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Armstrong World Industries (AWI)

Participants
Tom Waters Vice President, Corporate Finance
Vic Grizzle Chief Executive Officer
Brian MacNeal Chief Financial Officer
John Lovallo Bank of America Merrill Lynch
Maggie Grady Jeffries
Susan Maklari Goldman Sachs
Brian Biros Thompson Research Group
Keith Hughes SunTrust Robinson Humphrey
Kenneth Zener KeyBanc Capital Markets
Adam Baumgarten Credit Suisse
Stephen Kim Evercore ISI
Yves Bromehead Exane BNP Paribas
Justin Speer Zelman & Associates
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter 2020 Armstrong World Industries Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Corporate of VP Waters, Finance. Tom ahead. Sir, please go

Tom Waters

our during live you reference call note Thank release Investor will our Hopefully, the the of expected this that and this presentation on and and Actual being implied. statements the seen Please on With are you this website are at to call, CEO; involve you. morning forward-looking and call both and and our broadcast is call uncertainties. those will morning Grizzle, or outcomes posted Good release call that the Relations the Brian our media me CFO. section. press to website that armstrongceilings.com. members we listen this welcome. on differ in Vic the may have from our today risks making I be invited been advise MacNeal, during materially Brian have

more affect detailed of a earlier and Industries, XX-Q risks SEC including this the our World morning. filed review the Armstrong For filings, that may discussion uncertainties please

are statements they of applicable beyond law. is by only We undertake update as forward-looking the what required date obligation statement speak securities any no Forward-looking to made.

the non-GAAP discussion the press of Regulation release and In over performance addition, Both to measures the that, call the of in available included presentation. the of I’ll GAAP are website. is measures With Vic. financial of measures most meaning will with G. our the include these on within reconciliation operating turn SEC A directly our appendix comparable in

Vic Grizzle

good and everyone. morning, Tom, Thanks,

altered has and the But colleagues, significant in continue been quarter nonnegotiable most been that when everyone well. proud this in and extraordinary and I'm of very the are with hope be staying Armstrong, Safety challenge. know, many recent on your I all a safe along always you As challenge. are at to how has and rallied face ways, challenging will a and unusual this has Armstrong team these this and unique was but extremely your call, of families service, virus to This you times, operating just innovate safe new and these. have installed challenges working continued and and safety, barriers, cleaning levels installed In create a of our methods has operating our distribution done find our to of demonstrate accustomed problem new unique are processes, organization performance facilities, like innovation and manufacturing created a at these, energy a team The adopted lot and that. solving like of world-class for environment. to customer and passion and to to procedures practices numerous you teams has

As meeting of our customers. levels customer metrics, I've working running measure. well are to and meet and order safety, Output order changes today, been the service and March, service middle Since one very the levels. maintained our been I've multi-factor perfect needs positioned. service that our of plants our maintain It's all a customer conditions up our important the monitoring closely has required the are levels patterns, we been aligned pre-COVID of pleased in centers to at distribution demand high and remote unpredictable of our of inventory despite and have of factories gauge quality. most

remotely continue and remote increasingly sales headquarters Our and staff work work. at to have adept become

engaged important more Our us with partners. ever, customers now set than fully is our digital tool and allowing our to remain

capabilities platforms, the areas. to in And digital expand significant our usage order. our we pandemic, seen quote of one-quote have have self-service these to this We during continued and

architects, us cover But DESIGNFlex tool more an capabilities project to pandemic, to of works creates example, as family works platform, design out For project in work our products. core during launched installation expanded designers spaces with much product healthy and support for enabling products, intensified working in our the was concurrent and demand efforts instructions the drawings, bill enhancer materials productivity as environment we've conditions. initially which format for In efforts. during sequential these we automate have this evolved of remote major quoting driving contractors, low the our April. rolled a quarter, has Also, for all a heightened improvement point innovation interior need in the been this which and from pandemic with expected

City in in discussed X by regions Boston. mandated now, X the California the and albeit country. rest on rest call, than the slowly, seeing line territories, subject Collectively, more in sales given top drops sales as our our down were XX%. of they are X were New these last which the significant territories the seven top are demand premium were As impactful. AUV in and sites to government In have These These were as of XX% late to in territories the now key new quarter, down York the shutdowns. we are April, reopening tracking all and of such especially safety key territories, country, includes with we Northern an construction protocols territories required so other the territories

most we versus decades. seen cancellations sales represents have the relatively in $XXX down were have the tend of decline year. be In We experienced million year-on-year remodel small very are prior of seeing to that quarter, largest XX% quarterly few the we projects. cancellations and This

end positive we end of the Adjusted shutdowns, the territory/mix year we the getting the flat EBITDA as drove high-end The earlier. by continue was a half as offerings, generation our quarter mix result. of saw were first is and the of we continue new way continued quarter. beginning quarter, offset year, and outpace mix the XX%. learned XX% for volume the product throughout from the the as decline. activity quarter, with year-on-year expect was as million positive the $XX well by better and capital. including of these Despite pace position contractors pricing where earnings at key primarily like-for-like long of Total the our construction each with trends the the but inventory Commercial from portfolio. product Sustain improving, for and by to progressively mix level, to delays slower, the liquidity be improved we $XX full-year to minus quarter, first positive I project see was Within positive reductions driven in from quarter, reopening down the the April's positive moved mentioned moderated from headwinds, safety the guidelines. AUV the within Acoustics Price territory territories. in to and headwind lower as million work cash the declines we At the albeit continued of is distributor is working to our positive Volume month issues government

expect on will basis. July Over sales productivity, continue that the to the a encouraged are sequential and remains levels And encouraged these Month-to-date the by we are of marketplace the half their in we by are improve uncertain. weekly June. second sales of seeing trajectory I'm over we improvement they year, trends, showing of while

are such, As not our reinstating detailed yet XXXX. we normal guidance for

providing details full-year. expecting are XX% wave note think possibilities for will -- I outlook we we and of to to XX% improvement assuming the now the in no of sequential we likely, that range in will shutdowns. outcomes second the on However, range provide is Brian are range the moment, sales and continued a be an but of down

