Armstrong World Industries Inc · NYSE:AWI
Armstrong World Industries — Investor Day (March 2022)
73 slides from Armstrong World Industries's investor day presentation, Mar 3, 2022
Slide 1: AWI Investor Day 2022: The Power of Focus
AWI Investor Day 2022 THE POWER OF FOCUS March 3, 2022 Explanatory Note: This version includes a typographical correction to slide 65 which now shows the correct adjusted EBITDA guidance that was issued on February 22, 2022.
Slide 2: Safe Harbor Statement
Safe Harbor Statement Our disclosures in this presentation, including without limitation, those relating to future financial results market conditions and guidance, the impacts of COVID on our business, and in our other public documents and comments contain forward-looking statements within the mean
Slide 3: Basis of Presentation Explanation
Basis of Presentation Explanation • References to “AWI”, “Armstrong”, “the Company”, “we”, “us”, “our” are to Armstrong World Industries, Inc. • A glossary of terms is included in the appendix which may help the reader understand terms that are specific to AWI or the building products industry. • Re
Slide 4: Agenda
Agenda Vic Grizzle 01 The Power of Focus President & CEO Mark Hershey 02 Segment Overview SVP, Americas Nick Taraborelli 03 Healthy Spaces VP, Mineral Fiber Jill Crager 04 Digital Initiatives SVP, Sales Operations Brian MacNeal 05 Financial Overview SVP & CFO 06 Q&A All 4
Slide 5: The Power of Focus
The Power of Focus VIC GRIZZLE, CEO 5
Slide 6: AWI Leadership
AWI Leadership Proven leadership and experience supporting a winning culture – combined 100 years with AWI Executive Leadership Additional Speakers Vic Grizzle Brian MacNeal President & CEO SVP & CFO Joined in 2011 Joined in 2014 Nick Taraborelli Mark Hershey Jill Crager VP, Mineral Fiber SVP, Ameri
Slide 7: Poised to Accelerate Value Creation for All Stakeholders
Poised to Accelerate Value Creation for All Stakeholders What You Will Hear Today We’ve created a uniquely focused building products company built on strong fundamentals with an improving competitive position. Our enhanced ability to compete sustains and strengthens the existing value drivers of AUV
Slide 8: Armstrong World Industries Overview
Armstrong World Industries Overview • Leader in the design & Full Year 2021 Consolidated Results manufacture of innovative Net Sales Adj. Diluted EPS* Adj. EBITDA* Adj. Free Cash Flow* Market Cap(1) commercial and residential ceiling and wall solutions $1,107M $4.36 $372M $190M $5.5B • For more than
Slide 9: Armstrong World Industries – Our Why
Armstrong World Industries – Our Why Making a positive in the spaces where we… It matters to us, and it matters to our customers 9
Slide 10: Sustainability at the Heart of Our Why and Our Strategy
Sustainability at the Heart of Our Why and Our Strategy Our Approach Three Pillars guide our sustainability program, with specific goals and 2030 targets. Delivering on these aspirations drives value for our customers, our employees, our communities and our shareholders(1). Our Sustainability Goals
Slide 11: Uniquely Positioned to Win in an Attractive Category
Uniquely Positioned to Win in an Attractive Category Attractive Category Why We Win Ceilings & specialty walls is unique AWI is advantageously positioned to within the building products win in this category. industry. Consolidated industry structure with exposure to Strongest and most trusted brand
Slide 12: Creating a Uniquely Focused Building Products Company
Creating a Uniquely Focused Building Products Company 2016 2018 2020 • Separated from Armstrong • Initiated quarterly cash dividend • Launched new Healthy Flooring to focus on ceilings • Initiated comprehensive Spaces portfolio and specialty walls digitalization effort • Expanded sustainability effo
Slide 13: Delivering on 2018 Strategic Imperatives
