Armstrong World Industries(AWI) - 2025 Q2 - Quarterly Results

Q2 2025 Earnings Release Overview Armstrong World Industries achieved record Q2 2025 sales and earnings, driven by strong segment performance and strategic acquisitions, leading to an updated full-year outlook Second-Quarter 2025 Consolidated Results Armstrong World Industries reported record Q2 2025 results with significant growth in net sales and operating income, driven by higher volumes, favorable AUV, and acquisitions Q2 2025 Consolidated Financial Highlights | (Dollar amounts in millions except per-share data) | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $424.6 | $365.1 | 16.3% | | Operating income | $123.2 | $95.0 | 29.7% | | Operating income margin | 29.0% | 26.0% | 300bps | | Net earnings | $87.8 | $65.9 | 33.2% | | Diluted net earnings per share | $2.01 | $1.50 | 34.0% | | Adjusted EBITDA | $154 | $125 | 23.2% | | Adjusted EBITDA margin | 36.3% | 34.3% | 200bps | | Adjusted diluted net earnings per share | $2.09 | $1.62 | 29.0% | - Net sales growth was driven by a $46 million increase from higher volumes and a $14 million benefit from favorable Average Unit Value (AUV)[6] - Operating income increased primarily due to a $25 million benefit from sales volume growth, an $8 million margin benefit from favorable AUV, and a $6 million increase in equity earnings from the WAVE joint venture[7] - The 2024 acquisitions of 3form and Zahner contributed $28 million to the increase in net sales and $5 million to the increase in operating income in Q2 2025[7] Second-Quarter 2025 Segment Performance Both Mineral Fiber and Architectural Specialties segments demonstrated strong sales growth and margin expansion, with acquisitions significantly boosting Architectural Specialties Mineral Fiber The Mineral Fiber segment achieved 6.7% net sales growth and 20.4% operating income increase, driven by favorable AUV, increased WAVE equity earnings, and reduced SG&A Q2 2025 Mineral Fiber Segment Results | (Dollar amounts in millions) | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $267.0 | $250.2 | 6.7% | | Operating income | $98.4 | $81.7 | 20.4% | | Adjusted EBITDA | $121 | $104 | 15.6% | | Operating income margin | 36.9% | 32.7% | 420bps | | Adjusted EBITDA margin | 45.2% | 41.7% | 350bps | - Net sales growth was composed of $14 million from favorable AUV (like-for-like price and mix) and $3 million from higher sales volumes[8] - The increase in operating income was primarily due to an $8 million benefit from favorable AUV, a $6 million increase in WAVE equity earnings, and a $4 million decrease in SG&A expenses[9] Architectural Specialties Architectural Specialties saw significant growth with 37.2% net sales and 80.3% operating income increase, primarily from 2024 acquisitions and strong organic performance Q2 2025 Architectural Specialties Segment Results | (Dollar amounts in millions) | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $157.6 | $114.9 | 37.2% | | Operating income | $25.6 | $14.2 | 80.3% | | Adjusted EBITDA | $34 | $21 | 60.7% | | Operating income margin | 16.2% | 12.4% | 380bps | | Adjusted EBITDA margin | 21.5% | 18.4% | 310bps | - Net sales growth was driven by a $28 million increase from the 2024 acquisitions of 3form and Zahner, along with increased organic sales from broad-based product penetration[10] - Operating income growth was driven by operating leverage on strong organic growth and contributions from acquisitions, partially offset by a $4 million increase in manufacturing costs and a $7 million increase in SG&A, both primarily attributable to the acquisitions[11][12] Unallocated Corporate Unallocated Corporate operating loss remained consistent at $1 million in Q2 2025 compared to the prior year - Unallocated Corporate operating loss was $1 million in Q2 2025, consistent