Armstrong World Industries (AWI) Q2 FY26 earnings call: guidance and Q&A

Can you provide more details on the strong order rates in AS, how they span verticals, and their implications for H2 and beyond?

AS segment has seen double-digit order intake for four consecutive quarters, supporting the H2 outlook and providing visibility into 2027. This pipeline is broad-based across new construction and renovation, and various verticals like transportation, office, healthcare, and education, without over-concentration in any single AS category.

“So the double-digit intake again this quarter reinforces what we've seen over the last several quarters, which is now roughly our fourth consecutive quarter of double-digit intake in AS. That's supporting the pipeline, that's supporting our outlook for the second half and really starting to give us some visibility into 2027 as well.”

asked by Susan Maklari · answered by Mark Hershey

What feedback did you receive at NeoCon regarding the Armstrong-branded showroom, and how will it contribute to long-term growth for both AS and Mineral Fiber?

Attendees were impressed by the breadth and diversity of offerings, showcasing the collective enterprise of Armstrong's ceiling and wall solutions. The integrated portfolio helps win more jobs by offering a comprehensive solution set to architects and designers, as demonstrated by the success in larger projects like transportation.

“I think the number 1 consistent theme we heard from the thousands of folks who went through our spaces was impressed by the breadth and the diversity of the offerings and the capabilities whether that's in materials or performance aesthetics, that sort of broad-based solution set, and we like to think of it really as a pallet for architects and designers to work from and in some ways, that showcase was really our strategy on display, if you think about it.”

asked by Susan Maklari · answered by Mark Hershey

Given Q1 and Q2 volume performance, do you expect acceleration or deceleration in H2 for Mineral Fiber? Can you comment on end market, channel inventories, and market share?

Management expects consistent positive volume performance in H2, similar to the first half, driven by strong commercial execution and growth initiatives. The portfolio breadth and high-end products (SWAT) are performing well in current verticals, supported by the commercial distribution channel.

“Yes, we're out looking at fairly consistent volume performance. As we talked earlier in the year, we were talking about a positive first half, positive second half. We think we're well on track for that with the performance in the last 2 quarters. And frankly, 4 out of the last 5 quarters, we've demonstrated positive volume growth, and that's our outlook for the back half.”

asked by Tomohiko Sano · answered by Mark Hershey

What is the strategic power of integrating businesses like Eventscape and Zahner into AWI, particularly regarding commercial pull-through with architects and designers, and what are the key synergy/integration KPIs?

Acquisitions like Eventscape and Zahner provide early access to projects at the design assistance stage. A key KPI is the transfer function, leveraging their early insights to introduce the broader Armstrong portfolio. An example showed Zahner's early involvement leading to pull-through of 5 other solution sets, including Mineral Fiber and other AS products. Robust business case financials are monitored monthly.

“So one of our key KPIs as we integrate them is focusing on the transfer function that can happen between those businesses when they have their early access and the rest of our portfolio to give insights into project activity to make connections with designers to introduce the broader part of the portfolio.”

asked by Tomohiko Sano · answered by Mark Hershey

What specific products work best in data centers (grid, Mineral Fiber, specific types)? How does the sales process work for these products, and do you work with GCs, hyperscalers, or directly with owners?

Data centers use traditional Mineral Fiber and acoustical grid for front-of-house. Back-of-house demands more structural solutions from the WAVE JV (e.g., DynaMax structural grid, containment solutions) and specialized tiles like gasketed or Data Zone tailored products. The sales process is diverse, targeting hyperscalers and co-locators directly via a strong national accounts program, in addition to traditional architect/GC-led motions.

“So not the traditional acoustical grid, but some of the heavier duty structural solutions that we've launched just recently out of the WAVE Venture, products like the DynaMax branded line of structural grid solutions, containment solutions there. And when there is a tile application in the back of house, then there can be tile applications. It's often a product that has acoustical, not so much in an acoustic but an air management attribute to it.”

asked by Keith Hughes · answered by Mark Hershey

What are the drivers behind the SG&A increase? Is it higher incentive comp, opportunistic investment, or related to initiatives like NeoCon?

In Mineral Fiber, SG&A increased due to investments in selling and innovation, plus higher incentive compensation. In AS, about half of the increase was from recent acquisitions, with the remainder from investments in selling resources to support growth. For the full year, total company SG&A margin is expected to be around 20%, in line with initial expectations, with a focus on growth initiatives like energy savings and data center sales.

“So maybe I can start with SG&A performance in the quarter. And in Mineral Fiber, as I stated in my prepared remarks, that the increase in SG&A was driven by investments to support growth of both the selling side of the house as well as innovation. And as you mentioned, an increase in incentive comp.”

asked by Rafe Jadrosich · answered by Christopher Calzaretta

Is the trend of high-end products outperforming, with project value up despite project count down, a short-term or multi-year trend?

This trend has continued for 13 consecutive quarters, indicating it's a multi-year trend. It's consistent across markets and verticals, reflecting a 'flight to quality' in commercial spaces and the strength of the high-end Mineral Fiber portfolio. Management expects this dynamic to continue.

“This past quarter was the 13th consecutive. So this has been running for a couple of years now, and we expect it to continue. It is too early to project how far out -- but I think it's part of the dynamic about the bidding activity that you mentioned and the starts activity that you mentioned that gets consistent with that.”

asked by Brian Biros · answered by Mark Hershey

Considering the $800 million step-up in share buyback authorization, would you consider a large share repo or ASR, and is it on your radar?

The increased authorization reflects confidence in the strategic plan and cash flow generation, but does not signal a change in capital allocation priorities. Share repurchases remain the third priority, after investing in the business and strategic M&A. The company will continue to be opportunistic with buybacks, maintaining a balanced approach to capital deployment.

“But we're not signaling any change in our capital allocation priorities, as Chris talked about in his remarks. We will be opportunistic as we've been. We were opportunistic in the second quarter, as you saw and over the life of the program, we'll continue to be opportunistic. That said, it's our third capital allocation priority and no change there.”

asked by John Lovallo · answered by Mark Hershey