourist unit.

Speaker Change: Yes, no additional color to provide there other than what we've disclosed on on that that aspect of our tourists.

Stephen Kim: Bummer. All right, we'll follow up with you later. Appreciate all the color, though. Thanks, guys. All right. Thanks, Evan.

Speaker Change: Alright, well ill follow up with you later.

Speaker Change: I appreciate all the color, though thanks guys alright.

Stephen Kim: Thanks Steven.

Stephen Kim: Your next question comes from the line of Jon <unk> of UBS. Please ask your question.

John Lovallo: Your next question comes from the line of John Lovallo of UBS. Please ask your question.

Spencer Kaufman: Hey guys, good morning. This is actually Spencer Kaufman on for John.

John Lovallo: Hey, guys. Good morning. This is actually Spencer Kaufman on for John Thank you for the questions.

Spencer Kaufman: Thank you for the questions. The first one, you guys mentioned that you're expecting slower economic growth in the second half relative to the first half. You know, is that just based on conservatism, or are you seeing some signs of slowing out there? And what could kind of change your view here, recognizing, you know, the weak March ABI print?

Spencer Kaufman: The first one you guys mentioned that you are expecting slower economic growth in the second half relative to the first half is that just based on conservatism or are you seeing some signs of slowing out there and look at kind of changed your view here recognizing the weak March Abi.

Victor D. Grizzle: Yeah, I mean, the outlook for the back half is again modestly softer market conditions. And that's really a reflection of a lot of the indicators, as well as the voice on the ground in the field.

Victor D. Grizzle: Yes.

Victor D. Grizzle: The outlook for the back half is again modestly softer market conditions, and that's really a reflection of a lot of the indicators as well as the voice on the on the ground in the field. So.

Victor D. Grizzle: So we're certainly not trying to be conservative here. I think we're trying to represent what we think is going to likely be generally overall slower economic activity in the back half, and that will likely impact discretionary spending, especially if there's some uncertainty about how long that lasts in the back half. So I think that, again, when you look at all the indicators, which are really fairly mixed at the moment, including the GDP number that you referenced and the ABI that you referenced, there's some mixed signals there that I think just reaffirm that we're likely to see a slower overall economic activity, and we think that's going to have a modest impact on business in the back half.

Victor D. Grizzle: We're certainly not trying to be conservative here I think we're trying to represent what we think.

Victor D. Grizzle: Is.

Victor D. Grizzle: Going to likely be generally overall slower economic activity in the back half.

Victor D. Grizzle: And that will likely impact discretionary spending, especially if there's some uncertainty about how long that lasts and the back half. So I think that again when you look at all of the indicators, which are really fairly mixed at the moment, including the GDP number that you referenced in the Abi that you referenced there's some mixed signals.

Victor D. Grizzle: There that I think just reaffirm that we're likely to see a slower economic overall activity and we think thats going to have a modest impact on the business in the back half.

Christopher P. Calzaretta: Right, okay, if that makes sense. In terms of input costs, I think you guys mentioned that you're now expecting that to be flat year over year. Just curious as to some of the puts and takes of that relative to, you know, your prior outlook.

Speaker Change: Alright, Okay, if that makes sense.

Christopher P. Calzaretta: In terms of input costs I think you guys mentioned that youre now expecting that to be flat year over year, just curious as to some of the puts and takes of that relative to your prior.

Christopher P. Calzaretta: Our outlook.

Christopher P. Calzaretta: Yeah, sure. So for the full year, we're expecting input costs to be about flat. It's really the energy deflation kind of offset by raw material inflation. So if I break that down a little bit for you, for the full year, we're expecting low single-digit deflation in freight. On raw materials, we expect low single-digit inflation on raw materials and then high single-digit deflation on energy, which kind of nets out to flat for the full year on inputs. And just a reminder, in terms of our COGS and inflation, raw materials are about 35%, freight's about 10%, and energy is about 10% of our total COGS line there. Thank you.

Speaker Change: Yes, sure so for full year, we're expecting input cost to be about flat. It is truly the energy deflation kind of offset by raw material inflation. So.

Christopher P. Calzaretta: If I break that down a little bit for you for full year, we're expecting low single digit deflation in freight.

