Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2022 Armstrong World Industries, Inc. earnings call. At this time, all participants are in a listen mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. I would now like to turn the call over to your host, Theresa Womble, Vice President of Investor Relations. You may begin. Thank you, Kevin, and welcome to everyone on the call this morning. Today we'll hear from Vic Grizzle, our CEO, and Chris Calzaretta, our CFO, who will discuss Armstrong World Industries' third quarter 2022 results and rest of year outlook, along with progress on our growth initiatives. Our discussion of operating and financial performance will include non-GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of these measures with the most directly comparable GAAP measures is included in the earnings press release and in the appendix of the presentation also issued this morning. Both are available on our investor relations website. During this call, we will be making forward-looking statements that represent the view we have of our financial and operational performance as of today's date, October 25, 2022. These statements involve risks and uncertainties that may differ materially from those expected or implied. We provide a detailed discussion of these risks and uncertainties in our SEC filings, including the 10-Q filed earlier this morning. We undertake no obligation to update any forward-looking statements beyond what is required by applicable securities law. For those of you now following along, please turn to slide 4 on our presentation as we turn the call over to Vic. Thanks, Theresa, and good morning, everyone. Today, we reported solid top-line growth of 11% for the third quarter versus the prior year, with Mineral Fiber net sales increasing 9% and Architectural Specialties net sales up 18%. Adjusted EBITDA increased 5% year-over-year, and our consolidated EBITDA margin performance improved sequentially. As we noted in our press release this morning, we achieved this growth while facing continued headwinds on input costs and softening market conditions. The softening was primarily felt in discretionary renovation work that limited our Mineral Fiber unit sales growth to just 1%. This pause in discretionary work developed throughout the quarter and was experienced mostly in our independent distribution sales channel. We saw impacts on both Mineral Fiber and Grid sales. In contrast, we had good performance in our retail and Latin America channels, which resulted in an unfavorable mix that pressured AUV performance in the Mineral Fiber segment. Supply chain issues improved in the quarter, but labor constraints continued, constraining construction capacity and perpetuating elongated project timelines. As expected, new construction activity remained a headwind in the quarter. However, as the quarter progressed, we experienced the impact of greater economic uncertainty and higher interest rates on commercial construction activity. This unexpected slowdown appeared to track the decline in overall economic sentiment, such as weaker GDP estimates, a deceleration in commercial construction indicators, and expected further moderated inflation. This backdrop presented opportunities for projects to pause, and many did. Despite softer than expected market conditions, however, I'm very pleased with how our teams are executing and how our plants are operating. Their efforts are responsible for driving strong productivity as we continue on our lean manufacturing journey. Our teams are also maintaining a best-in-class customer service level, and our sales teams have worked diligently to execute well on our pricing initiatives. In the Architectural Specialties segment, excuse me, we continued to generate strong top-line and bottom-line performance in the quarter. Our team delivered a third consecutive quarter of record-setting sales and generated $16 million of EBITDA. This is the highest earnings quarter on record for the segment and a 20% increase from last year's result. Importantly, EBITDA margin expanded above 17%, continuing its sequential margin improvement on our way back to 20%. Although sales strength was broad-based across all material groups and verticals within Architectural Specialties, we are particularly pleased with the growth achieved by our most recent acquisitions. Turf, Arktura, and 3form each generated double-digit sales growth in the quarter. Turf specifically delivered year-over-year sales growth of more than 40% in the quarter while expanding their margins. These are outstanding results and further demonstrate the synergies possible for these smaller but highly capable companies on the Armstrong platform. New order intake in the quarter remained strong also and supportive of our double-digit growth expectations for the full year and continued strength in 2023. We've seen robust quoting activity in education and transportation, with solid wins in both of these verticals. The activity on transportation projects includes a mix of new construction and major renovation projects. Our recent investments in new product development in metal, wood, and Tectum has also strengthened our ability to get specified into more projects, into more spaces, and ultimately drive additional growth. The breadth of our portfolio with our expanded design capabilities and now our size and scale, we're clearly establishing our leadership in this most important growth segment. With that, I'll pause and hand it over to Chris for some more details on our financial results. Chris? Thanks, Vic, and good morning to everyone on the call. I'm very excited to be in my new role as CFO, and I'm grateful to have this opportunity to lead such a talented team. Having spent the past four and a half years here at Armstrong, I continue to be impressed with this organization, and I'm excited about the future of this company. As I review our third quarter 2022 results, as well as our updated 2022 guidance, please keep in mind that I'll be referring to the slides available on our website, and slide three that details our basis of presentation. On slide five, we begin with our consolidated third quarter results. As Vic mentioned, net sales of $325 million were up 11% versus the prior