in walls seen walls. and leading in and architectural are and specialty sixth approximately design Specialties felt-based to felt further you've our Chicago our flexibility. ceilings, morning, With ceilings in leading is the our the in $XX sales, in annual This our And another specialty announce acoustical enhances Turf enormous excited past million acquisition Design. we this barrier space. provides As three release growing based a within segment, fast position Turf and Architectural press is is acquisition solutions. of It category custom-designed provider performance the years

this skilled due is especially center capabilities for leading Turf an need showroom product. of existing Fire especially unmatched and and also not respect for downtown felt table with increasing solutions, in the design of an Turf's barriers products combined design to capabilities the team custom and called just the healthy interior in but manufacturing on-trend out brings renovation the Given offerings COVID-XX, Chicago. Armstrong's portfolio spaces. working a House and to

a ceiling and life, to position specifications the leading go-to-market already brings products established their firms segment. XXX% Architectural independent contain recycled with to sales on specification Armstrong network specialized recyclable products. strengthens will in our wall an proven XX% and Turf within go-to-market complementary the accretive driving leadership are and interior at up be Turf to profitable is Turf and capabilities. of Armstrong's addition, material further In approach position design sustainable focused further end Specialties of and writing the This strengthening community. also overall felt useful

Armstrong. We to are team to welcome Turf the delighted

announce more and fact financial announce to transaction environment, great a demonstrates this acquisition. But be the It business. the the even we any would for to current Armstrong I'm of given this Now open at are time. pleased that strength

Our the set we to future and the build industry. specialty the sights are on continue strongest on to platform invest walls as in ceilings

and growing And us financial continue remains strategically we as strength do active is our pipeline pursue M&A so. opportunities. to Our to allows important

Directors to interior Our last digitalization with profitable drive investments process pivot and with newly strategic required will continue are as week. healthy plan financial that R&D commercial cash plan our our and do the builds reviewed believe our we efficiencies our we of become to completed current years. coming just to priorities planning in building to The space We business the as within meet in growth strategic efforts and products And easiest operations. ongoing as strive company flow as Board the the we strength requirements spaces. our annual numerous exciting well on drive

this our cash a of million the flow of the free to as billion and our extended acknowledgment further generation, strong program Board program XXXX. to repurchase December $X.X of result a increased As and maturity $XXX our share by review

we gain as the market in desire against environment. construction we uncertainty the current with caution look the commercial more proceed on demand prudent to the clarity in expect but and authorization recovery cash, to executing Given conserve this to our we the short-term, upsized forward and overall

to will over guidance, Brian to Now results then about to and turn with trends that, the are talk will to Brian? I financial I call and see. back our beginning review come we the

Brian MacNeal

year. be as on on referring to will results. reviewing results. X second X Sales details be I Slide second prior Adjusted will Thanks, of of per Slide earnings. But million friendly lower flow our $XXX Adjusted $X.XX year, Adjusted quarterly fell on everyone Beginning XX%, earnings prior diluted reminder, and points. 'XXs. Today, $X of XX% Vic. since slides cash call. decline morning the basis were and begin, basis XX% our our least the to fell Good XXX our EBITDA available by share margins for driven million contracted by over before the website free presentation. I down at versus XX%, quarter the our I a improved quarter or largest

balance cash at quarter-end Our million. is $XXX

million as last available availability is of $XX is Net positions $XXX September million million our revolver quarter cash million year, of earnings. $XX $XX up from $XXX million last in million a lower up result refinancing Our driven by us from $XXX of of than with XXXX. up and This debt liquidity, year. last

is As ratio versus the of EBITDA of credit agreement. quarter the calculated terms under as last end, our our X.Xx year debt to net X.Xx

Our covenant is X.XXx. threshold

we of of considerable repurchase the million inception repurchase preserve any as light COVID-XX we suspended $XXX price in the liquidity bought cost the headroom an a $XX.XX. the repurchase not of In impact have we in for measure. at our we on shares did So Since program, average back this to X.X quarter, million market. the have activity shares of

program, December have in now million increased now this We mentioned, which extended. under program has XXXX. Vic repurchase remaining our $XXX expires As been and

inventories. rate. as a Turning and outlook. factories. volume These at lockdowns on plants was we Slide territory headwind have Raw despite impact flat of down strong favorable to costs energy our decremental our SG&A disruptive investments and markets the line, performance EBITDA our sharp we declines quarter. was adjusted demand more EBITDA get AUV, were our of in we of now aided our reduced manufacturing was ongoing favorable, to their customers been mix a by productivity the through falls key a expenses X, to drove higher the as manufacturing light gains in sensors deployed have top the both as XX% COVID-XX were while related and segments as than material continued X,XXX managing digitalization from in now seven

result as shows review adjusted are the prudently working quarter mineral cash reporting. free XXXX our impacted a expenditures our cash I outlook. generation was WAVE's million, the to X XXXX up fiber even we expense year. we sales spend In regards short-term, aided in were Slide declines cash I prioritizing managing X XXXX. distribution from segment favorable will Pandemic were were quarter was entire capabilities, a of free capital the XXXX. second our related Interest with as our the the refinancing initiatives was circumstances. is $XX in and more XX% as of our free are we Slide volume lower story Fiber to down are cost flow Cash up lower decline. by the sales quarter continuing year-on-year result versus While essentially flow investments a costs challenging same Mineral XX% in long-term. when versus begins under of volume our versus address prior by performance XXXX. testament make Armstrong's reduction COVID-XX. to in September the capital cash Capital operations our in were detail for we Adjusted versus flow was facing issues business. strong best-in-class down, the

As through pricing territory $XX mentioned, the up fell line. bottom million decline the was and the to was top like-for-like with down. EBITDA as flat mix Adjusted down Vic line, AUV volume on

that As than the productivity contributors Manufacturing territory input greater demand. had were spending even deflation an cost negative contraction. EBITDA positive were by in and cost volume on mix impacted SG&A all controls, to fiber earnings our WAVE mineral same contributed I and the sales mentioned, reduced quarter. impact and margin affected headwinds on