Christopher P. Calzaretta: On raws, we expect low single digit inflation on raw materials, and then energy high single digit deflation, which kind of nets out to flat for the full year on inputs.

Christopher P. Calzaretta: Just a reminder.

Christopher P. Calzaretta: <unk> of our Cogs and inflation raw materials were about 35% freights about 10 and energy is about 10 of our total total Cogs.

Christopher P. Calzaretta: Alex line there.

Spencer Kaufman: Thanks; I really appreciate the color there.

Speaker Change: Thanks really appreciate the color there.

Spencer Kaufman: Yes.

Rafe Jason Jadrosich: Your next question comes from the line of Rafe Jadrosich from Bank of America. Your line is open.

Spencer Kaufman: Your next question comes from the line of Ralph <unk> from Bank of America. Your line is open.

Rafe Jason Jadrosich: Hi, good morning. Thanks for taking my question. I just wanted to follow up on the guidance and want to see if you can just walk us through a little bit more of the guidance raised. How much of it was 1Q upside, 3FORM, and then the change in the mineral fiber outlook? So guidance was raised by $15 million. You said about half was 3FORM, and the other half was organic. Did your expectation for organic performance change for the 2Q to 4Q on that, or was that just a 1Q performance change?

Speaker Change: Hi, good morning, Thanks for thanks for taking my question.

Rafe Jason Jadrosich: Just wanted to follow up on the guidance and want to see if you could just walk us through a little bit more of the guidance raise.

Rafe Jason Jadrosich: <unk>.

Rafe Jason Jadrosich: How much of it was <unk> upside.

Rafe Jason Jadrosich: Three form and then the change in the mineral fiber outlook guidance is raised by $15 million. You said about half was three form and the other half was organic does your expectation for organic performance change for <unk>.

Rafe Jason Jadrosich: <unk> to <unk> on that or is that organic change just <unk> performance.

Christopher P. Calzaretta: Hey Rafe, it's Chris. So, let me walk you through that. So, the guidance that you're referring to is on EBITDA. And so, yes, about half of that is attributable to the contribution from the three-form acquisition. The other half, when we take a step back and look at input costs and the contributions from our Wave Joint Venture, as previously mentioned, it's a combination of favorability, so deflation on the input side, and really the outsized performance of Wave in Q1 that we expect, you know, a portion of that to stick for the rest of the year. So, it's really looking forward to the rest of the year, looking at our Q1 performance and triangulating around that to inform the EBITDA raise.

Rafe Jason Jadrosich: Hey, Ralph it's Chris So let me, let me walk you through that so the guidance range raise that you're referring to is on is on the EBITDA and so yes about half of that is attributable to the contribution from the <unk> acquisition. The other half when you take a step step back and look at it.

Christopher P. Calzaretta: Input costs and the contributions from our wave joint venture as previously mentioned it is a combination of favorability so deflation on the input side and really the outsized performance of wave in Q1 that we expect a portion of that to stick for the rest of the year. So it was really looking forward.

Christopher P. Calzaretta: Third for the rest of the year looking at our Q1 performance and Triangulating around those two to inform the EBITDA EBITDA rates.

Rafe Jason Jadrosich: Got it. Okay, that's helpful. And then, just focusing on AS, if excluding Bach and 3-form, the 6-9% prior view for top line and then I think 19% margin, what does that look like today? Like, would you have changed the AS guidance if you hadn't acquired 3-form?

Speaker Change: Got it Okay. That's helpful and then.

Speaker Change: Just focusing on on a S <unk>.

Speaker Change: Excluding Falcon III form.

Speaker Change: 6% to 9% prior view.

Chris: For top line, and then I think 19% margin.

Speaker Change: What does that look like today would you have changed the <unk>.

Chris: Guidance, if you hadn't acquired three form.

Christopher P. Calzaretta: Yeah, so if I pull that apart a little bit in my prepared remarks, if you were to exclude the effect of 3FORM on the AS business for the year, the AS EBITDA margin would have expanded. So, from an organic perspective, you can see there's a dilutive effect of 3FORM here for 2024, and really, the change in sales and EBITDA is attributable in part to that 3FORM acquisition.

Rafe Jason Jadrosich: Yes, so if I pull that apart a little bit in my prepared remarks, if you were to exclude exclude the effect of three form on the us business for the year.

