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    AWI
    Earnings call· Mar 2026(Q1 FY26)

    ARMSTRONG WORLD INDUSTRIES Q1 FY26 earnings call AWI

    Apr 28, 2026 Source

    Executive summary

    Armstrong World Industries Q1 FY26 — Strong Mineral Fiber Performance and Data Center Traction

    Armstrong World Industries delivered a solid Q1 FY26, marked by robust Mineral Fiber performance and strong organic growth in Architectural Specialties, despite discrete headwinds. The company is strategically investing in high-growth areas like data centers and energy-efficient solutions, leveraging its strong market position and innovation to drive future volume and AUV growth. Management remains confident in its full-year outlook, anticipating improved performance in the second half and continued margin expansion across both segments.

    Highlights

    5

    • Total company sales increased by 7% with solid growth in both segments.

    • Mineral Fiber segment sales increased 5% with 4% AUV growth and modest volume increase, achieving adjusted EBITDA margin of 42.4%.

    • Architectural Specialties (AS) sales increased 11%, driven by 7% organic growth and strong order intake in low double-digits.

    • Adjusted diluted EPS increased 2% due to lower share count, with $60 million in share repurchases during the quarter.

    • Data center project pipeline for 2026 is more than 50% ahead of 2025 levels, and TEMPLOK energy-saving products are gaining momentum.

    Concerns

    3

    • AS segment adjusted EBITDA declined 12% due to a $2 million nonrecurring tariff adjustment, $2 million in acquisition costs, and $1 million in plant investments.

    • Recent acquisitions were slightly dilutive to AS adjusted EBITDA due to integration ramp-up.

    • Higher input costs, primarily raw materials and energy inflation, partially offset Mineral Fiber segment benefits.

    Guidance & targets

    12
    CategoryTargetConfidence
    Full-year Net Sales
    Reaffirmed
    high materiality
    High
    Full-year Adjusted EBITDA
    Reaffirmed
    high materiality
    High
    Full-year Adjusted Free Cash Flow
    Reaffirmed
    high materiality
    High
    Full-year Adjusted Diluted EPS Growth
    10% to 14% growth
    high materiality
    High
    Full-year Mineral Fiber Adjusted EBITDA Margin
    approximately 44%
    medium materiality
    High
    Full-year AS Adjusted EBITDA Margin
    approximately 19%
    medium materiality
    High
    Full-year Organic AS Adjusted EBITDA Margin
    between 19% and 20%
    medium materiality
    High
    AS Adjusted EBITDA Margin Trajectory
    significantly improve sequentially in Q2 and resume year-over-year adjusted EBITDA growth in the back half of 2026
    medium materiality
    High
    Net Sales and Adjusted EBITDA Growth
    improved in the second half of the year as compared to the first half in both segments
    medium materiality
    High
    Mineral Fiber AUV Growth
    about 6%
    medium materiality
    High
    Volume Growth Ahead of Market
    up to 1.5 percentage points
    medium materiality
    High
    AS Organic Growth
    high single-digit range
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Mineral Fiber
    Driven by favorable AUV and modest volume increase. Benefits partially offset by higher input costs, unfavorable inventory valuation, and increased SG&A.
    AUV growth: 4%Volume growth: modest increaseAdjusted EBITDA growth: 4%
    		Increased 5%5%—42.4% Adjusted EBITDA margin
    Architectural Specialties
    Driven by solid organic growth and contributions from recent acquisitions. Adjusted EBITDA decreased due to a $2 million nonrecurring tariff adjustment, $2 million in acquisition costs, and $1 million in plant investments. Recent acquisitions were slightly dilutive.
    Organic growth: 7%Acquisition contribution: 4 pointsOrganic Adjusted EBITDA decline: 9%
    		Increased 11%11%—Decreased $3 million (12%) Adjusted EBITDA

    Operational metrics

    17
    Mineral Fiber Adjusted EBITDA Margin
    greater than 45%record high
    Q2 FY25

    Prior year record performance for the segment.

    COGS Inflation - Raw Materials
    mid-single-digitvs prior year
    FY26

    Expected for the full year.

    COGS Inflation - Energy
    10%vs prior year
    FY26

    Expected for the full year.

    COGS Inflation - Freight
    mid-single-digitvs prior year
    FY26

    Expected for the full year, given uptick in fuel pricing.