Slide is essentially story X. same. on Architectural The the Specialties segment to Moving

volume line. As large the bottom Architectural were fell delayed shut to Specialties the construction shipments and sites declines down, through were

was $XX second quarter September half flow, of as Capital free bridge, the down XX results. to taking adjusted free can year-to-date not As Slide jobs Vic costs, shipments and Slide actions note, vast up. sites bridge. historically year-to-date results prioritize May, the guidance. million, quarter in is year-to-date impacted less our we XX mentioned, the shows year-to-date WAVE good by majority which is first cash lower the volume see X decline in than for result provide normally the in our Interest in are seen up a Starting that a Mineral of earnings bad second quarter of and flow, we well have including expense the dramatic driven by Slide reflects input favorability Slide are EBITDA encouraged that combination reflects sales is as is near-term. flow and we reopening operating productivity a cash and Of cash job cancellations. the are line as SG&A. our expenditures of our XX%. our of delays we XXXX. XX% year-to-date picking were pandemic, where capital. down our up Fiber. stopped although And you impact The delaying XX%. with refinancing are first in cash XX and clearly working

lack suspended. clarity want about do our provide remains some how We in the the are given we mentioned, insights however detailed thinking financial Vic market, guidance XXXX. into As to of

We've strong third applied we excludes XX%. will our savings instituted flow last believe to in drive our of range of we to quarter the expect are million expenditures be $XX of of of actions, primarily to of will of Given related of continued shortly, trajectory and will cost will EBITDA we $XX fourth year. capital margin flow million to our to bill. growth, to manufacturing coupled in half $XX and quarter XX%. drive SG&A use of $XX manufacturing will which million cash down million the and of Qingpu bid XX%. AUV sales free cash sale and These actions the tax the plant China, the free and a XX% to international to down in second which from seeing, sale losses full-year the and million, XX% additional sales XX% favorable XX% business, with tax SG&A, adjusted reduction XX% we year's This EPS the range that reduction adjusted in reductions, input a receive activity productivity to ongoing margin costs, an our $XX be benefits of With currently

excited earn-out The or mentioned, completed Turf. $XX reflected for under outlook plan. feature our consideration this months' cash is of we've in has little more million updated and are last that to As a acquisition incentive This this Vic been long-term designed just want Xx an XX EBITDA. multiple we of I of similar is transaction the total that the on details action XXXX, to provide

cash high includes additional strong and certain already to investor for single and XXXX medium foundation payout at on cash multiple and XX% objectives resulting aside, is annual model. for margins, if Slide to The XXXX. measure performance is also of EBITDA in a XX be contingent contingent consideration measure drive value our this a a class capped XX% of to This grow rates adjusted year, finally, built million year. through the to that team, deck Full it sales our is achievement performance requires business management and creation growth in believe for achieve is be even the of times, they Armstrong under digits and flow total doubt happy faster; compound payout Similarly, achieved, EBITDA payable EPS just to XXXX. $XX we performance. through expand contingent of performance a This Our that of strong EBITDA certain challenging very excess grow XXXX. additional borrowed consideration million. is targets. consideration a best taking with is XXXX compound agreement for requires grow free in creation in have target at performance from for there XX% we'd Turf above is I Xx. but through rates we no have target is includes level every growth long-term revenue payout per upon up from to each future standpoint, by XX% each additional based in than growth this the These maximum cash If annual $XX greater value would coronavirus. uniquely positioned unchanged succeed. are an maximum model consideration annually and growth is excess XX%

We best industry, best unparalleled the and best service, that, best fully Vic. back the I leading on in turn products, the margins, cash industry of to have innovation expect free creation this capital on emerge model intact. With generation. value crisis with to other side pipeline, best-in-class will distribution the We brand, return invested our flow it the

Vic Grizzle

Brian. Thanks,

commercial but May as due and the has and weeks, new CDC its has about activity, before guidelines mentioned, encouraging is activity in we take of originally and activity their a Generally construction done and July up, and from of I were projects as there significantly talked are seeing in than imagine, sign we activity. versus last bounced ramping as but in As back April down ahead I sequentially construction as imagined year. seeing new improving want bidding what positive discuss past evolving shutdown minutes Bidding current normal month-to-date improving cancellations. protocols, turned this we I level more are few you actually the as very to environment. that so mentioned. Education back adoption declined look to an we four are XX% to we economic for improved in These have still expected. have the there slowly Projects would and seen there, an few to we're safety

expect design prior advantage current most that pipeline activity construction took office requirements that to get renovation a need to will project classrooms planned projects there in new and than as empty likely were make to schools it's be started education will going the are companies work. of construction to years renovations. earlier major repairs With and space assess said, as completed started as that New pause reasonable beyond new and

our how the get the into effort big from make continue as to months summer in this get and COVID-XX. uncertainty schools. The vaccine much get renovations in a over the they fall. will for there to will until normal. whatever money maybe back positive view, for In There will renovation the net safely systems classrooms in be market expect school an kids a government additional federal remain months the is We activity in next significant question to be six

the that on second downs are mandated created quarter. the potential our in outlook, of So continue we outbreaks shutdowns expecting parts and we are in country. staying not likely In like ups the by experienced are vigilant the we various to government regional

settings data verticals into clean Today, pressure retail these offices Existing flexibility air ceilings other learn Health and schools clean our control work increasingly prevalent. cleanability, spacing systems or virus new us. the safe family what hybrid will customers, are redefined these than will we in safety spaces flow which is room means changes cetera. next and new be so Health will within HVAC and is and this Now, being speak. applications and the X-month of from gasketed of Zone will we healthy sold impact in patients, on to thing and definition increased and healthcare systems, meet office now this healthy home period, as behave safe for think beyond products modes from and significant. centers spaces as certain. other. no suspension required the enhanced in are true. offices longer rooms, in is our what and we and think Upgraded how XX% schools, of et One labs The students, home, in with opportunity commercial a will Therefore, constitutes more antimicrobial and old be have workers, expectations become space products definition. facilities be commercial The accommodate to of still like

likely and the flow We phases These to are manage next also to working few come healthy over years. to additional create develop spaces. air are in more changes ceiling better solutions

these will to workers in as kind get customers quick changes as and phase first and and students soon back require of possible. makeshift spaces The

The optimizing making changes permanent systems the these likely -- focus second phase phase of finally, phase learn layout major result phase is And reimagining more and work is to and third workers structurally in students the so changes. office for and and office is how and best third likely classroom spaces will on many renovation involve collaborate This best involve to of to how and change a forth. and configurations.