Delivering on 2018 Strategic Imperatives Strong execution across all imperatives despite COVID challenges Strategic Imperative Outcomes Since 2018 Revitalize Mineral Fiber (MF) Product Vitality index up from 28% Multiple new product lines category through innovation and to ~40% introduced new paths
Slide 14: Doing What We Said We Would Do: Changing our Top-Line Trajectory
Doing What We Said We Would Do: Changing our Top-Line Trajectory Strong execution on key value drivers AWI Net Sales(1) (in $ millions) $1,107 Results Driven by 6% CAGR 2% $837 • Like-for-like pricing above $781 CAGR inflation • Mix up to higher value products • Double-digit growth in Architectural
Slide 15: Macro Trends Provide Additional Opportunity for AWI
Macro Trends Provide Additional Opportunity for AWI Economic recovery Focus on safety Increased Demand for from pandemic and indoor government funding sustainable solutions recession environmental quality for education / infrastructure 15
Slide 16: Investing in Industry Leading Growth Initiatives
Investing in Industry Leading Growth Initiatives Initiatives INNOVATION HEALTHY SPACES DIGITAL • New Products and • Solutions to meet secular • New channels to access Driving applications shift to healthy new demand sustainable spaces • Improved • Enhanced Mineral • Sustained • Mineral Fiber Outcome
Slide 17: Tailwinds and Growth Initiatives Accelerating Top Line Growth
Tailwinds and Growth Initiatives Accelerating Top Line Growth Expecting strong sales growth at attractive margins AWI Net Sales(1) and Adjusted EBITDA* ($ millions) Results Accelerated by Net Sales Adj. EBITDA* • Mineral Fiber volume growth ~$2B 12% CAGR Ongoing benefits 6% CAGR $1,107 • Like-for-li
Slide 18: Segment Overview
Segment Overview Mark Hershey, SVP Americas 18
Slide 19: Foundations and Focus to Accelerate Growth
Foundations and Focus to Accelerate Growth What you will hear today Together, our segments offer a total value proposition that differentiates AWI in the industry. Our segments share strategic initiatives and enablers that directly support our value drivers and growth strategy. Our growth initiative
Slide 20: Segments Serve Diverse Projects and End Markets
Segments Serve Diverse Projects and End Markets Mineral Fiber Architectural Specialties $819M 41% $288M 14% 2021 Adj. EBITDA* 2021 Adj. EBITDA* 2021 Net Sales 2021 Net Sales Margin Margin Net Sales by Project Type(1) Net Sales by Vertical(1) Net Sales by Project Type(1) Net Sales by Vertical(1) 5% 5
Slide 21: Complementary Segments Support Our Winning Formula
Complementary Segments Support Our Winning Formula A unique value proposition for our customers differentiates AWI in the industry Broadest Product Specification Portfolio Leadership Mineral Fiber Total Customer Experience Operational Best-In-Class Excellence Distribution Architectural Specialties B
Slide 22: Complementary Segments Provide Total Solutions
Complementary Segments Provide Total Solutions Selling more products into more spaces Project: St. Mary’s Episcopal School – Windland Smith Rice Building Selling innovative solutions to Location: Memphis, TN solve for complexity Architect: Fleming Architects AS WOODWORKS® GRID AXIOM® Classic – Curve
Slide 23: Complementary Segments Strengthen Customer Relationships
Complementary Segments Strengthen Customer Relationships Capabilities and loyal customer relationships provide repeat opportunities Project: St. Mary’s Episcopal School Location: Memphis, TN Architect: Fleming Architects ALTITUDES® Torsion AS Spring GRID AXIOM® Classic MF LYRA® Plant Based MF INVISA
Slide 24: Our Segments Share Key Growth Initiatives to Accelerate Value Drivers
Our Segments Share Key Growth Initiatives to Accelerate Value Drivers Reinforcing and strengthening our winning formula Initiatives Key Objectives Expected Outcomes • Provide new products to address emerging, market-driven needs through efficient process and INNOVATION collaborations • Enhanced Mine
Slide 25: Innovation at the Core of AWI