year, driven by sales growth in both segments. Adjusted EBITDA increased 5% and adjusted EBITDA margin contracted 180 basis points. Adjusted diluted earnings per share increased to $1.36, or 16%, driven by higher adjusted earnings, a decrease in the effective tax rate, and a reduced share count from the prior year. I'm happy to report that in the third quarter, we repurchased $60 million of shares. This represents a continued step-up of the increased buybacks we made in the second quarter and brings our year-to-date share repurchases total to $145 million. Last week, we also announced a 10% increase in our quarterly dividend, which marks our fourth annual increase in our quarterly dividend since we instituted the dividend in 2018. This recent increase in share repurchases and dividend activity reflects our commitment to our capital allocation priorities, which remain unchanged. First, reinvesting into the business. Second, strategic acquisitions and partnerships. Third, returning cash to shareholders via a stable dividend and a flexible repurchase program. Since the inception of the share program in 2016, we have repurchased 12.1 million shares for a total of about $831 million. As of the end of Q3 2022, we have $369 million remaining under our repurchase program, which runs through December 2023. When including our dividend payments, we have returned just shy of $1 billion to shareholders through both repurchases and dividends since 2016. Slide 5 also shows our third quarter adjusted EBITDA bridge versus the prior year. The 5% increase in adjusted EBITDA was driven primarily by favorable AUV performance and an increase in sales volumes, which was partially offset by increased levels of inflation. Favorable AUV was driven primarily by positive like-for-like pricing and partially offset by negative Mineral Fiber channel mix. Both Mineral Fiber volume and AS sales growth contributed in the quarter, with Mineral Fiber volume growth driven by year-over-year increases in our retail and Latin America channels, which partially offset decelerating market conditions. EBITDA margin was compressed by continued inflation on raw material, energy, and freight costs. WAVE equity earnings remained under pressure by lower volumes during the quarter due to inventory destocking in Grid and softer market conditions. On slide 6, we summarize our Mineral Fiber segment results. Third quarter net sales increased 9% year-over-year, driven by favorable AUV of 8% and 1% of volume growth. First, on AUV, we experienced double-digit like-for-like pricing in the quarter versus prior year on the heels of our July 1st price increase. This was offset by negative channel mix. While we were pleased that Mineral Fiber volumes were positive in the quarter, we were disappointed by the deceleration of demand in certain key markets, which contributed to the negative channel mix. On a positive note, we saw sequential improvement in our price over inflation dollar realization, an important step to expanding Mineral Fiber margins. We talked last quarter about a temporary squeeze on Mineral Fiber margins as the rate and pace of inflation hindered our ability to maintain our gross margins. We expect to get back to our historical realization rate in the coming quarters as the rate and pace of inflation moderates compared to what we experienced this year. These factors also impacted our Mineral Fiber EBITDA results, which increased by $3 million or 3% year-over-year. While AUV was a strong contributor of $16 million to EBITDA results, it was lower than our expectations and sequentially lower than Q2 results due to the negative channel mix we experienced. Inflation remained a headwind for us. The two biggest drivers of that input cost inflation were raw materials and natural gas within our energy spend. We are hopeful that inflation overall will continue to moderate in the coming months, but natural gas prices specifically have been volatile, and such volatility could continue into the winter. Last, WAVE equity earnings were negative in the quarter compared to the prior year, driven by weaker volumes. The team at WAVE continued to price ahead of inflation during the quarter. While steel costs have leveled off over the past several months, we expect these lower steel price levels to flow through our results starting in Q4. On slide 7, we discuss our Architectural Specialties or AS segment results. AS continued to execute and deliver sales growth, posting a year-over-year increase of 18% for the quarter, for the third quarter. Similar to the first six months of 2022, sales growth was driven by improved performance from recent acquisitions compared to the prior year period and an increase in custom project sales. Adjusted EBITDA increased 20%, and adjusted EBITDA margin expanded 30 basis points versus prior year. Driving the increase in adjusted EBITDA is the fall through from the increased sales levels. Manufacturing costs were higher compared to the prior year, commensurate with higher sales levels. SG&A expenses were slightly higher than the prior year due to continued investments in support of increased sales growth. We expect AS EBITDA margin to continue to expand in Q4 versus prior year. Slide eight shows year-to-date adjusted free cash flow performance versus the prior year. The 10% decline in adjusted free cash flow resulted primarily from negative working capital changes in accounts payable and accrued expenses and inventory, primarily due to timing, in addition to an increase in income tax payments. These items were partially offset by higher cash earnings. Slide nine shows our year-to-date consolidated metrics. We delivered strong top-line growth of 13% versus the prior year, while adjusted EBITDA remained pressured. The majority of the contraction in EBITDA margin resulted from higher costs and negative WAVE equity earnings versus the prior year. Adjusted diluted earnings per share increased 11% and as previously mentioned, adjusted free cash flow declined by 10%. Looking at the year-to-date EBITDA bridge, favorable AUV and positive volumes were partially offset by higher inflation, increased SG&A expenses, and lower WAVE equity earnings. As we move to slide 10, you'll see our updated full-year guidance for 