we're remodel their and subject catalyst the these remodel the way repair at been coming transportation. And these first these commercial this has a renovation especially under Each repair billion feet Now, we have to on excited phase REITs own their XX% phase XX and be about commercial has Therefore renaissance options AWI, projects. as as commercial seen we of Because healthcare base average, three and retail the new This like the this sales are square schools roughly changes of many of what situations. has diverse renovation large in operators XX% At existing catalyst space U.S kinds our office, now. or a XX% suspended changes and and AWI, may are is no and is or composed the phase of space alone. mix are this of in But of already discretionary. largely tied in two about installed and are borne longer a of decades. thinking of spaces organization a Commercial verticals and a health of discretionary to state-local of been crisis, mid financial health Making teens activity. view to in not have budgets. spaces. ceilings

commercial the We sustainable brand are ceiling most the well for healthy leading as with positioned solutions spaces.

opportunity years. timely will our Board require a market Meeting. The industry-leading of so this our increase the Board our is mentioned Directors pillar come. likely over cash that around in in market, our our We renovation plan has unlike for earlier, is with for to in to the what billion coming is of over a the been solutions and confidence many, Our catalyst continue supply July customers. be we repurchase quality, plan seen construction this we’ve share ability anything for the reviewed many and is spaces Armstrong years. renovating for innovative generation next and ceiling three and leader for catalyst excitement $X.X to most years to the Board our the the commercial motivated years of new authorization and our wall in are clear This highest decades, strategic our with we've commercial to activity us products

have distribution architects, We partners developers. the and relationships great contractors with leading strong and

we out market As positive evolves construction also, of will industry. evolve commercial we the crisis, this this will in and drive change

usage For the take believe will our make a by leadership greater ordering we role example, we digitalization in to and commercial process design, promoting customers of product delivery much efficient. more

forefront changes and excuse in require of believe grow industry business now As will also -- me, further leader believe this. these healthier further run our to will long the allow at the our We construction will be Armstrong market like we market the commercial position. buildings, leadership cement a we

growth. specialties new penetration the with profitable top Armstrong segment, to architectural for So with renovation, resume line this well positioned along into our continued is catalyst

We continue changes, to and And live, and strong with for deliver will take our adapt and spaces making to heal of happy are will positive these where we in ready grow and shareholders that, your work, difference returns be play. we a questions. continuation through learn, for people the

Operator

Your America. [Operator of Lovallo of comes line Bank from question from Instructions] John the first

open. is line Your

John Lovallo

my for you Thank questions. guys. Hey, taking

the Fiber, In as have Brian. then half decremental would higher on Should remainder The though Architectural the should we bit of this a the what think that it back understand Specialties the and improve us the And XQ. on year? year? how in XX% side, than first the XX% to decrementals little about regional was Maybe expected. help margins, we about looked one in Mineral of mix improves drove

Vic Grizzle

ahead, Go Brian.

Brian MacNeal

it's John, great Yes, question.

actions, As of back them we at out the our a cost half. look good majority are in

we're XX% we XX% So see what and QX, from come so decremental down in that we range. to in that saw hit should

John Lovallo

Got it.

we the delta simply if just process? just think things Okay. your there Thank of XQ thought sort be slower mean, was thoughts then of as would thoughts Vic, then, and to about really what being over XQ, as reopen? sort in post maybe is it biggest helpful. you. And evolved your I Any

Vic Grizzle

would that you try -- there lost in the continue would guidelines surprised the mean, the many people cities of these would to restarted us I CDC a -- new continue. this productivity, you work going would is April, -- things mentioned how one and they right, And and and back the eventually or adopt will, most if spacing open in can say I the an how the uncertainty and that I even deep of that think that and again. a it and would up was it, would we one, sites these think get get all I crew go Yes, how But can getting how long right, it lot to sitting might elevator, long felt many up you in whole was said imagine up job take. to on

I watching those that by that cancellations. saw did the see the sites and of of flow cancellations, and of I The long job there sites. what be product or would whether some be the was were throughout they periods one into were that So as things before serve not still to job improvement they shutdowns, we time. that massive for that few ones quarter starting pipeline, when lifted, these the reopen We opening large very like we delayed they be and of is that were was think our slowed back would see there pleased the expected had the of were there that some the because there. back I would sequential but projects we The these we mandates encouraging. and in again or ones was though, jobs canceled up, And to hypothesis

John Lovallo

Great. Thank you, guys.

Vic Grizzle

Yes. Thank you.

Operator

question of next Your Phil from the comes Ng from line Jefferies.

line Your is open.

Maggie Grady

guys. Maggie in sales morning, outcomes off pretty range guess I good This with big a is on guidance implies Hey, half. start the full-year the of Phil. just second

to call XX% out is through just XX% to for different you Mineral trends could get you that if And AS. if maybe there So the that end each between and want you Fiber with any the walk full-year? to scenarios decline

Vic Grizzle

can going run then from of scenarios, with of Maggie, and on jobs especially with Yes, level we jobs a the uncertainty imagine, happen you do that. to follow-on what's bunch

larger scenario these we've guidance capture the we -- done outlook we of of versus needed planning. to amount really tremendous to and got range ranges And because So some the of really scenario a an scenarios.

dampening wider the And at productivity seven territories back without their of jobs it, the assumptions to to well wider get on much we to But are about of think have. we big into that for. sure mandated these levels is how have so scenarios. detail capture these the of think to any provide on. and that make we key looking and shutdowns bracket looking well Again, around was outside when we some see outbreaks, for think going really what drivers these us government that are ranges. we're to open it we scenarios, purposely it Plus, it's continue bracketed are important it these some There I going ranges we effect they And we on in could up scenarios wanted and of happen. too around

around effects there're different regions, like these dampening those there recovery key scenarios -- dampened might in areas. look shutdowns, some that Although some no scenarioed we in a are some in of and what of

point. by at this So sales really driven

have scenarios. cost handle modeling We various our feel our our really and We really those -- think about I pricing. feel a costs on about we mix, the good control. good good We given

component does to Mineral comes to modeled to visibility Architectural well versus we've It project the going Mineral large have harder a the Specialties, up, to that the pipeline we're doesn't just it like Fiber predict demand in against and on continue shape think how really nature the is based on this there. that. business the of expect Specialties discretionary Architectural the I just to So and do market outperform we to down profile Fiber. that

Fiber an So business continue this, especially. in I environment like the Specialty Mineral to between expect see would we the two, will outperform Architectural