Christopher P. Calzaretta: EBITA margin would have expanded so.

Christopher P. Calzaretta: So that from an organic perspective, you can see there is a dilutive effect of three form here for 2024.

Christopher P. Calzaretta: And really the change in sales.

Christopher P. Calzaretta: And EBITDA is attributable in NAR.

Rafe Jason Jadrosich: Okay, so the core, they're really on top. The core outlook for AS is unchanged.

Christopher P. Calzaretta: To that to that three form acquisition.

Rafe Jason Jadrosich: So the core it really on the top.

Rafe Jason Jadrosich: The core outlook is unchanged.

Christopher P. Calzaretta: Correct, that's correct. It's really all three-form, primarily three-form driven. Okay, thank you.

Speaker Change: Correct. That's correct, it's really all three form primarily three three form driven.

Rafe Jason Jadrosich: Okay, thank you. That's helpful.

Speaker Change: Thank you that's helpful.

Speaker Change: Youre welcome.

Kathryn Ingram Thompson: Your next question comes from the line of Kathryn Thompson with Thompson Research Group. Your line is open.

Rafe Jason Jadrosich: Your next question comes from the line of Kathryn Thompson with Thompson Research Group. Your line is open.

Kathryn Ingram Thompson: Hi, thank you for taking my question today. I just wanted to follow up on free cash flow generation and then capital allocation for 24. So in Q1, you had a nice year-over-year increase of 46% in free cash generation, but most of it was driven by lower-capital assets versus last year. As you look at Capital Deployment for the Full Year, how should we think about the cadence of... CapEx versus dividends and share repurchases, which are lower this year, and M&A activity?

Kathryn Ingram Thompson: Hi, Thank you for taking my question today.

Kathryn Ingram Thompson: I just wanted to follow up on free cash flow generation, and then capital allocation or 24.

Kathryn Ingram Thompson: In Q1, you had a nice increase year over year increase of 26%.

Kathryn Ingram Thompson: With free cash generation, but most of it was driven by lower Capex.

Kathryn Ingram Thompson: Last year as you as you look at capital deployment for the full year.

Kathryn Ingram Thompson: How should we think about the cadence of.

Kathryn Ingram Thompson: Capex versus dividends and share repurchases, which are lower this year.

Kathryn Ingram Thompson: And M&A activity.

Christopher P. Calzaretta: Yeah, so on CapEx, you're right, a lot of the favorability in Q1 was due to the timing of CapEx. And I still expect CapEx to follow our kind of historical patterns. I mean, we don't inform or guide on that quarterly, but you can see that our range has not changed from that 80 to 90 million dollar range for the year. In terms of dividends, so again, 12 million in dividends in the quarter.

Christopher P. Calzaretta: Yes, so on Capex Youre right a lot of the favorability in Q1 was due to the timing of Capex and I still expect capex to follow our kind of our historical patterns. I mean, we don't inform or guide on that quarterly but.

Christopher P. Calzaretta: You can see that our range has not changed still in that $80 million to $90 million range for for the year.

Christopher P. Calzaretta: Terms of dividends, so again $12 million of dividends in the quarter.

Christopher P. Calzaretta: I just take a step back from an overall capital allocation perspective. Our priorities haven't changed, and we continue to look at returning cash to shareholders by way of dividends and share repurchases as our third priority, with share repurchases continuing to be a flex. You can see in the first quarter, our share repos were softer than they have been, and that's just evidence of the flexing of the share repurchase program opposite the three-form acquisition here that was on deck as we entered the second quarter. So no change to how we're thinking about it, no change to our strategy, but certainly a little bit of noise here and timing on adjusted free cash flow in Q1, as you pointed out.

Christopher P. Calzaretta: I just take a step back from an overall capital allocation perspective, our priorities haven't changed.

Christopher P. Calzaretta: And we continue to look at.

Christopher P. Calzaretta: Returning cash to shareholders by way of dividends and share repurchases as our third priority with share repurchases continuing to be to be a flex you can see in the first quarter our share repos were softer than they have been and that's just evidence of the flexing of the share repurchase program opposite the <unk> acquisition.