2022, where I will highlight a few revisions. We now expect Mineral Fiber AUV of between 11% and 12%, a downward revision from our previous range, driven by our third quarter channel mix headwind. Mineral fiber volume to be about -2% versus the prior year to reflect weaker market conditions. Our AS sales guidance is increasing to greater than 15% as the business continues to execute and perform at a high level. The AS segment will face a more difficult comparison in the fourth quarter as we are beginning to lap improved performance for the segment in the prior year period. Moving to adjusted EBITDA and EPS, we've lowered our guidance ranges primarily due to the softer market conditions, which we expect to continue for the remainder of 2022. Adjusted free cash flow guidance revisions are driven mostly by working capital headwinds, which we expect to improve in the fourth quarter. We expect free cash flow as a percentage of sales to be in the 17%–18% range for the full year 2022. Finally, we are maintaining focus on our strategic initiatives and our long-term growth strategy as we look forward, while diligently controlling our costs and making adjustments as needed given the evolving market landscape. With that, I'll turn it back over to Vic to wrap up before we take your questions. Thank you, Chris. Before we move to the Q&A session, I'd like to provide a few additional thoughts on our digital and healthy spaces initiatives. Momentum for Kanopi by Armstrong, our online end-to-end platform, continues to build. It's been two years now since we launched the platform, and the breadth of capability added in just a short amount of time is simply impressive. The results are demonstrating this platform's ability to attract new repair and replace customers. Year to date, sales through Kanopi have increased nearly 400% from prior year. The number of orders on the site has increased at a similar rate, and we're up 44% sequentially from the second quarter. We're also pleased to see new users continue to grow, with more than double the number of users from 2021. ProjectWorks, our automated design service, continued to make progress as well. With ProjectWorks, we're further building customer loyalty and trust by offering this unique capability to streamline the entire design to pre-construction process, all in, on average, in 48 hours. We're providing this service to more and more architects and contractors and achieving higher win rates as a result of this. What's exciting to see from these digital initiatives is how they're further differentiating us in the ceilings category, enabling the next level of innovation, and are creating higher levels of customer loyalty. Most importantly, these initiatives are adding incremental sales for both our Mineral Fiber and Architectural Specialties segments. Turning to healthy spaces, we continue to get confirmation of the need and desire for healthy indoor spaces, as broadly defined as healthier air, comfort, and sustainability. High-performing healthy buildings offer occupants high indoor environmental quality while reducing energy usage and carbon footprints. We believe our ceiling solutions have an important role to play in helping owners and occupants achieve healthier spaces. We're tackling this opportunity through our own innovative products like HealthZone, AirAssure, and Total Acoustics. We're engaging in partnerships to enhance our product development efforts and extend our reach into this new space. On this front, I'm excited to announce a new partnership with a leading air quality sensors company called Awair. Awair is a developer of innovative indoor environmental quality sensors that empower users to monitor and mitigate risk to indoor environmental quality. Their sensors can measure seven key indoor environmental quality parameters, such as particulates and VOCs, acoustics and light, and others. We have been using Awair sensors and dashboards in our living lab at our corporate headquarters for some time now, and are excited about the value this data provides in solving for healthier spaces. We're now in the process of conducting pilot programs with a variety of school districts where Awair sensors will help schools identify and then improve indoor environments and overall enhance the learning experience for their students. We believe this tool is critical to the customer education process and ultimately should help spur demand for our healthy spaces solutions. This partnership adds to those we've announced earlier in 2022, such as our expanded relationship with Price Industries and our partnership with 9F. I look forward to updating you on our progress with all of these efforts in the coming quarters. Now before getting to your questions, I'd like to take a step back and just share how we think about our business in light of the macroeconomic conditions we are about to face. Our business is steady and resilient. This comes from a variety of factors, including the portfolio effect of both the diverse set of vertical markets we serve and the types of projects that make up the demand profile for our products. Our verticals span from education to office to healthcare, retail and transportation. Very rarely are all of these verticals moving in the same direction at the same time. Add to that the various project types, from new construction to large renovation to smaller repair jobs, all on different time schedules. The dynamics of this diverse set of factors dampens the peaks and the troughs throughout the cycle, providing for a steady, stable business. Longer term, our targets remain unchanged. We have an attractive set of growth initiatives, including our digital and healthy spaces initiatives, that are driving incremental growth for both Mineral Fiber and Architectural Specialties. We see opportunities for continued growth in the Mineral Fiber AUV rates above our historical rate of 5%, supported by our innovation and our new specification work. We expect market tailwinds for delayed renovation activity due to the pandemic and now recessionary pressures that should propel Mineral Fiber volumes back to 2019 levels. Aside from the timing of the market tailwinds, we believe our long-term value creation targets are achievable. As we always do, we will continue to assess and evaluate our macroeconomic conditions and make adjustments. All in all, I remain excited about the long-term growth potential for Armstrong. With that, we'll turn the call over to the operator and open it up for questions. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your touch-tone telephone. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Joe Ahlersmeyer with Deutsche Bank. Your line is open. Yeah, good morning, everybody. Thanks for taking my question. Morning, Joe. Yeah. Within Mineral Fiber, wondering if we could just put a finer point on the AUV, talk about double digit like for like price. Is there a way we can, you know, get a little closer on what that number is and maybe what the negative customer and channel mix was? Just secondarily, did you see any noteworthy product mix within that as well? Yeah, let me hit the product mix. I'll go back to the AUV. Our product mix was unaffected by the overall mix, pretty much as we would have expected. It's typically positive, but it was flattish to positive in the quarter, so no contribution to the overall mix from product mix. Architects and contractors continued to request and want the latest and greatest products that come at higher price points, so on the AUV question overall, we did continue to get double-digit like-for-like pricing in the quarter. We got good realization from our July 1 price increase. The mix really came from channel mix, as we talked about our retail and Latin America channels that are at considerably lower price points, offsetting good double-digit like-for-like pricing. I would size that channel mix for you in that middle single digit area to help with understanding the price realization on the July price increase. Again, we're happy and pleased with our price realization overall, just offset with some unexpected channel mix. Okay, great. That's encouraging. Just based on those recent price increases and, you know, the healthy AUV guide for Q4, as well as your expectation for moderating inflation from here, do you have an estimate maybe on EBITDA of how much price cost favorability you could be carrying into the first half of next year? You want to comment on that, Chris, or do you want me to take it? Yeah, you want to take it? Okay. If you see sequentially from second quarter to the third quarter, we're catching up to the inflation curve with our pricing. I expect that to continue into the fourth quarter. We should get some margin expansion continuing the fourth quarter. Of course, it's really tough sitting here today to call the inflation curve for next year. As you know, we tend to hold on to our pricing in all parts of the cycle, and I would expect us to perform in that way next year. The answer to your question really becomes a function then of what your expectations are in inflation. I think sitting here today, we expect it to start to roll over and be more favorable in the fourth quarter. How much that, you know, grows into next year, I think we have to wait until February, and we'll do a better job, I think, in outlook and sizing that for you. Okay, understood. Thanks a lot. Yeah, you bet. One moment for our next question. Our next question comes from Keith Hughes with Truist. Your line is open. Thank you. I want to get some more detail on your commentary of, you know, deceleration in the quarter. It's obviously going to show up in your fourth quarter volume guide. Yeah. Can you talk a little more, are these projects just being delayed, or have you seen outright cancellations? If there's any subsegment that really stands out where this is most pervasive? Yeah, it's a good question because we really try to pay attention to what's being delayed versus canceled. It's a good question. Thank you for that, Keith. We don't see cancellations. We continue to track that. Actually, from the pandemic on, we've been tracking how much of this is cancellation versus delayed. You know, if coming off of May and June, we had mid to upper single-digit volume growth. The growth trajectory that we were on in May and June is what we were expecting in the third quarter. Obviously that moderated throughout the quarter. Where it showed up is in these discretionary projects, ones that, you know, people could hold or they could wait or they could delay very easily. Those are the ones that we saw really take a pause. You know, the major renovation projects, the new construction projects, even some of this mid-size work that was already begun or started, that was not the issue. Those were continuing on completion cycles as they were expecting to. Where we saw is in this flow part of our business, we saw that soften dramatically throughout the quarter. Again, I pin it on two things, Keith. One is there's clearly a level of uncertainty out there. People who could wait are waiting because of that uncertainty. Number two, I think the market is starting to recognize that inflation is turning over. Everybody that got quotes and sticker shock on the cost of their renovation projects could see now that this could, by waiting 3–6 months or maybe another year, they could wait this out and get a better price for their renovation projects. It felt like those people who could wait chose to wait, and we really felt that in the third quarter. Along those lines, for your next quarter or two of production, do you feel like, I know there's not a lot of Mineral Fiber inventory in the channel or so, but do you feel like you'll have to, you know, slow production down below demand to just prevent a buildup? Only on the edges here. I think the type of adjustments we're talking about from the third quarter to the fourth quarter are really around the fringes of our production cycle. We can manage this on a day-to-day basis. I don't see any major corrections on the manufacturing floor at this point. Okay. Thank you. You bet. Thank you. One moment for our next question. Our next question comes from Kathryn Thompson with Thompson Research Group. Your line is open. Hey, good morning. This is actually Brian Biros on for Kathryn. Thank you for taking my questions today. First one, I guess building on the question from previously, I guess, when did you really see the pace change in growth? And I