Innovation at the Core of AWI R&D capabilities & competencies provide a strong foundation for our value drivers Organization - Structure Key Competencies Outcomes Codes & Standards Broad Product Portfolio 80 FTEs Testing & Analytics Scientists, PHDs, Compliance, Speed, Engineers, Project Mgrs. Insig
Slide 26: Innovation Supports Consistent Mineral Fiber AUV Growth
Innovation Supports Consistent Mineral Fiber AUV Growth New products and features rewarded in the market Product Vitality Index(1) Robust & Consistent AUV(2) Performance 50% Annual MF AUV (in $) 40% 5% CAGR 30% 20% 10% 0% 2011 2013 2015 2017 2019 2021 2011 2013 2015 2017 2019 2021 2x Product launch
Slide 27: Comprehensive Range of Innovation Further Differentiates AWI
Comprehensive Range of Innovation Further Differentiates AWI Unrivaled product development to meet customer needs with higher value products History of Market Driven Innovation up to 6x up to 7x up to 4x up to 2x Aesthetics Avg. MF AUV Fire Safety AcoustiBuiltTM DesignFlex® Acoustics 2015 2016 2019
Slide 28: Initiatives to Benefit Mineral Fiber AUV Performance and Volume Growth
Initiatives to Benefit Mineral Fiber AUV Performance and Volume Growth Large Installed Base Provides New Major Repair Sizable Opportunity to Influence(1) Construction Reno ABI(2) >50 Tenant Improving Leading Indicators Improvement GDP Bidding Activity Key Initiatives Focus on MF Volume Growth AUV Im
Slide 29: Architectural Specialties: Driving Profitable Growth
Architectural Specialties: Driving Profitable Growth Building and scaling a broad portfolio of specialty ceiling and wall products and design capabilities $’s in Millions AS Net Sales Primary Sales Drivers >$500 • Deeper market penetration 23% CAGR $288 • Leverage channel partners • Improve project
Slide 30: Acquisition Synergies in Action
Acquisition Synergies in Action Maximizing category value from recent acquisitions AS - Metal Category Five complementary acquisitions to add capabilities and obtain scale to meet growing demand for these performance attributes and aesthetics >20% Leveraging AWI scale & channels to 3 Year Net Sales
Slide 31: Healthy Spaces
Healthy Spaces Nick Taraborelli, VP Mineral Fiber 31
Slide 32: Healthy Spaces: A Catalyst for Growth
Healthy Spaces: A Catalyst for Growth What You Will Hear Today Healthy spaces is a long-term secular shift accelerated by COVID & sustainability awareness. Ceilings are an essential, integral part of the solution for healthy indoor spaces. HEALTHY SPACES AWI is uniquely positioned to lead in develop
Slide 33: Healthy Space Environment Increasingly In Demand
Healthy Space Environment Increasingly In Demand Macro trends and COVID accelerating the advancement Demand for Healthy Buildings Macro Trends Expected to be Above 90% Building Health 3B ft2… % of survey respondents that expect & Wellness WELL registered space increase in 2021, up 200% from 2020(2)
Slide 34: Drivers of Healthy Spaces Demand by Key Verticals
Drivers of Healthy Spaces Demand by Key Verticals Opportunities across multiple verticals for increasing renovation rates HEALTHCARE OFFICE EDUCATION Inova Women’s and Children’s Hospital Subaru Corporate Headquarters St. Francis Xavier Cafeteria • Emerging needs for additional • Hybrid schedules dr
Slide 35: Need for Space per Employee Offsets Work from Home Increase
Need for Space per Employee Offsets Work from Home Increase Space per worker increases drive renovation Work from Home % vs Office Gensler Office Design – Social Square Feet per Employee Distancing is Intentional 40% 30% Work from home % 2024 20% Installed base growth 10% 2019 0% 200 225 250 270 300
Slide 36: Why Ceilings Matter
Why Ceilings Matter Ceilings support a holistic approach to Indoor Environmental Quality (IEQ) Healthy Buildings Thought Leaders AWI redefining the role of the ceiling Defines a healthy building as a space that supports for future state of IEQ the physical, psychological, and social health and well-
Slide 37: Ceilings an Essential Part of the Healthy Spaces Solution