Christopher P. Calzaretta: <unk> here that was that was on deck as we as we entered the second quarter. So no change to how we're thinking about it and no change to our strategy, but certainly a little bit of noise here and timing on on adjusted free cash flow in Q1 as you as you pointed out.

Kathryn Ingram Thompson: So is it fair to say that, just for the balance, broadly, excluding any other significant acquisitions, there shouldn't be any meaningful change year-over-year in terms of capital allocation priorities?

Christopher P. Calzaretta: So is it fair to say that just from the balance broadly.

Kathryn Ingram Thompson: Excluding any other.

Kathryn Ingram Thompson: Significant acquisitions, roughly there shouldn't be any meaningful change in your view in terms of capital.

Kathryn Ingram Thompson: <unk> priorities.

Christopher P. Calzaretta: I think that's fair.

Speaker Change: I think Thats I think Thats fair.

Kathryn Ingram Thompson: OK, and I know that the horse has been beaten a bit on guidance. But from our perspective, what you've been saying about volumes today doesn't appear to be meaningfully different from what you said when you reported Q4 earnings. Am I missing anything, and has anything changed that perhaps is a little more nuanced than what you had said for Q4 earnings? Thank you.

Christopher P. Calzaretta: Okay and no debt.

Kathryn Ingram Thompson: Horse dead horses, and beaten a bit on on guidance, but.

Speaker Change: From our perspective.

Kathryn Ingram Thompson: What <unk> been saying about volumes today.

Kathryn Ingram Thompson: It doesn't appear to be meaningfully different than what you've said when you reported Q4 earnings and I'm missing anything and has anything changed.

Kathryn Ingram Thompson: That perhaps is a little more nuanced than what you had said.

Victor D. Grizzle: Yeah, thank you, Kathryn. I think that's exactly right. We're communicating that there's nothing that we've seen in the market that has materially changed our outlook for the year, for the first half, for the back half, and for the total year. The markets seem to be fairly stable at this point, moving sideways, if you will, for the market that we've been experiencing for the last several quarters. And all indicators say that we're probably on track for a little lower economic activity in the second half.

Kathryn Ingram Thompson: For Q4 earnings Thank you.

Speaker Change: Yes. Thank you Catherine I think thats exactly right.

Victor D. Grizzle: Communicating that theres nothing that we've seen in the market.

Victor D. Grizzle: That has materially changed our outlook for for the year for the first half and for the back half and for the total year the markets seem to be fairly stable at this point moving sideways. If you will for the market that we've been experiencing for the last several quarters and all indicators say that we're probably on track for a little little lower economic activity.

Victor D. Grizzle: The back half so no change in our volume outlook and.

Victor D. Grizzle: So no change in our volume outlook. And again, even in this softer condition, we plan to do a really good job on productivity in our plants and growing our AUV, making sure that we're more than covering inflation and expanding our margins. So that's the play we ran in 23. We ran it again in the first quarter, and we plan to continue on that in 24. Thank you for that clarification.

Victor D. Grizzle: <unk>.

Victor D. Grizzle: And Ken and even in these.

Victor D. Grizzle: Softer conditions, we plan to do a really good job on productivity in our plants in <unk>.

Victor D. Grizzle: Growing our <unk>, making sure that.

Victor D. Grizzle: We're more than covering inflation.

Victor D. Grizzle: And expanding our margins.

Victor D. Grizzle: That's the play we ran in 'twenty three we ran it again in the first quarter and we plan to continue on that in 'twenty four.

Victor D. Grizzle: Thank you for that clarification.

Philip H. Ng: Your next question comes from Phil Ng from Jeffreys. Your line is open.

Speaker Change: You're welcome.

Philip H. Ng: Your next question comes from Phil <unk> from Jefferies. Your line is open.

Philip H. Ng: Hey Vic, thanks for the color around Kathryn's question. I guess looking beyond the back half of 2024, you know, if the ABI and Dodge start data softening a little bit this year, and just given the lag in your business, is that a risk that could spill over to 2025 that we should be mindful of where volumes could... You know, take another step down, or you've seen pretty good bidding activity. The hope is perhaps stabilization as we kind of look into 2025.

Philip H. Ng: Hey, Vic thanks for the color.

Philip H. Ng: Round Catherine's question, I guess looking beyond the back half of 2024, the Abi and Dodge Dart data softening a little bit this year.