guess, what are you seeing going forward into Q4 and early 2023? It seems like maybe July timeframe was when you started to see the deceleration really start based on your earlier comments. I guess just since then, has it accelerated or did it kind of just all come at once and has it kind of steadied out? I guess just how has it trended since July? Yeah, it really decelerated throughout the quarter. We have a really strong first half of July, which by the way, was coming off of a July 1 price increase. There was some pretty good strength in the first part of July in the face of that price increase. That was encouraging. I would really put it on toward the end of July and then a little more in August and then a little more in September. It kind of again followed a bit of the sentiment curve that we were all kind of experiencing with the reductions in economic activity outlook and the deceleration of some of these indicators that we've all been watching. Although they stayed positive, they were decelerating. I hope that answered your question, but I would say really toward the end of July and then we saw our first signal, but then in August and September is where we got the validation of that. No, that does answer the question. Thank you. As a follow-up, just how is the retail channel reacting to the deceleration you've been talking about in the independent distribution channel? Is it kind of isolated over in the independent one and probably won't bleed into the retail side? Or is it maybe a leading indicator of, you know, things are happening first here, but then it'll bleed into the rest of the channels going forward? What are you hearing from the other retail sides? They kind of move together typically. You know what makes it choppy on the retail side as you've heard before is some of these load-ins and inventory drawdowns that we get a little bit more lumpiness in the retail channel. The retail channel, for the most part, is serving the small contractor as you know so really the lighter contractor work. They kind of move together, and I wouldn't try to separate that they're seeing one market versus another market but it can be more lumpy quarter to quarter. Okay. Thank you. Uh-huh. One moment for our next question. Our next question comes from Garik Shmois with Loop Capital. Your line is open. Oh, hi. Thanks for taking my question. I'm just wondering if you could speak a little bit more broadly, just in prior periods of economic deceleration. I think you've mentioned that your volumes tend to remain relatively stable. I'm just kind of curious, and I know we're not talking about 2023 formally, but in this new period, how do you anticipate your volumes in Mineral Fiber generally to behave? Would you expect it to be, you know, relatively stable or, you know, does the recent deceleration give you some pause to that outlook? No, I think with the deceleration, you still saw Mineral Fiber volume growth positive in the quarter. If you go back 10 years, you know, 95% of the data points fall within a ±2% range. As I was saying in my prepared remarks, I mean, you get the peaks and the troughs cut off by the portfolio effect of the diversity of types of projects that we're on, as well as the verticals in which we're in. That shouldn't change. You know, where it did change, of course, was during the pandemic when everything across the board was shut down. Then, of course, there was no portfolio effect there. In a garden variety recession, you would expect some of the verticals to be still positive and some of them to be more negative. That portfolio effect, I think, plays out. I'd expect no change there in terms of the portfolio effect of the diversity of our end markets and types of projects we're in. Got it. Thanks for that. Just wanted to ask on Architectural Specialties if you've noticed any change in the bidding environment there? Well, that market, as you know, is, it being specialty in a sense, it's very much a project-based business. I think the difference in that business, frankly, is not so much on the market side, but I think where Armstrong is playing. We're playing in so many different spaces within the same commercial buildings. We're playing in more of the commercial buildings, and we're winning more work. I think those are the real drivers behind the Architectural Specialties business. Again, our breadth of our portfolio and the capability that we have there is just pulling us into more areas. You know, again, the project nature of that business will give us a little bit more visibility in what's going on in that business than some of the flow parts of the Mineral Fiber business I would contrast that with. Understood. Thank you. Mm-hmm. One moment before our next question. Our next question comes from Philip Ng with Jefferies. Your line is open. Hey, morning, guys. You've called out double-digit bidding act- Good morning, Phil. Morning, everyone. You called out double-digit bidding activity for some time now, I think sometimes since last year, but demand's certainly been a little choppier this year, with the weaker macro backdrop. How much line of sight at this point do you have in 2023? Are you comfortable that with that backlog that volumes could be up next year in Mineral Fiber? Or how should we think about it at this point? Yeah, you know, the bidding activity that you're referring to is really it's a first-time bidding activity, so it's a really good future indicator, maybe, you know, 18–24 months out of projects that could be on the horizon. You know, one of the things that we talked about, Phil, with that data is that that data was not translating into real projects on the ground, right? We weren't seeing it in the Dodge starts data. We weren't seeing it on the ground in terms of new projects, which really spoke to the constraints that were in the marketplace around supply chain and labor issues that were just not allowing, I think, either that or the high inflation that people were saying just wasn't allowing that business to land. I still think that that business is out there. Those are strong, I think, market signals around the demand for commercial construction activity that's out there. How it lands into 2023 or 2024, I think is still too uncertain to call. I'm