Armstrong World Industries — Third Quarter 2026 Earnings Summary

Financial Performance:

• Consolidated net sales reached $475.8 million in Q3 2026, an 11.9% increase from $425.2 million in the prior-year period.
• Operating income was $131.2 million, up 11.9% from $117.2 million, with an operating income margin of 27.6% (unchanged from prior year).
• Net earnings were $91.9 million, a 6.5% increase from $86.3 million.
• Diluted net earnings per share (EPS) were $2.17, up 9.6% from $1.98.
• Adjusted EBITDA was $164 million, an 11.0% increase from $148 million, with an adjusted EBITDA margin of 34.5% (down 30 basis points from 34.7%).
• Adjusted net earnings were $96 million, up 7.2% from $89 million.
• Adjusted diluted EPS was $2.26, up 10.2% from $2.05.
• Year-to-date operating cash flows decreased $23 million (10%) to $222.1 million compared to $245.5 million in the prior year.
• Year-to-date investing cash flows used increased $52 million to $34.8 million (from $16.8 million used in prior year), driven by the acquisition of Eventscape.
• Total assets were $2,004.4 million as of September 30, 2026, compared to $1,924.7 million at December 31, 2025.

Guidance and Future Outlook:

• 2026 Net Sales guidance updated to $1,788 million to $1,803 million, reflecting 10% to 11% year-over-year growth.
• 2026 Adjusted EBITDA guidance updated to $602 million to $612 million, reflecting 8% to 10% year-over-year growth.
• 2026 Adjusted Diluted EPS guidance updated to $8.30 to $8.40, reflecting 12% to 13% year-over-year growth.
• 2026 Adjusted Free Cash Flow guidance updated to $380 million to $390 million, reflecting 10% to 13% year-over-year growth.
• Outlook reflects increased organic Architectural Specialties net sales, accelerating costs for both segments, mix headwinds in Mineral Fiber, and softer contributions from recent acquisitions.

Business Segments and Product Lines:

• Mineral Fiber: Net sales increased 6.6% to $292.1 million (from $274.0 million), driven by $16 million in favorable Average Unit Value (AUV) and $2 million in volume growth. Operating income rose 7.4% to $106.0 million, with an operating margin of 36.3% (up 30 basis points). Adjusted EBITDA increased 7.6% to $129 million.
• Architectural Specialties: Net sales increased 21.5% to $183.7 million (from $151.2 million), driven by $25 million in organic sales growth and $8 million in inorganic contribution. Operating income surged 33.7% to $25.8 million, with an operating margin of 14.0% (up 120 basis points). Adjusted EBITDA increased 25.5% to $36 million.
• Unallocated Corporate: Operating loss was $1 million for the quarter, consistent with the prior year.

Market and Competitive Landscape:

• Growth initiatives enabled profitable growth ahead of the market in relatively stable end market conditions.
• Mineral Fiber volume growth was driven by timing-related demand from Canadian customers and benefits from growth initiatives.
• Architectural Specialties growth was driven by strong performance across most specialty product categories.
• The company faces rapidly rising inflationary pressures, including higher freight and raw material costs, as well as ongoing tariff impacts.

Risks and Challenges:

• Input cost inflation, particularly in freight and raw materials, increased manufacturing costs by $10 million in the quarter.
• Mix headwinds within the Mineral Fiber segment impacted sales.
• Ongoing impact of tariffs pressured operating and adjusted EBITDA margins.
• Inorganic impacts from 2026 and 2025 acquisitions increased costs and impacted SG&A expenses.
• Elevated metal costs negatively impacted project margins in Architectural Specialties.

Management Commentary and Tone:

• CEO Mark Hershey stated that strong demand for Architectural Specialties and solid Mineral Fiber AUV/volume performance drove record top-line results.
• CFO Chris Calzaretta highlighted double-digit growth in net sales and adjusted EBITDA despite cost and tariff pressures, emphasizing a resilient business model and disciplined capital allocation.
• Management expressed confidence in delivering strong full-year growth across all key metrics.

Other Key Points:

• The company repurchased 0.4 million shares of common stock in Q3 2026 for $75 million at an average price of $174.36 per share.
• $1.1 billion remained available under the share repurchase program as of September 30, 2026.
• The company acquired Eventscape during the year, contributing to increased investing cash outflows.
• Equity earnings from the Worthington Armstrong Joint Venture (WAVE) increased by $4 million in the quarter.
• The company has approximately 4,100 employees and a manufacturing network of 24 facilities plus seven facilities dedicated to the WAVE joint venture.