    Total Input Cost Inflation
    mid-single-digitsunchanged outlook
    FY26

    Overall outlook for the full year remains unchanged.

    Adjusted EBITDA Growth
    1%YoY
    Q1 FY26

    Consistent building blocks largely offset by higher manufacturing/input costs and SG&A.

    Dividends Paid
    $15 million
    Q1 FY26

    Part of disciplined capital deployment.

    Share Repurchases Executed
    $60 millionaccelerated pace
    Q1 FY26

    Representing an accelerated pace compared to recent quarters.

    Remaining Share Repurchase Authorization
    $473 million
    as of March 31, 2026

    Under existing share repurchase authorization.

    AS Organic Net Sales Growth
    7%YoY
    Q1 FY26

    Driven by broad-based growth led by metal and wood categories.

    AS Organic Adjusted EBITDA Decline
    9%YoY
    Q1 FY26

    Primarily driven by $2 million nonrecurring tariff-related adjustment and $3 million in higher selling expenses/manufacturing investments.

    AS Acquisitions Net Sales
    $5 million
    Q1 FY26

    Delivered by recent acquisitions (Avenscape, Parallel, Geometric).

    AS Acquisitions Adjusted EBITDA Impact
    slightly dilutive
    Q1 FY26

    Anticipated short-term dilution due to integration ramp.

    Kanopi EBITDA Contribution Growth
    more than triplingYoY
    Q1 FY26

    Kanopi continues to reach new customers and improve revenue and profitability.

    PROJECTWORKS Specification Win Rate Increase
    almost 20%
    Q1 FY26

    When projects go through this complementary automated design service.

    Perfect Order Measure
    exceeded targets
    Q1 FY26

    Captures full customer experience: shipped completely, delivered on time, priced/billed accurately, received without damage.

    Total Recordable Incident Rate
    well below 1well below industry average
    Q1 FY26

    Reflects strong safety culture across the enterprise.

    Industry KPIs

    4
    MetricValueDetails
    Price cost4%%
    Order backloghealthy backlogs
    Data center hvac exposuremore than 50% ahead
    Orders bookings growth by verticallow double-digit range%

    Orderbook & backlog

    3
    AS Order Intake Levelsincreased in the low double-digit rangeQ1 FY26 and last 12 months

    Supporting full year outlook and providing visibility into early 2027.

    AS Transportation Projects Order Intakesurpassed entire 2025 totalYear-to-date Q1 FY26

    Includes new projects at San Antonio, San Francisco, and Dallas-Fort Worth airports, in addition to JFK and LAX.

    Data Center Project Pipelinemore than 50% aheadYear-to-date Q1 FY26

    vs 2025 levels

    For projects expected to ship in 2026.

    Product announcements

    2
    ProductTypeDetails
    TEMPLOK energy-saving ceiling productsupdate
    Data Center Solutions (Dynamex, Dynamex LT, structural grid, data zone ceiling panels, containment)update

    Deals & partnerships

    5
    ZenerEnhanced design and engineering expertise.

    Enabled collaboration with broader network of architects, designers, engineers, and contractors, increasing project participation and brand influence.

    AvenscapeEnhanced design and engineering expertise.

    Enabled collaboration with broader network of architects, designers, engineers, and contractors, increasing project participation and brand influence. Acquired in February.

    ParallelContributed to AS segment growth.

    Acquired in 2025.

    GeometricContributed to AS segment growth.

    Acquired in 2025.

    [indiscernible]Products added to PROJECTWORKS platform.

    Products from this 2024 acquisition were recently added to the PROJECTWORKS platform to improve sales volumes and AUV.

    Risks & headwinds

    6
    Discrete HeadwindsQ1 FY26

    AS segment adjusted EBITDA declined $3 million or 12%.

    Mitigation: Expected to be largely short-term in nature; mitigation measures deployed for tariff issue.

    Nonrecurring Tariff AdjustmentQ1 FY26

    $2 million impact to AS adjusted EBITDA.

    Mitigation: Proactive reevaluation of guidance and application of duties; deployed series of mitigation measures (supply chain, manufacturing, pricing) to prevent recurrence.

    Integration of Recent AcquisitionsQ1 FY26

    Recent acquisitions were slightly dilutive to AS adjusted EBITDA.

    Mitigation: Anticipated short-term dilution due to integration ramp; focus on integrating well and gaining scale/momentum.