encouraged by that signal out there, and we'll have to see again how the supply chain, the labor constraint ease and I think this rolling over inflation is a very important dynamic to how much of that gets realized into real work in 2023. I think we'll have a better outlook and a better feel for that, when we get to February. Gotcha. With growth coming through a little slower than expected, how much of a lever is throttling back investments which you've been investing the last few years, and when do you kind of expect that to kind of come through? You know, certainly your Q4 implied guidance is encouraging. I mean, demand down in Mineral Fiber, still expecting margins to be up. Part of that, I assume, is price cost. But help us think through maybe next year if demand is weaker again, you know, your ability to kind of drive margin expansion from throttling back investments and price cost. Yeah. You know, I think I would say throttling back our expenses, we may not throttle back our investments. We may throttle back our costs in other areas. Broadly speaking, I think we do a really good job of finding places to control our costs so that we can be right-sized to the market environment that we're in, so we can expand margins and really let that price over inflation flow through in the business. Again, we're going to be very prudent managers of our expenses and make sure that we're setting this business up to expand margins going forward. Okay. As we have really throughout parts of the cycle. Yeah. Thanks, Phil. One moment for our next question. Our next question comes from Susan Maklari of Goldman Sachs. Your line is open. Thank you. Good morning, everyone. Hi, Susan. My first question is, you know, as we do think about the setup into 2023 and the potential that some of this inflation does roll over, and perhaps some of your underlying customers are waiting for that to come through, how are you thinking about price versus volume in Mineral Fiber, understanding that there's no precedent necessarily to take that pricing down? Given the magnitude and the number of increases that we've seen in the last two years, how would you think about the trade-off between those two? Well, I think about it this way, that our teams have done a terrific job in managing the spread at the gross margin level, right? As you know, we have a history of holding our price even in deflationary periods. Of course, we need to get more price in those inflationary periods. We manage the business for the spread at the gross margin level so that we can fund these investments, we can perpetuate our business model. That's how we think about it, and I think we'll continue to manage that next year based on the macroeconomic environment we face, so that we're managing the price and cost equation to expand margins at the gross margin level. Okay. As we think about capital allocation, can you give just an update on the M&A pipeline, anything that you're seeing there, any changes? How are you thinking overall just about capital allocation, your interest in buybacks versus perhaps some of the other opportunities? Yeah, I think, and Chris, I'll let you comment on this in just a second. Just, you know, in terms of the business development effort, again, we have a fully staffed team, and they're hard charging it every day. I review this periodically with the team, so I'm very engaged in what they're working on. I'm very encouraged by what they're working on. I still am hopeful that even some of the smaller deals we're working on, we can get done here in the near future. We're active here. Susan, I think this is a timing thing that we don't control, frankly. These companies are not on the market for sale in a bidding process on a timeline. We really are working the relationships and the partnerships as precursors to buying these companies. We continue to be active here. Our pipeline continues to be robust and healthy here. I think it's fair to expect more from us in this area. Okay. Thank you. Good luck. Mm-hmm. Thank you, Susan. Thanks. One moment for our next question. Our next question comes from Rafe Jadrosich with Bank of America. Your line is open. Hi. Good morning. It's Rafe. Thanks for taking my question. Vic, I just wanted to follow up on a comment, the comment you just made on pricing. I think historically, you pretty consistently increased pricing on Mineral Fibers, and your comments there were sort of talking about raising price each year, to maintain a certain gross margin level. I just want to make sure I understand. Is there a change in terms of the way you're thinking about pricing going forward, relative to cost, or do you expect to kind of maintain that same cadence of price increases going forward? Yeah. No change, to be really clear. There's no change in how we're thinking about that and how we expect to manage it. Okay. Thanks. I appreciate the clarification. Just what's the outlook for inflation, for this year, maybe, like, relative to where it was a quarter ago? You commented that natural gas materials has been the biggest headwind to your input costs. We can obviously see that, like, natural gas prices have come down quite a bit, in the last 90 days. Like, when would we start to see some of this, some of the relief on input costs start to flow through your P&L? Yeah. Yep. Hey, Rafe. This is Chris. Thanks for the question. Yeah, for the year, I mean, for Mineral Fiber, you know, we're outlooking high single digit inflation, right? I mean, you really identified it well. The wild card and kind of the variability is around natural gas pricing. We expect overall inflation to slightly moderate a bit as we finish out the year. The volatility really remains with what happens with natural gas. You kind of saw how it spiked up in the latter part of the third quarter. If the prices, as they've come down, continue to tick down, I think we have some potential upside there. That is really the wild card and one that we continue to monitor pretty closely. If natural gas prices kind of stay where they are today, when would you expect that to start to be a benefit to your margins? Yeah, I think that would be part of something that we'd look at as we head into 2023. Again, there's a lot of variability in that