Ceilings an Essential Part of the Healthy Spaces Solution Air Flow Examples Stand Alone Floor Unit VidaShield UV24TM Recently Completed Study(1) Two VidaShield UV24TM units in the ceiling reduced exposure to airborne viruses and bacteria by 22%* No supplemental Air Cleaning Two VidaShield UV24TM Uni
Slide 38: Recent Wins Demonstrate Healthy Spaces Demand Across Verticals
Recent Wins Demonstrate Healthy Spaces Demand Across Verticals Florida Charter Schools CMD Construction Office Encompass Health CT-Dot Data Center BridgePrep Academy Miami, FL Irvine, CA Middletown, DE Newington, CT Did VidaShield help parents feel more secure about sending kids back to school? Abso
Slide 39: Healthy Spaces Potential to Unleash Volume Growth at Higher AUV
Healthy Spaces Potential to Unleash Volume Growth at Higher AUV Secular Shift Drives Sizable Volume Meaningful AUV Upside from Opportunities(1) Healthy Spaces Solutions Annual renovation rate volume +$350M Standard Classroom Ceiling AUV +$200M 2X +75bps vs Standard +50bps Health Zone AirAssureTM Cla
Slide 40: AWI Uniquely Positioned to Lead Healthy Spaces Solution
AWI Uniquely Positioned to Lead Healthy Spaces Solution Using the Power of Focus to extend leadership Poised to win and lead this catalyst for growth • The Healthy Buildings renovation renaissance has started • Ceilings are a critical piece of a Healthy building design HEALTHY SPACES • Our trusted b
Slide 41: AWI Invests in 1st Healthy Space Living Lab of the Future
AWI Invests in 1st Healthy Space Living Lab of the Future Building 402 Living Lab Space Location: Armstrong headquarters, Lancaster, PA Living Lab Partners WELL Health-Safety Approved - Credits from AWI Solutions Innovation Credit: New interventions that address health and wellbeing in novel ways Pa
Slide 42: Digital Initiatives
Digital Initiatives Jill Crager, SVP Sales Operations 42
Slide 43: AWI Investing in Digitalization to Enable Further Growth
AWI Investing in Digitalization to Enable Further Growth What you will hear today We seek to reach new untapped and underserved markets and create demand. We are developing differentiated solutions to support specification win rate and AUV growth. DIGITAL We are deploying digital tools to efficientl
Slide 44: Balanced Spectrum of Digital Opportunities
Balanced Spectrum of Digital Opportunities Focus of Digital Strategy Industry Disruption Future Opportunity Impact Step Change Outcomes Kanopi Lead optimization engine ProjectWorks Optimization Opportunities Customer Focus Manufacturing Supply Chain Back Office Level of Disruption 44
Slide 45: Digital Investments Supporting Volume Growth and AUV
Digital Investments Supporting Volume Growth and AUV Step-change projects strengthen Mineral Fiber and Architectural Specialties segments Growth Impact Investment Overview Strategic Rationale Volume AUV Key stakeholders Intensity Access largely untouched demand from Digital platform to deliver Repai
Slide 46: Kanopi: Sparking Demand in a Hidden Market
Kanopi: Sparking Demand in a Hidden Market Sizing the kanopi opportunity(1) Existing Friction • Underserved market doesn’t know: What to buy, where to Installed base of 38 Billion ft2 buy, how much to buy, how to install…think it’s expensive • Facility Manager Survey Results: “Buying Ceiling tiles i
Slide 47: Kanopi Personas and Sample Verticals
Kanopi Personas and Sample Verticals The Coordinator The Peacekeeper The Refresher Job Title: General Contractor Job Title: Owner Job Title: Office Manager Needs a direct way to access a variety Seeking to decrease noise levels Looking for a variety of options for a of SKUs & source orders from AWI
Slide 48: Lead Optimization Engine Tool Driving Sales Efficiencies
Lead Optimization Engine Tool Driving Sales Efficiencies Solving For • Time spent on qualifying leads • Sales team scope and coverage – missing untracked market AWI’s Differentiated Solution • Aggregates multiple data sources to analyze and score leads • Expanding reach from TOP opportunities to ALL