    Higher Input CostsFY26

    Raw materials (mid-single-digit inflation), energy (10% inflation), freight (mid-single-digit inflation).

    Mitigation: Strong track record of mitigating inflationary headwinds; implemented fuel surcharge in late March.

    Geopolitical DevelopmentsOngoing

    Rising carrier fuel costs picked up in recent weeks.

    Mitigation: Implemented a fuel surcharge in late March.

    Uncertainty in Construction MarketOngoing

    Market conditions remained flattish; early signs of better discretionary demand, but too early to shift views on underlying market trends.

    Mitigation: Focused on driving growth initiatives to gain up to 1.5 percentage points of volume growth ahead of market-driven demand.

    What to watch in Q2 FY26

    5

    AS Adjusted EBITDA Margin Improvement

    Q2 FY26
    CurrentDeclined 12% YoY in Q1 FY26
    TargetSignificantly improve sequentially

    Why it matters

    Indicates successful mitigation of Q1 headwinds and progress towards full-year margin expansion targets for the AS segment.

    At the segment level, I'd like to note here that we expect the adjusted EBITDA margin for Architectural Specialties to significantly improve sequentially in Q2 and resume year-over-year adjusted EBITDA growth in the back half of 2026.

    Q&A highlights

    8

    How has geopolitical conflict affected bidding activity, and how are new products (energy savings, data centers) driving elasticity?

    Bidding activity is stable, with project values up (well above inflation), favoring larger projects. Geopolitical impact is minimal. New products are on target, with dramatically building pipelines and strong commercial execution, contributing to the 1.5 percentage points volume growth ahead of market.

    “bidding activity with project counts being down but project values being up. That continues. We continue to see that. That's a good thing for us. We continue to believe that, that plays [indiscernible] well to our strengths, these larger, higher-value products, and by the way, values that are up well above inflation for that matter.”

    asked by Susan Maklari · answered by Mark Hershey

    2 min read6 chapters

    Detailed Narrative

    01

    CEO Transition and Strategic Focus

    Mark Hershey's first earnings call as CEO emphasized continuity in strategy, focusing on consistent mineral fiber growth (AUV and volume), healthy margins in Architectural Specialties (AS), and leveraging innovation. Key initiatives include digital platforms (Kanopi, PROJECTWORKS), TEMPLOK energy-saving products, and data center solutions. The strategy aims to solidify business resilience and support cash generation.

    02

    Architectural Specialties (AS) Growth and Margin Drivers

    The AS segment saw 11% sales growth, with 7% organic growth. Management expects significant sequential margin improvement in Q2 and year-over-year growth in H2 2026, targeting 19-20% organic adjusted EBITDA margin for the full year. This is supported by strong quoting activity and low double-digit order intake, providing visibility into 2027, and successful project wins in transportation.

    03

    Innovation and Market Expansion

    Armstrong is expanding its portfolio with TEMPLOK energy-saving ceiling products, which meet high sustainability standards and are gaining traction due to energy efficiency needs and tax credit incentives. Data centers represent a multi-year opportunity, with the 2026 project pipeline more than 50% ahead of 2025 levels, driven by demand for airflow management and higher power densities. These initiatives are expected to drive future growth.

    04

    Capital Allocation and Shareholder Returns

    The company's capital allocation priorities remain unchanged: reinvesting in the business (productivity, capacity expansion for high-AUV products like TEMPLOK and SWAT), M&A (acquiring companies like Avenscape, Parallel, Geometric to expand capabilities), and returning value to shareholders. $60 million in shares were repurchased in Q1, with $473 million remaining under authorization, reflecting an opportunistic approach.

    05

    Market Conditions and Outlook

    Market conditions remained flattish, similar to late 2025, but bidding activity is stable with project values up, favoring larger, higher-value projects. Verticals like data centers, transportation, and healthcare are performing well. The company aims to achieve up to 1.5 percentage points of volume growth ahead of market demand in 2026 through its growth initiatives, despite geopolitical uncertainties.

    06

    Operational Excellence and Customer Experience

    The company reported a strong safety quarter with a total recordable incident rate well below 1. Mineral Fiber plants successfully navigated winter storms, maintaining strong quality and service levels, with the 'perfect order' measure exceeding targets and reaching a record in February, reinforcing reliability and customer trust and contributing to consistent AUV performance.

    AI-generated summary of the company’s earnings call. Not investment advice.