natural gas market. I'd say as we finish out the year and head into 2023, that'll give us a better insight into you know, our overall inflation profile. Great. Thanks. One moment for our next question. Our next question comes from John Lovallo with UBS. Your line is open. Hey, guys. Thank you for taking my questions. The first one is, it seems like the Q4 guide may be implying an improvement in channel mix. Are you seeing that already? Or if not, what sort of gives you the confidence that that's going to happen? Yeah, I think in the month of October, we can say we're seeing what we're outlooking. It's consistent with what we're outlooking in the month of October. Yeah, I think, again, as you know, you've heard us, John, before on some of these load-ins or lumpiness in some of the orders. It rarely happens two quarters in a row, as you know. I think what we experienced in the third quarter is a bit of an unusual situation. What we're seeing in October is reinforcing that. Gotcha. Okay. You called out education as being one of the strong parts of the business in the quarter. In my mind, that's a natural candidate for healthy spaces. I'm just curious if you're seeing any improved, you know, penetration or, you know, desire for healthy spaces in that education segment. Yeah. Overall, our activity in the summer and in the third quarter was a strong area for us in terms of activity. We closed a lot of business in that area. We're tracking 2x the number of projects we're tracking in healthy spaces. Yeah, I think you're right. I think this is an area that's rich. There's all kinds of things going around now that's beyond COVID-19 that our healthy space solutions can really help the classrooms with, and we're excited about that. There's a lot more engagement. Obviously, there is still a lot of money to be spent here. Less than 20% of the ESSER funds have been spent so far. There's plenty of money out there for the education to support the upgrades that around healthy spaces in particular. Thanks, John. Yeah. One moment for our next question. Thank you. Our next question comes from Dan Oppenheim with Credit Suisse. Your line is open. Great. Thanks very much. Was wondering if you can talk, I guess, a little bit on the specialty side. You talked about winning more buildings, and we've seen the margins growing, so clearly speaks to the offering that you have there. Wondering, you know, you talked about the margins in terms of, further expansion in the fourth quarter. How do you think about the potential in terms of what can happen then in, 2023 on that? Yeah, I think, I mean, our teams are doing a terrific job in selling the new design capability that we have, the depth of our capability and the breadth of the portfolio to take care of more spaces within these buildings for architects. It's really exciting. We're getting some good leverage, right, with that increased activity on our plants. Within our plants, our teams are doing a good job in controlling costs and driving productivity, doing the things that we need to do to get good operating leverage at the plant level. Both of those are real drivers, I think, for us to continue to expand the margins. As I said, we're well on our way to getting back to that 20% EBITDA level that we've established is where we want to run this business. You know, not trying to optimize margins too quickly at the expense of growth. This is a real strong growth engine for us, but at that 20% EBITDA level for the quality of those, the quality of that growth. We're well on our way to getting back to that 20% level. Great. Thanks very much. That should continue into 2023. I guess that was your question, right? Is that should continue into 2023. Great. Thanks. One moment for our next question. Our next question comes from Steven King with, sorry, Stephen Kim with Evercore ISI. Thanks very much, guys. Yeah, I think you guys mentioned that across your segments, retail, ADM, education, and transportation were pretty strong. Was curious how those specific segments trended throughout the quarter and entering 4Q. Did it maintain its strength? Did they maintain their strength, or did you see the weakness broaden across categories or segments as the quarter progressed? Well, we naturally see a falloff in education toward the end of the quarter, so it'd be really hard to tease out how much that was just the seasonality of kids getting back in the classrooms in September. I would say the biggest, maybe the standout was around office and healthcare, where we saw some of the softness in the renovation work. Again, from the beginning of the quarter to the end of the quarter, I would say those probably stood out the most. Okay. Gotcha. That makes sense. Secondly, I think you talked about a little bit about inventory levels. I think you talked about in grid, for example, there was some inventory destocking. Anything else to sort of call out there, and whether or not you know you have any concerns? I think you had talked about in 2Q that your inventory levels you thought were pretty normal in distribution. Was curious as to whether or not there'd been any change in that. No, I think inventory levels from what we're hearing from our distribution partners are at comfortable levels. Again, you know, I think in the third quarter, going into the third quarter, everybody felt pretty good about their inventory levels based on an outlook of stronger volume growth. I think when the signal from the market was, "Hey, there's less volume growth here," they in effect, in the grid part of the business in particular, ended up destocking more on a weaker market condition than they were expecting. Mm-hmm. Again, remember all last year in 2021. There was nine price increases because of the steel inflation. They were accumulating a lot more volume on the grid side than they were tile side. But again, comfortable with that, given the growth outlook in the third quarter. Unfortunately, that moderated throughout the quarter and, in effect, we felt that more in the grid business because in effect it became a bit of destocking. Yeah, that makes sense. Okay. Thanks a lot. Yeah. Thank you. One moment for our next question. Our next question comes from Adam Baumgarten with Vertical Research Partners. Your