Slide 49: ProjectWorks: Rapid and Efficient Designs for AWI & Customers
ProjectWorks®: Rapid and Efficient Designs for AWI & Customers Existing Friction ProjectWorks Lifts AUV Across the Business(1) • Ceiling layouts are increasingly complex and understanding all of the components takes significant time, expertise and energy to figure out ~8x AWI’s Differentiated Soluti
Slide 50: Digital Initiatives Ramping Up Value for AWI
Digital Initiatives Ramping Up Value for AWI Business Impacts • kanopi increases the renovation rate with facility managers, small business owners and DIY community, creating new demand • Lead optimization engine drives productivity and supports AUV by DIGITAL converting, tracking and closing more o
Slide 51: Financial Overview
Financial Overview Brian MacNeal, CFO 51
Slide 52: Sound Investment Thesis
Sound Investment Thesis What you will hear today We’re continuing to focus on AUV to sustain our strong margin profile, while investing in key initiatives to drive mineral fiber volume growth. The AS segment is growing through strategic acquisitions and investments in capabilities to consolidate a f
Slide 53: Consistent Ability to Grow AUV & Expand Margins
Consistent Ability to Grow AUV & Expand Margins …Yielding Significant AWI Adjusted Increases in MF AUV(1) Over Time ... EBITDA* Growth and Margin Expansion $500 175 34% 150 $400 Indexed AUV (2011 = 100) 125 5% CAGR $300 28% 100 6% CAGR $200 75 $100 50 25 $0 2012 2013 2014 2015 2016 2017 2018 2019 20
Slide 54: Peer-Leading Free Cash Flow Enables Value Creating Capital Allocation
Peer-Leading Free Cash Flow Enables Value Creating Capital Allocation Strong FCF* Generation & Stability 3 Year Average Capital Deployment History throughout Cycles 2019 - 2021 12% Over 1/3rd of 19% deployable capital returned to shareholders Indexed to 2006(1) 21% ^ 26% Capital Spend: ~50% Maintena
Slide 55: Balanced and Disciplined Capital Allocation Strategy
Balanced and Disciplined Capital Allocation Strategy Strong, consistent cash flow generation allows commitment to all three priorities 2 Consolidating AS market via new partners and avenues of growth. 1 Targeting our highest returning investments. Peer Leading FCF Plenty of opportunity to grow in th
Slide 56: Investments in Initiatives Drive Mineral Fiber Volume Growth
Investments in Initiatives Drive Mineral Fiber Volume Growth Mineral Fiber Volume Growth to Strengthen Value Creators MF Volume (MFt2)(1) Mineral Fiber Volume Growth Drivers 1-2% CAGR 2-4% Volume From Initiatives CAGR 1-2% CAGR Innovation from Market New products and applications Healthy Spaces Solu
Slide 57: Architectural Specialties - Growing Through Acquisitions
Architectural Specialties - Growing Through Acquisitions Targeting companies with unique capabilities or competitive advantages Broadens Pre-Synergies Post-Synergies Portfolio 2020 Acquisitions(1) 9.6x 6.5x All Acquisitions 9.1x 7.1x Acquired Companies Allows one supplier for entire project (MF & AS
Slide 58: Near-Term Investments Drive Long-Term Results
Near-Term Investments Drive Long-Term Results Step Change Growth Expectations Fueled Investments in SG&A Support by Growth Initiatives and Market Tailwinds Growth Initiatives SG&A $ SG&A % of Sales 15% 12% to 15% 10% to 13% 25% 2016 - 2021 CAGR 10% (1) 2021 - 2026 CAGR Dollars in Millions 20% % of S
Slide 59: Consistent Strategic Priorities Enabling Shareholder Value Creation
Consistent Strategic Priorities Enabling Shareholder Value Creation Value Creation Model(1) 10% - 13% 12% - 15% 15% – 20% 15% - 20% Adjusted Diluted EPS* Net Sales Growth Adjusted EBITDA* Growth Adjusted FCF* Growth Growth 5% - 10% prior >10% prior 15 - 20% prior 10% - 15% prior Key Assumptions • Mi
Slide 60: What You Heard Today
What You Heard Today Building on our strengths to elevate our growth potential Growth HEALTHY DIGITAL Leveraging secular tailwinds to drive mineral Initiatives SPACES fiber volume growth beyond COVID recovery INNOVATION Accelerating Value Creation 60