Philip H. Ng: And just given the lag in your business is that a risk that could spill over to 2025 that we should be mindful of where volumes could.

Philip H. Ng: Take another step down or you've seen pretty good bidding activity to help us to perhaps stabilization as you kind of look into 2025.

Philip H. Ng: Yes, the API.

Victor D. Grizzle: Yeah, you know, the API is quite publicized, right? And we've said for a long time that API is, is, is a weak indicator for our business, really. But I will say, even within that, from a correlation standpoint, it's kind of a weak correlator. But even within that, when you peel back the ABI, there are some mixed, actually, positives and negatives in that. And so.

Philip H. Ng: Is quite.

Victor D. Grizzle: Publicize right.

Victor D. Grizzle: And we've said.

Victor D. Grizzle: For a long time API as a as.

Victor D. Grizzle: As a weak indicator for our business really it.

Victor D. Grizzle: But I will say, even within that from a correlation San Francisco kind of a weaker later, but even within that when you Peel back the Abi Theres, some mixed actually positives or negatives in that and.

Victor D. Grizzle: So.

Victor D. Grizzle: We're not overly concerned about the ABI reading that came out in terms of our outlook for our business, not in 24 and certainly not into 25. We'll keep an eye on it because it is an indicator, but we look at our bidding activity, the Dodge bidding activity in particular, and look at that across the verticals and, of course, in aggregate, as other indicators to look at overall economic activity. And again, it was fairly flattish, so it's... It's all kind of pointing to a very stabilized, a more stabilized market moving forward. That's kind of what it feels like to us.

Victor D. Grizzle: We're not overly concerned about the Abi reading that came out.

Victor D. Grizzle: In terms of our outlook for our business.

Victor D. Grizzle: 24, and certainly not into 'twenty five we'll keep an eye on it because it is an indicator.

Victor D. Grizzle: But we look at our bidding activity the Dodge bidding activity in particular and looking at that across the verticals and of course in aggregate.

Victor D. Grizzle: As other indicators to look at the overall economic activity and again it was fairly flattish so it's.

Victor D. Grizzle: It's all kind of pointing to a very stabilized a more stabilized market moving forward, that's kind of what it feels like to us okay.

Philip H. Ng: Okay, that's really helpful. I guess a question for Chris. I think in your prepared remarks, you said about 50% of the upside in EBITDA in your guide was three forms. Does that shake out roughly EBITDA margins in the 11 to 12 percent range? I just want to make sure I'm thinking about it correctly. And when you think about that business longer term, what's the growth profile under Armstrong's watch, and what are some of the applications that that product will have?

Speaker Change: That's really helpful.

Philip H. Ng: I guess a question for Chris I think in your prepared remark you said about 50% of the upside in EBITDA and your guide was three forms does that shake out roughly EBITDA margins in the 11% to 12% rate I just want to make sure I'm thinking about it correctly.

Chris: When you think about that business longer term.

Philip H. Ng: What's the growth profile under Armstrong is watching what are some of the applications.

Chris: That product is typically use it right now.

Christopher P. Calzaretta: Yeah, it's a good question, Phil. Thanks.

Chris: Yes, it's a good question Phil Thanks, Yes, so looking at.

Christopher P. Calzaretta: Yeah, so looking at EBITDA margins in that, you know, low double-digit range is kind of how we think about that kind of initially. And then, obviously, we've been able to demonstrate shareholder value creation through, again, as Vic mentioned, integrating these acquisitions, bringing them onto the Armstrong platform, and then, you know, driving additional value creation through top line and cost synergies. But to answer your question directly, it's initially in that low double digit margin range. Yeah, I was just going to think about it, oh, sorry, go ahead. No, go ahead, Phil, go ahead.

Christopher P. Calzaretta: EBITDA margins in that low double digit range is kind of how we how we think about that kind of initially and then obviously we have been able to demonstrate.

Speaker Change: Shareholder value creation through again as Vic mentioned.

Christopher P. Calzaretta: Through the App.

Christopher P. Calzaretta: Integrating these acquisitions, bringing them onto the Armstrong platform, and then driving additional value great value creation through topline and cost synergies, but to answer your question directly yes. It's initially in that low double digit margin range.