with Q2 2024[13] Cash Flow and Capital Allocation The company demonstrated strong cash generation with a 46% increase in operating cash flow year-to-date and returned $30 million to shareholders via share repurchases - Year-to-date cash flows from operating activities increased by $39 million (46%) compared to the prior year, driven by higher cash earnings[14] - In Q2 2025, the company repurchased 0.2 million shares for a total cost of $30 million[15] - As of June 30, 2025, $610 million remained available under the authorized share repurchase program[15] Full-Year 2025 Outlook Armstrong World Industries raised its full-year 2025 guidance for net sales, Adjusted EBITDA, and adjusted diluted EPS, reflecting strong first-half performance - Management raised its full-year 2025 guidance for net sales, Adjusted EBITDA, adjusted diluted net earnings per share, and adjusted free cash flow, citing strong first-half results[17] Updated Full-Year 2025 Guidance | (Dollar amounts in millions except per-share data) | 2024 Actual | Current Guidance (2025) | VPY Growth % | | :--- | :--- | :--- | :--- | | Net sales | $1,446 | $1,600 to $1,630 | 11% to 13% | | Adjusted EBITDA | $486 | $545 to $560 | 12% to 15% | | Adjusted diluted net earnings per share | $6.31 | $7.15 to $7.30 | 13% to 16% | | Adjusted free cash flow | $298 | $330 to $345 | 11% to 16% | Appendix: Financial Statements and Reconciliations This section provides detailed unaudited financial statements and comprehensive reconciliations of GAAP to non-GAAP measures for Q2 2025 and full-year 2025 guidance Selected Financial Statements Presents unaudited consolidated income statement, segment results, balance sheet, and cash flow statement for Q2 2025 and year-to-date, with comparative 2024 data Selected Financial Results (Income Statement) | (Amounts in millions, except per share data) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net sales | $424.6 | $365.1 | $807.3 | $691.4 | | Gross profit | $175.8 | $149.3 | $325.7 | $273.6 | | Operating income | $123.2 | $95.0 | $221.7 | $181.1 | | Net earnings | $87.8 | $65.9 | $156.9 | $125.8 | | Diluted net earnings per share | $2.01 | $1.50 | $3.59 | $2.86 | Selected Balance Sheet Information | (Amounts in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total assets | $1,862.0 | $1,842.7 | | Total liabilities | $1,024.2 | $1,085.6 | | Shareholders' equity | $837.8 | $757.1 | GAAP to Non-GAAP Reconciliations Details reconciliations for key non-GAAP metrics including Adjusted EBITDA and Adjusted Diluted EPS for Q2 2025 and the updated full-year 2025 guidance Q2 2025 Adjusted EBITDA Reconciliation | (Amounts in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net earnings | $88 | $66 | | Add: Income tax expense | 28 | 21 | | Add: Interest/other income and expense, net | 8 | 8 | | Operating income | $123 | $95 | | Add: Adjustments (RIP, Acquisition, etc.) | 1 | 5 | | Adjusted operating income | $124 | $100 | | Add: Depreciation and amortization | 30 | 25 | | Adjusted EBITDA | $154 | $125 | Q2 2025 Adjusted Diluted EPS Reconciliation | (Amounts in millions, except per share) | Q2 2025 Total | Q2 2025 Per Share | Q2 2024 Total | Q2 2024 Per Share | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $88 | $2.01 | $66 | $1.50 | | Add: Adjustments (Acquisition impacts, Amortization, etc.) | 4 | | 7 | | | (Less): Adjusted income tax expense | (29) | | (23) | | | Adjusted net earnings | $91 | $2.09 | $71 | $1.62 | FY 2025 Adjusted EBITDA Guidance Reconciliation | (Amounts in millions) | Low | High | | :--- | :--- | :--- | | Net earnings | $300 | $304 | | Add: Taxes, Interest, Other | 124 | 132 | | Operating income | $425 | $436 | | Add: RIP expense | 2 | 2 | | Adjusted operating income | $427 | $438 | | Add: Depreciation and amortization | 117 | 122 | | Adjusted EBITDA | $545 | $560 |