Slide 61: @mstrong:
61 @mstrong: WORLD INDUSTRIES
Slide 62: Appendix
Appendix 62 @mstrong: WORLD INDUSTRIES
Slide 63: Glossary and Acronyms
Glossary and Acronyms The following words and phrases are defined here for use throughout the presentation: Architects and Designers (“A&D”): These people are heavily involved in the design and planning of commercial construction. Architectural Billings Index (“ABI”): An economic indicator for nonre
Slide 64: Strong Balance Sheet and Liquidity Position Supporting Growth and Capital Allocation Priorities
Strong Balance Sheet and Liquidity Position Supporting Growth and Capital Allocation Priorities AWI Capital Structure(1) $’s in Millions Amount Cash & equivalents $98 $98M $335M $433M Revolver Availability $335 Cash Revolver Available Liquidity(4) Availability Term Loan A $468 Principal Debt Outstan
Slide 65: 2022 Guidance
2022 Guidance (1) Double-digit growth on both top and bottom line 2021 Actual 2022 Guidance Current Guidance • MF AUV 8 - 10% positive like-for-like pricing & mix benefits $1,215 – $1,255 • Market recovery and benefits from growth initiatives expected to drive Net Sales $1,107 MF volume up 2% - 4% 1
Slide 66: 2021 Adjusted Diluted Earnings per Share Reconciliation
2021 Adjusted Diluted Earnings per Share Reconciliation For the Twelve Months Ended December 31, CONSOLIDATED 2021 Per Diluted Share Earnings from continuing operations before $185 $3.86 income taxes, As Reported Add/(Less): Income tax expense (benefit), as reported 57 Earnings (Loss) from continuin
Slide 67: 2022 Adjusted EBITDA Guidance Reconciliation
2022 Adjusted EBITDA Guidance Reconciliation Consolidated For the Year Ending December 31, 2022 Low to High Net Income $232 to $241 Add: Interest expense 22 26 (Less): RIP credit (1) (5) (5) Add: Income tax expense 76 79 Operating Income $325 to $340 Add: RIP expense (2) 5 5 Add: Depreciation 65 68
Slide 68: 2022 Adjusted Diluted EPS Guidance Reconciliation
2022 Adjusted Diluted EPS Guidance Reconciliation Consolidated For the Year Ending December 31, 2022 Low Per Diluted Share (1) to High Per Diluted Share (1) Net income $232 $4.87 to $241 $5.05 Add: Interest expense 22 26 (Less): RIP credit (2) (5) (5) Add: Income tax expense 76 79 Operating income $
Slide 69: 2022 Free Cash Flow Guidance Reconciliation
2022 Free Cash Flow Guidance Reconciliation Consolidated For the Year Ending December 31, 2022 Low to High Net cash provided by operating activities $210 to $230 Add: Return of investment from joint venture 95 105 Adjusted net cash provided by operating activities $305 to $335 Less: Capital expendit
Slide 70: 2018 – 2021 Adjusted Free Cash Flow Reconciliation
2018 – 2021 Adjusted Free Cash Flow Reconciliation For the Year Ending Consolidated 2018 2019 2020 2021 As Reported net cash provided by operating activities $203 $183 $219 $187 Net cash (used for) provided by investing activities $310 ($89) ($141) ($14) Net cash provided by (used for) operating and
Slide 71: 2016 – 2021 AS Adjusted EBITDA Reconciliation
2016 – 2021 AS Adjusted EBITDA Reconciliation For the Year Ending Architectural Specialties Segment 2016 2017 2018 2019 2020 2021 Operating Income, Reported $19 $28 $34 $36 $22 $4 Add: Acquisition-related impacts(1) - - - - 3 10 Add: Depreciation & Amortization 1 2 4 9 11 27 Adjusted EBITDA from Con
Slide 72: 2021 Mineral Fiber Adjusted EBITDA Reconciliation
2021 Mineral Fiber Adjusted EBITDA Reconciliation For the Year Ending Mineral Fiber Segment 2021 Operating Income, Reported $261 Add: Depreciation & Amortization 70 Adjusted EBITDA $331 72
Slide 73: AWI Adjusted EBITDA Reconciliation 2012 - 2021
AWI Adjusted EBITDA Reconciliation 2012 - 2021 For the Year Ending Consolidated 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Earnings (Loss) from continuing operations, reported $159 $127 $79 $58 $99 $221 $190 $242 ($84) $185 Add/(Less) Income tax expense (benefit), as reported $76 $71 $69 $37
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