Maggie Grady

of Got or it. your That's Specialties, think players. then I most And touching more I local are guess competitors there on helpful. regional really Architectural

this near-term? So bolt-ons impact does maybe and have to share more appetite you seen over environment pipeline your M&A and the your pursue how gains that in

Vic Grizzle

one I matter were, environment, of change or to -- there in way of There's say didn't of they It think trajectory kind moving I fair not the were this not share a mean, Yes, is lot these to shut it's projects the activity really projects other. down. enough what right.

some So change that I'd and continue, that the the lot to these trajectory the be these say expect were advancing low to many companies trajectory, like that. but several Certainly, expect come to have no out of to in a quarter, really environment share we've continue been to I share this for in our now, years and have of in demand second in change with for no conversations trajectory. although no opportunities were that we share of struggling and gaining we're a and we companies gaining we

this product Turf have especially management the the Armstrong many very with for keep new category category, felt a bring strong capability. today. particular. team. that a pleased brings design in strong team. ability to with is know And owners wins have a the they some just things We you going is to the the how and They in synergistic marketplace and specification It's for exciting as management really very conversation are versus new acquisition a in product which advanced they But a company team, Armstrong us

have excited team. overall management them on are our We to

So we expect continue. to

believe I pipeline that as as pipeline business, remarks. the in to continues we my grow, and the for here, said mentioned prepared open are actually we -- We

Maggie Grady

for Thanks questions. my taking right. All

Vic Grizzle

Thank you. bet. You

Operator

Your next from from Sachs. question the comes Susan Goldman of line Maklari

Your line is open.

Susan Maklari

morning, Good everyone. you. Thank

Vic Grizzle

Susan. Hi,

Susan Maklari

running a in color where you of your July is just kind maybe of us trending things comments, question date first to more just relative July Vic, give how if to on bit is you wondered June. mentioned are June. ahead and is, could that My in I coming

Vic Grizzle

you not from covering improving sequentially you a effects June, you that also, seasonality June month look the June it's some July and would It's July. but that to uptick I that movement Yes. for from can have seasonality sequentially only versus improving is month-to-month, see normal versus say and expect to

in the some we've nice in So of flow July. sales seen uptick

Susan Maklari

that between how encouraging. to color you in $XX reductions guiding that the much potentially you Can of of the us is then million. a $XX how are on hold start That's the just second to business some SG&A the model guidance give flow going the kind cost also my side, Okay. just the manufacturing for on perhaps kind as to bit on question much how expect kind more margins a breakdown of is could the volumes that million and of should versus much structural as we versus So more the back discretionary? of while to return? forward, we And

Vic Grizzle

and question, Yes, to color. it's a Brian I ask bit little provide good of will

just I approach in add effort. downturn we’ve in our made invest growth cost of particular that important at to to innovation -- and on we've continued year, on conscious to me a growing this beginning this in Let we've it's of the the say reductions, and to high-end that business, effort continue embarked we've think the initiatives investments the very the continued

the of the not making we've that going of our -- kind nice Susan future the Brian, company. eye outline team's done found right-sizing we're And nice a to could we investments and growth of balance these been that a a there, that's nice buckets so a you But and drive important team. that side an also job cost found sure the maybe we're referenced. really of taking initiatives really are growth couple demand business, on work the but off for And these on of the of we've balance really this front. And the management

Brian MacNeal

Yes, absolutely.

and variable more to it's volume. of XX% tied So,

our -- temporary, The improvement, reminder, like and we a to back and sequential continue comp variable vendors, come expect XX% into We P&L we more as third-party other to travel, is expect which meaningful in demand, I all obviously of XX% think, the Susan, be other in scrutinized. XX% that temporary. the variable short further is in is any is, would more answer setback But costs the event and XXXX.

Susan Maklari

you. everything. That's Good Thank helpful. with luck Okay.

Vic Grizzle

Thank Yes. you.

Operator

of comes Your Thompson from from next Research. line the question Kathryn Thompson

Your line is open.

Brian Biros

Hey, actually Kathryn. you good taking my morning. for for on is Thank Brian questions. This

opportunities. one, the post First maybe regarding COVID

kind you Armstrong fruit for and in more of in to some mentioned versus that these then out guys prepared there. the can remarks, if on of kind You participate reconfiguration that the low-hanging commercial near-term of like opportunities longer-term the in are but the more space expand

Vic Grizzle

that And and get have from HVAC that's happens, you renovation for of Thanks for around now. low-hanging At to think referenced, that think question. the as replacement and patch a in fruit, is any the Armstrong. plenum match the that you ongoing disturbances Yes. things into really layout or is whatever the -- for opportunity the I changes, lights, plenum changes,

real in some our layout own of make change to have that the had healthy. it our to campus more We examples of when we cafe

remove ceiling removed You the example have it to bar have for protect tiles bar hang ceiling and over to things be the changed. this salad the have that salad be and from therefore to to

forth the social to classrooms schools at we the an as just so, so of even But actually antimicrobial longer-term, Zone then are office Armstrong like I And to the it's change give moving the now, at fruit impact how believe of products, looking And types replace to with onset as distancing opportunities term going opportunity of medium and wrestling it footprint here. we are do as structurally HVAC see. be and do are the are and mentioned, Health all opportunities again. right or those how do us more create and companies will there the we tiles you and walls, some and impact and an those are renovation or lighting in diffusers type we relay the with your systems have longer which the changing ceiling on those so where out our opportunities also cubicle nice where configurations will ceiling, is that forth, and low-hanging

It's the this where we it way in So the office. know employees the do come to our healthy health think differently with this is the pathogens as redefined eyes. in to and crisis do this again, how we we from employees while about and come I think best spaces to we own being for us the renovation change my coming back a and to about think their are what And air best health be catalyst innovation, office, we we and think I going that's desperately activity, so our they're want back renovation is thinking overall collaboration. is how our expectations and to to

our manager, along CEO, owner, is what to these we lines students let as the back to business every in do well, have bet get I thinking alone classroom. students our So and

time. is excited we're side this -- a about So that long haven't overall of the real seen renovation a the we in in business catalyst

Brian Biros

the And occupancy the office, balance that back footprints, side guess pendulum, those I people for of of you downside lower office that? Got do other the are and how it. of for opportunities rates risk guess that How you kind and catalysts the to with come the with to smaller opportunity those I balancing two?