line is open. Hey, good morning, everyone. Maybe just sticking with Mineral Fiber volumes in October, are they consistent with the implied mid- to high-single-digit decline for 4Q as a whole, or are you expecting November and December to decelerate further in that guide? Yeah, I think the big thing here is what we saw last year. We're anniversarying. Remember, we moved our price increase this year from February to January. That brought more buy-ahead volume into the month of December than we typically have. You're going to see us anniversarying that event in December, so I would expect more of that delta year-over-year to be in December. Okay, got it. Just I think you mentioned that new construction was still a headwind in the quarter. Do you expect that to flip to a tailwind at some point in 2023? Well, the actual starts this year are forecasted to be positive. They're way off their forecast. You know, originally, they were at the mid-single digit levels forecasted from the Dodge starts. We don't believe that that's actually what's happened. It's much less than that, although still positive. We'll have to see. I think macro conditions may drive the actual start and continuation of that activity in next year. Again, sitting here today, it'll be really hard to say that's going to be much of a tailwind, if at all next year. Okay. Got it. Just maybe one more quick one. In the presentation you called out on the Mineral Fiber margin bridge, inventory valuation, as a headwind. Can you just give some more detail around that? Yeah. Hey, Adam, this is Chris. Yeah, inventory valuation, think about it more in terms of, call it inflation running through, you know, inventory levels and flushing through on the P&L due to vals. Okay. Got it. Thank you. Really more, yeah, inflation timing related. Yep. One moment for our next question. Our next question comes from Kenneth Zener with KeyBanc Capital Markets. Your line is open. Good morning, Vic, Chris. Hi, Ken. Hey, good morning. Obviously your business is a lot steadier than the, you know, kind of concerns we're seeing in the broader economy. What's different, it seems post- COVID-19 or since COVID-19, is the regional dynamics. Obviously, you're big in the Northeast. I'm based out in San Francisco, where the Salesforce Tower, one of your big clients at one point in time is largely empty. Could you maybe take a step back? I understand the healthcare and, you know, the education, all these trends, but are we seeing something pretty different in terms of, you know, the occupancy rates by region, as opposed to the very strong growth we've seen in places like Texas and Florida versus traditional markets? I know a lot of them, you know, is replacement in your portfolio, but can you talk about anything that you might be thinking about, you know, a little bigger picture stuff in terms of what we've seen geographically in our country? Thank you. Yeah. I think the back to office rate and pace overall nationally has stalled out, as we all know and watch very carefully. To your point, it is uneven by territory. Certainly out where you are, Ken, in the West, it's clearly lagged from what we see in New York City or in Boston and in Dallas. There's definitely some disparity there. If you get back to these whether these buildings will be occupied, the question is when and how big is the lag until to when they'll be occupied? Because that's what drives the TI work that I think you're referencing here in terms of how we think about the demand profile from office in particular. We've seen it in other areas. It goes faster, but then it drives the TI work that we're, you know, that it's important to the overall demand profile. We expect this to continue to move forward and to gain traction, just like we have in other parts of the country in places like the West, where it's still lagging. We're not giving up on that as a market opportunity just because of some of the lags here. We still believe that those are strong renovation opportunities for us. The question is the lag. How long will it take for these buildings to be reoccupied, whether by the existing tenants or the next generation tenants that come behind them? Again, just like we have seen in some of these other cities, like New York, for example. Right. We're thinking this renovation activity is pent-up demand, not lost demand. Right. No, that makes sense. Just, you know, it's the footprint of buildings you're servicing is in place already, but it's noticeable the regional differences. I guess, excuse me. Obviously we had some mix in the quarter and stuff, and you guided for Mineral Fiber in the fourth quarter to be down. From the pricing perspective, which is the larger component, does it seem as though because we've constantly had these price increases that we're basically going to just be all else equal from today? It'll really have price increases through decelerating from, you know, where we are now into the back half of next year, would be a reasonable assumption, not making any inflation forecast? Well, I think it's reasonable to expect. I mean, we've had two years, right, of just unprecedented levels of inflation. You've had unprecedented levels of pricing. Right. If inflation moderates next year and gets back to a more normal inflationary rate, then our pricing initiatives should reflect a more normal inflationary environment. I think that's a fair assumption to, you know, to pair together. Yeah, just trying to normalize the strong pricing that we've had. Thank you very much. Yeah. Thank you, Kenneth. I'm not showing any further questions at this time. I'd like to turn the call back over to Vic Grizzle, President and CEO, for any closing remarks. Yeah, thank you again. Thank you all for joining us. Again, disappointing third quarter results for us, but as I said, I'm proud of our team and how we're executing. We're executing well on those things we can control. I believe we're on the right initiatives for the long-term success of the company. Thank you for joining us today, and we'll look at value creation opportunity that's in front of us. Again, thank you for joining us today, and we'll look forward to talking to you at our next call. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.