Christopher P. Calzaretta: Okay.

Christopher P. Calzaretta: Jack.

Phil: No no go ahead I was going to ask.

Philip H. Ng: I was going to ask Chris if he was going to miss the growth profile of this business and some of the applicants. Yeah, you know, it's similar. We think that the leverage opportunity is a little larger in size, right? So we think it's similar in terms of getting it exposed to more architects' offices and services through our distribution network. We think there are some real revenue synergies in that business as well. It's a well-established business, right? So that's another aspect of this business, which is a positive that we'll be looking to leverage as we bolt it onto the Armstrong platform, the go-to-market platform for Armstrong.

Christopher P. Calzaretta: If Chris was going to Miss the growth profile of this business and some of the applications. It used.

Philip H. Ng: Yes, it's similar we think that the leverage opportunity, it's a little larger size right. So we think it's similar in terms of getting it exposed to more architect's offices and service through our distribution network. We think there's some real center revenue synergies on that business as well, it's a well establish.

Philip H. Ng: Business right. So that's another.

Philip H. Ng: Aspect of this business, which is which is a positive.

Philip H. Ng: We will be looking to leverage as we.

Philip H. Ng: Bolt it onto the platform to go to market platform of Armstrong.

Victor D. Grizzle: Okay, so we should largely think of it as pretty comparable from a growth standpoint to how your AS business is growing currently, and I guess that's a lot, and since it's a larger deal for you, how quickly do you think you could bring some of these products on to your existing distribution relations, and is there an opportunity to kind of leverage some of your products into the relationships they already have that you call on the independent side of things?

Philip H. Ng: Okay. So we should largely think of it at pretty comparable from a growth standpoint to how you are.

Victor D. Grizzle: <unk> business is growing currently.

Speaker Change: Yes, that's correct.

Victor D. Grizzle: Since it's a larger deal for you.

Victor D. Grizzle: How quickly do you think you could bring some of these products onto your existing distribution.

Victor D. Grizzle: Relations and is that and is there an opportunity to kind of leverage some of your products into the relationship. They already have that you called out on the independent side of things.

Philip H. Ng: Yeah, with their established network, there are reverse synergies as well with this well-established network that they have. So we're gonna be after it very quickly here. We're gonna run the play that we've run at these other acquisitions. There will be a sense of urgency on the integration side to get everybody up to speed on each other's products. And yeah, we have a team on the ground today starting the process. Okay. Great. Okay, thanks, Phil. Thanks, Phil.

Victor D. Grizzle: Yes, with our established network. There is there is reverse synergies as well.

Philip H. Ng: With this well established network that they have so we're going to be after it very quickly here, we're going to run the play that we run at other these other acquisitions.

Philip H. Ng: There'll be a sense of urgency on the integration side to get everybody up to speed on each other's products and yes, we have a team on the ground today.

Philip H. Ng: Starting to process.

Philip H. Ng: Okay.

Speaker Change: Good color.

Speaker Change: Okay. Thanks, a lot.

Operator: There are no further questions at this time. I will now turn the conference back over to Vic Grizzle for closing remarks.

Philip H. Ng: There are no further questions at this time I will now turn the conference back over to Vic Grizzle for closing remarks.

Victor D. Grizzle: Yeah, thank you all for joining our call today. We're obviously very excited about the start of the year and the markets that we're in and how we're operating in the markets that we're in. And we're extremely excited about the addition of 3FORM to our portfolio and what it can mean for the entire business model by having this additional portfolio to leverage. So thank you again. Look forward to updating you next quarter.

Victor D. Grizzle: Yes. Thank you all for joining our call today, we're obviously very excited about the start to the year.

Victor D. Grizzle: And.

Victor D. Grizzle: The markets that we're in and how we're operating in the markets that we're in and we're extremely excited about the addition of three form to our portfolio and what it can mean for the entire business model by having this additional ports.

Victor D. Grizzle: Portfolio leverage so thank you again look forward to updating you next quarter.

Operator: That concludes today's call. Thank you all for joining. You may now go. Please wait; the conference will begin shortly.

Victor D. Grizzle: Yeah.

Operator: That concludes today's call. Thank you all for joining you may now disconnect.

Operator: Please wait the conference will begin shortly.

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