Vic Grizzle

for come balance, week. go not is Well, It's back time. to to there their the part direction. what employees office, the surveyed of know is do time, to a we to going to But XX% at XX% back that employees want least full right? all if in majority move not one want the office of of

that as out to the if move space renovation the of renovation have, Armstrong. gets the have they things reassess But company change opportunity the another Armstrong. generate So they in opportunity going That's for a space, That's even footprint repurposed. like they space. a for to

say, the So opportunity tenant they if it building we again, leases us. for to somebody says, else. let out And somebody don't of back that's to, need owner, improvement hey, XX% our go space, he a it

that, to more displacing space. they're need but when need other an the space. terms trend they here actually of eye keep is city-dwelling in as less space, they don't on where The say they they need Maybe suburban offices, much

to And of so counterbalancing there these. is both

company there renovation activity. opportunities, net XX% positive for Armstrong time, -- but it's relies think of like counterbalance over going XX% and they're a a demand to I overall and there's again, from that risks So is

Brian Biros

Thanks color. the for

Vic Grizzle

You bet.

Operator

Keith Your next question the comes line from from of SunTrust. Hughes

line Your open. is

Keith Hughes

questions. Two you. Thank

meaningful think a how far opportunity, any from renovation could up I is some mean, demand? away when this? you is this First, get it do business you year or to actually

Vic Grizzle

fruit think is right low-hanging now. going on I there

right the to in days, especially meaning the next classrooms. -- get I they think XXX into now, mean XX I as and the back

and we and -- be to other going that's education -- activity already verticals. think in has bidding I versus I mentioned turned the positive the that

the see And we'll event this to -- from going continue think next over. to it's that go not in I it's to expect some would opportunities an XXX So waves. and as and -- I days. happens in Again, it's to XX phases start then

of I of the plan over square out we part be years that and to think there somehow is continued conversation installed a next touched needs XX in opportunities. this the the terms several feet billion of renovated, and base get renovating and each to of

Keith Hughes

Okay. save The you've save that And or second given, cost month the is number? earlier. that highlighted cost-save you numbers on a question XX cost run rate

Vic Grizzle

Brian?

Brian MacNeal

that's Keith, Yes, year. this

Keith Hughes

Just this year? Okay.

Brian MacNeal

Yes.

Keith Hughes

All right. That's Thank all. you.

Vic Grizzle

Thanks, Keith.

Operator

question KeyBanc. from the from comes next Kenneth Your line Zener

open. is line Your

Kenneth Zener

Good morning, gentlemen.

Vic Grizzle

Ken. Hi,

Brian MacNeal

Good morning, Ken.

Kenneth Zener

then I appreciate current your going a are comments. my I future. know to difficult be have about two the -- questions very and landscape. I

the inventory first, the talked want sure POS could expand that make reduction. that Vic, seven about you on you we you correctly. spend talk you saw? trends I -- or made -- if the to about markets? comments think, I then, was Brian, you about drag just you So, understood what top And Could

I XX% it was versus said the others. think XX% down for you

we a or sure relative what XQ we to That's sequential be sales first should don't your then from you expect think trying we is make saying to or you're can. us interpret give we which or I'm mix question. somehow -- could that. down best And guidance, XQ, something just you but about my as about trends, talked if So normal in to half seasonality to second back-weigh

Vic Grizzle

Ken. several, like sounded That

Kenneth Zener

have, I might but appreciate I think it. it

Vic Grizzle

right. to of first really what really we asked on you will the that let of about. territories the take Brian sale that are -- seeing you then I me data, but and majority the part So is it's of comment when point said ask market, The

the that a second want seven wouldn't I I'm most on you was channel, and XX% out little of quarter. government inventory minus mandated to But the prudently. of correction Brian, we sure. it think shutdowns was in overall call was country. the on in I there cash comment meaningful for across bit the saw was everybody of their part going that managing that the And the a was sure downturn say we that saw territories?

Brian MacNeal

piece. Ken, And, also maybe, about the Vic, will sequential talk Sure. I

So, the start markets the seasonality, Ken, these Vic And even key be than to with think get his up. seven I QX level. is we them seen same look remarks, really start X July as markets, better as in what mentioned prepared open those expect we've we key to do to at to in

those So in improvement we've QX what from sequentially. seen seven an saw we in

they the we're and of up how the sites. quickly job some open so And to on continuing logistics monitor

Kenneth Zener

you. Thank

-- -- appreciate what are Thank it The spending is what And this you expand running from is patience on question a deficits? market? from funding could you -- second are I is switch -- then, state seeing education your they're considering perhaps what's from elective hospital you early -- York required And seeing the out and trends you. New these of then institutional to for health/safety? early feedback from Houston that

Vic Grizzle

the the Houston in of was on first question? But so part what Ken, was the thinking and was New Because York. Yes. -- your one I part? about what first your second

Kenneth Zener

education, state, the Yes, broke. states just one, first are

Vic Grizzle

Okay. got No, Yes. it. I

Kenneth Zener

health allocate they Schools very That's reason. funds. of before how had this for terms a than different a an in what need been elective approach expenditures to do

Vic Grizzle

crisis education school. funding last these to about years, as books went other we've you and when the back But kids that of and like is in send supporting and the we making more prioritize. own to classrooms probably now parents really importantly their are with or environment. so eight noted more confident things Yes, were budgets, right, relying they on terms they And the healthier note their the state had to -- over seven places,

teachers the well. course, space in feel as superintendents, everybody, the this Of safer

the either being They to real in classroom. kids GOP than and presence to to these get think safer to stimulus back the just to the the have address to these the to billion allocated between It solve are billion it That's kids I $XXX or solve definitely help they do and somewhere the because back potential is make that So we the renovation for for activity. a $XXX Democratic is less be healthier how used classrooms discretionary in money in. address have of bill bill pathogens. spaces get

So got yes, a to than it's discretionary used I it to be. believe less lot

that, They're in healthcare the their make part the places country -- good as renovating we but replacing to and facilities activity I front of actually -- spaces of a healthier. patience continue appreciate York far on to ceilings as and of terms see lot New As really in on cleanup them the your across healthcare Houston in effort.

to So it's had And some healthcare we're standout we've improvement nice a big the activity overall. see facility. there but we're again, driver continuing seeing not yet, in like

longer-term, I facility do like a of medical think in nice pandemic healthcare is, the has healthcare. facilities really on could to activity things the of some Ken, think long the the available shined is the think new lack and that about I light this one to things be way for testing, this really local term construction

to have will see. We wait and

Kenneth Zener

you. Thank

Vic Grizzle

Thank you, Ken.

Operator

from Baumgarten Adam line Your of Credit next Suisse. question the comes from

open. is line Your

Adam Baumgarten

morning. good Hey,

Vic Grizzle

morning. Good

Brian MacNeal

morning. Good

Adam Baumgarten

Just the we year? be forward going the with on thinking you pricing, proceeding equation in in how like-for-like laid should increase price was about earlier still AUV are August pricing? And, that the out

Vic Grizzle

environment in. -- our Yes. February pricing, we getting price in are are deflationary On we traction we on significant good on the increase still are and --

toolbox We opportunities. for in are not pricing increase August, surgical likely out price pricing that to general but our use in more we the tools have go a with

second we That's more get have And positive is what pricing, AUV as improve that expect price year. I traction to we should now continue running are we mix through these so to the and that going think overall to and as expect we the pricing year. increase like-for-like I and half we going be continue to up mix a AUV of like-for-like should with the the though for get territories and year-to-date positive of see. positive regional mix normal Overall, back

Adam Baumgarten

just then tailwind. And input a Thanks. for costs. on been that in continue? going contemplated forward that it. They've Is guidance to Got

Vic Grizzle

is. it Yes,

Adam Baumgarten

Thanks. Great.

Vic Grizzle

welcome. You're

Operator

Your from Kim of from the ISI. next Evercore Stephen comes line question

is line open. Your

Stephen Kim

times. Thanks Yes. Crazy much, very guys.

Vic Grizzle

Yes.

Stephen Kim

making salad more mean get you would that thought rid that workers bar. the of Who healthy would have

Vic Grizzle

a pretty unusual time. It's

Vic Grizzle

the What right, to, bar? the coming without world salad is

Stephen Kim

I opportunity. you Well, Yes, little talk this exactly. a to retrofit bit about wanted to

timing data seeing is, the hearing picture, you think of first and community the layoffs of come. of I the big mean, sort billings architect that you potential kind drops that So in renovation think thing about in we're we're at for the guess about projects, big and architectural that And I'm -- about and I may when wave looking the thing.

or And billings jobs are therefore, I'm an opportunity or usage requiring wondering, of retrofit you So increase to not? architect architectural input -- or renovation of would the this not? the ahead these the of see expect typically

Vic Grizzle

involved No, is Yes. definitely the renovations. these A&D a community in of lot

going right. a to mix, You're have

have lighting stuff. to and but of to earlier, facility manager don't because of those question, damaged have or outlet. -- some a and were need with something, like a I include those described that, in They're just or patch going do of don't Stephen, -- match going do they patch You're type something and opportunity, Keith's match some distribution you good some most know, to things you're filters I anything patch and match think trying change and change tiles as

spaces up on -- to A&D business buildings. XX% that's But reported the their that just a low-hanging this are the create community, how has said healthy all them of most or space. is survey that good So asking clients healthy and to discussing XX% of from to It's we -- and a been clients community they've show fruit. how A&D portion in healthy community going clients has A&D their create there asked through distribution. of

think thinking is on, how to them community that's you or about it a we're And this discussion I about this one fruit two/phase depend have So in phase three the it. going is involved, going is succession A&D I think just to low-hanging the in to really think be it's do right. and to and phase

Stephen Kim

products combine cleanability to simply desire you being able that a a attenuation I potential in we generally thought needs of products are mentioned address ceiling existing your for and meant that know. growth that because innovation really for products room medical lot. antimicrobial currently I'm you is that with healthcare settings. sense. -- newfound makes Can about products touched I And see little to sort as too, more to for the are today? be clean think area for used an specific opposed these attenuation -- effective sound the be I the sound you Yes, in about these of opportunity It tiles or don't make you antimicrobial curious the aren't are to

to that to how has are Company to so, address And desire. the I'm as extent the ideas fixated any for if people on cleanability, curious that

Vic Grizzle

in patient That required is to and Health No, in cleanability sell the healthcare Yes. cleanability Zone facilities, is have designed product a a was product, to we this requirement. our probability big that And environment. can as you It has attenuation a is very blood pressure how acoustics well and their facility. sound lot in imagine, to do and healthcare important a with they recover.

they today they as really bring of vertical just bring Zone well and products the as outside that the performance. good have healthcare acoustics, aesthetics we're antimicrobial Health talking bring application to So, that going these we're cleanability about yes,

technology platform on lift we verticals we it's features of and of them this benefits So place the can the other product. a educate as in that these

going continue so build we broader as range on of drive We performances to this, to antimicrobial of performance. acoustical broader well are even can a as range a

Stephen Kim

Vic, lower average little Zone say it or share this your kind here for within average that growth? market and I guys than than your -- market would a an generally. know opportunity footprint it you Company dominant area, of is your that is or you share But have therefore Company pretty your your higher is Health

Vic Grizzle

that position really big in types projects. and a innovation, really specifications. jobs those our specification I driven, share publicly Health product a and those our you of said that. Zone are It's think get we've into generation next And driver channels when cater average of spec and the community we’ve our to of Well, is above that innovation we

Stephen Kim

Thanks sounds That it. Yes. great. Appreciate very much.

Vic Grizzle

Yes.

You bet, Stephen.

Operator

Exane from question from Bromehead of Paribas. line Yves the next comes BNP Your

Your line is open.

Yves Bromehead

I just will two I have gentlemen. may. questions, morning, if Good

exposure first your retrofit just to to a wondering in or exposed I in end nine have just was the if higher similar of sales The XX% one, and sector. you you new your think market these renovation construction mentioned is territories have about I you a structure key markets?

Vic Grizzle

especially Yes, same. about activity new then and XX% Again, by territories driven mature really seven that that's remainder large construction the a of XX% talking there there and installed that really large of some so installed allocation about, tend in good be question. to They base a the that the base key these is activity. renovation to we're XX-XX. -- are these bases in dictates and is

Yves Bromehead

mentioned be you would to through if of just 'XX, especially you I -- quantify improvements able was have we terms the And versus in you the so rate But year-on-year second be question, in I think that decline June can wondering Okay. mentioned you a QX what reference XXXX would sequential June. levels exit just in point.

Vic Grizzle

our ranges We because mean, jobs run capture think specifically very and are I hesitant more the still to what the are to I expecting happen I serve rate. we provided improvement were pleased sequential that that to could are the with outlook that think we we there. in do that

and as clip. about talked May July nice May at And June so continuing from June and to a then to from is improvement earlier, I April sequential the to

to thing what where to reference and at of the So exit terms year. with rate the just to this trying could I outlook expect first in best point land is the end that, you could I our happen of think we

Yves Bromehead

Okay. to political I And here I be if can mean, of over retrofits in last the also you the you've the if exited in look potential plans? some it's Europe, and those it one from may. the more part for in actually more lot to U.S, a especially installations I Would or verticals. decade, be HVAC, sphere renovation. is and seems Historically, and starting just renovation benefit on at of talk that willing future, in add question, thermal there in verticals possible try example, in in

Vic Grizzle

this -- this on focused really walls. we're now, Right and in opportunity ceilings

innings ceilings we We that have the adjacency are early specialty nice a and in of. in walls

base, additional there. have our We renovation this the for an catalyst with growth think good have and Mineral Fiber engine runway we opportunity. now business I installed a And

we So focused space now. that's a the ceiling in going within to have sure behind to initiatives. dollars investment are our lot stay I And make we go those where right focused stay on in the think and wall and

Yves Bromehead

much. Great. All Thank right. you so

Vic Grizzle

Thanks for your questions.

Operator

Justin comes line Speer of the Your next from Zelman. from question

Your line is open.

Justin Speer

me for in, sneaking guys. it. appreciate Thanks I

few Just a questions, couple a of questions.

bidding is think the substantially gross in cancellations -- April, down of improved, in that activity mentioned a July. you or XX% referenced, I it you is On what slowed that I figure? that that guess, to net

Vic Grizzle

comparison. We're measuring together. of the That year-over-year two activity, would is This really not a figure. amount gross the be

think metric, it. So it's to really an activity about the way

Justin Speer

Yes.

So the I of guess terms … in second

Vic Grizzle

been cancellations very but Yes, have small.

Justin Speer

that you in mentioning or very are -- projects cancellations those cancellations So mentioned backlog you already that so that on in motion. were small were

Vic Grizzle

Correct.

Justin Speer

have is, that guess So for yet I'm bidding not broken Is ground? or talking so ground. prior those or is that activity is has the transacted projects encompassing ground, that broken I already activity about not to question that have bid projects that yet -- ground broken breaking

Vic Grizzle

that, be would doesn't it be … prior right, right? so fit-outs, to to have be tenant These This breaking can So ground.

Justin Speer

Okay.

Vic Grizzle

Yes. yes. This a activity an overall would bidding metric. metric, These this new isn't be construction aren't --

Justin Speer

I how phasing was in terms does overall, of out? or revenues quarter guess as in that bidding what did the decline? we activity? it How So second much of translate timing terms to guess, I look the

Vic Grizzle

go right. these anywhere out from, out, three what, years can to two Well, projects months

it's So tough all -- a because activity really kind is answer that that's are of the projects to being of sides bidding picking really up question specifically, the let. very

for future wouldn't our and of flow activity is again, patch part in a So, just demand this bidding that I future for that just getting directional number But of correlation a activity is a terms metric and of it's in we is terms comparison a right business, would of it bids, example, bidding terms think revenue. think and for a be versus captured, actual about to business know, better match is I and the example, up, more the I activity it an as than I activity in downturn you experienced good quarter a of this hold think on and in in -- a what -- is it requiring think and proxy activity.

weight measure it revenue, heavily forecaster for wouldn't activity too terms but I So good a of in it bidding that a is continued. of overall

Justin Speer

in if know verticals, I faring maybe terms lodging. others, guess like the you breakout that how better parts your are don't are know rank about but key don't channel order where big you nonresidential look I better, order for if of than know could you rank are the and the relatively could fashion a you how chunk healthcare, residential, a put guess think and things I as you certain office, that, rank doing for verticals any transportation, at outlook? that then you some retail, of but order you some us but I I there education, trending of them some And distinctions, in

Vic Grizzle

the think mentioned was something in of bidding sequentially as of April. earlier, this was outlier, important and right says Education Well, these in kind year activity, prior that the versus all I are us, which terms improved from bidding environment. actually verticals that to all they of really the activity really in accelerated -- that I positive its

think the I kind when improved others So have together. out of that I called sequentially

Justin Speer

in exclusive distinctions or any more in in last partners then of me, maybe light in distribution the for question environment? arrangements, in And terms partnerships, your strategy a maybe just change Okay. distribution there your to tack changes there loop or distribution of

Vic Grizzle

today. rely partnership have we rely on have a us in today. We marketplace distribution heavily, partners them good We on heavily, they the best-in-class coverage really the really in

our to our covering marketplace. we are in more covering So -- digitalization channel with initiatives customers investing our efficient of what even be in customers we and and relationship more are the the doing help that is

real it's best So company we we of do partners believe industry. a the really asset the and in I -- the have

Justin Speer

to guys. I you. luck appreciate it, Best of

Vic Grizzle

Thank you, Justin.

Operator

questions. presenters, back Excuse me, you. to further no are Mr. there Grizzle,

Vic Grizzle

similar has everybody some a joining thank very, the remain long-term obviously to had shareholder experience really terms Went good questions. want very We focused for in just today. I tough value. creating We time, quarter. Everybody a think shutdowns. very over you. of on Thank but -- little I a

and As and very, starve growth of our business we not are and found initiative initiatives business. did we maintaining from take mentioned or -- we money the I very happy about that the the side away the the cost long-term trajectory growth on have earlier, balance initiatives, growth pause of

forward. side of about, to excited expenditure opportunity, are we're companies solution going nondiscretionary part this, conversation we on be lot renovation healthy going to that part sure are is more we So that of working the hard of other the make of this and are much spaces of a going a which we to for be creating and

So thank next you you, again, forward to and to look quarter. talking

Operator

conference call. today’s concludes This

disconnect. now You may