Good day, and thank you for standing by. Welcome to the second quarter of 2023 Armstrong World Industries Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Theresa Womble, VP of Investor Relations and Corporate Communications. Please go ahead. Thank you, and welcome everyone to our call this morning. Today, we have Vic Grizzle, our CEO, and Chris Calzaretta, our CFO, to discuss Armstrong World Industries' second quarter 2023 results and rest of year outlook. To accompany these remarks, we have provided a presentation that is available on the investor section of the Armstrong World Industries website. Our discussion of operating and financial performance will include non-GAAP financial measures within the meaning of the SEC Reg G. A reconciliation of these measures with the most appropriate comparable GAAP measure is included in the earnings press release and in the appendix of the presentation issued this morning. Both of these are available on our investor relations website. During the call, we will be making forward-looking statements that represent our view of our financial and operational performance as of today's date, July 25, 2023. These statements involve risks and uncertainties that may differ materially from those implied or expected. We provide a detailed discussion of the risks and uncertainties in our SEC filings, including the 10-Q, filed earlier this morning. We undertake no obligation to update any forward-looking statement beyond what is required by applicable securities law. I will turn the call over to Vic. Thank you, Theresa, Good morning everyone, and welcome to our earnings call. We have lots of exciting things going on at the company, including a strong quarter of execution and the acquisition of BOK Modern, which we announced yesterday. Let's jump right in. On a total company basis, we generated 10% year-over-year adjusted EBITDA growth on 1% net sales growth in the quarter, despite soft market conditions and continued economic uncertainty. These results helped increase our year-to-date adjusted free cash flow to $103 million, a 60% increase from 2022 results. Both the Mineral Fiber and Architectural Specialties segments contributed to the strong earnings and free cash flow growth, and both segments delivered meaningful EBITDA margin expansion. These are solid results, and I'm pleased with how our team is executing thus far in 2023, managing softer market conditions while increasing profitability and continuing to deliver on our growth initiatives. In our Mineral Fiber segment, sales ended the quarter essentially flat to 2022 levels. Strong AUV performance of 7% offset a decline in sales volume. As mentioned on our first quarter call, we expected market demand to be softer versus prior year, and we had highlighted first quarter restocking activity in the home centers that would begin reversing out in the second quarter. Also, you may remember the second quarter last year was impacted by the unusual timing of our July first price increase versus our typical August timing. Overall, we believe that sequentially underlying market demand was modestly softer than the first quarter. Relevant indicators for our primary sectors were mixed overall in the quarter. Dodge bidding activity softened, ABI declined but remained in positive territory. Office vacancies continued to rise, but at a slower pace. Commercial leasing activity improved in the quarter for the first time in fourth quarter. Now that we've begun the second half, on-the-ground sentiment has slightly improved, with verticals like transportation, healthcare, and education remaining active, partially offsetting soft replacement activity and tenant improvement work in the office vertical. The fact that we sell into a variety of verticals is important for us. The office vertical, which has been the most challenged area, represents about 30% of our sales, similar to the education vertical, followed by healthcare, retail, and transportation. They rarely move up or down at the same rate, and this has helped cushion our business from cyclical swings, and we believe that it positions us well in this current environment. Another highlight of the quarter was our Mineral Fiber AUV performance of 7%. This result was driven primarily by like-for-like pricing. As we've often noted, our ability to consistently achieve price is an important part of our value creation model. We've captured our normal price realization for the increase that we announced early, earlier in 2023, and it has helped offset the inflation on raw materials we're experiencing. Our industry-leading value proposition, enabled by the work of our sales team, staying close to our customers, and the efforts by our plants and customer service teams to maintain our best-in-class service levels and our new product innovation, have all contributed to our consistent ability to earn our prices in the marketplace. I'd also like to highlight that our Healthy Spaces and digital growth initiatives were a positive contributor to Mineral Fiber sales in the quarter. Sales growth in our HEALTH ZONE product line continued at elevated levels, and our sales through our online marketplace, Kanopi, doubled from 2022 levels. Both of these helped offset some of the negative impacts from the overall lower market activity. Another highlight for the Mineral Fiber segment is that our plants did very well with delivering productivity gains despite lower volumes in the quarter. The great work by our plant teams demonstrates another of the core value creators for Armstrong, which is operational excellence in all parts of the cycle. Our ability to consistently generate manufacturing productivity while maintaining best-in-class quality and service throughout our network, contributed to Mineral Fiber margin expansion this quarter, and has been a hallmark of our company's success. These efforts, along with our continued growth in AUV, helped push Mineral Fiber quarterly adjusted EBITDA margin above 40% for the first time since 2021. Moving on to Architectural Specialties. Sales for this segment accelerated from first quarter results and were up 6% from a strong 2022 level. We continue to see good activity in verticals like transportation, healthcare, and education. Our order intake for the quarter in Architectural Specialties reached a historical high in the quarter. Importantly, we're also driving EBITDA growth and margin expansion in this important growth segment. We're now seeing the benefits from the investments that we've made in the businesses where we've acquired and are achieving the expected operating leverage on increased sales volumes. Last, before I turn it over to Chris, I would like to briefly illustrate how our investments across the segments work together to deliver value for our customers and grow our business through a successful project involving a hospital that we recently completed in Colorado. This was a sizable project with typical complexities that required many different solution types to achieve the design intent of the architect. The project began with the architect employing the use of ProjectWorks, our pre-construction design service platform. The architect was able to input the project requirements and develop a layout in ProjectWorks that enabled multiple iterations to optimize the design intent and costs, and do it quickly and efficiently. This project ultimately required a mix of 28 different Armstrong products across both our segments. This included sustained, smooth, white acoustic tile, including our HEALTH ZONE products, as well as a variety of grid and architectural specialty products, including our METALWORKS blades. The project ended up being a very strong specification for AWI, since no other single manufacturer could offer the complete suite of products digitally enabled by our proprietary design platform. This is a great example of how valuable the breadth of our portfolio of products and our innovative services can be for our customers, making it easier for architects to specify more Armstrong products in more spaces, leading to stronger specifications and greater AUV growth. Now I'll pause and turn it over to Chris for some more details on our financials. Chris? Thanks, Vic. Good morning to everyone on the call. As a reminder, throughout my remarks, I'll be referring to the slides available on our website, and slide 3, which details the basis of presentation. On slide 6, we discuss our quarterly Mineral Fiber segment results. Mineral Fiber sales were essentially unchanged from the prior year, as AUV growth of 7% was offset by lower volumes. AUV performance this quarter was driven by like-for-like pricing, while mix was essentially flat, with positive product mix being offset by timing-related channel mix headwinds. Our Q2 Mineral Fiber AUV result gives us confidence that we are on track to deliver above average historical performance for the full year. The decrease in volume during the quarter was driven primarily by softer market demand, and to a lesser extent, the timing of year-over-year announced price increases and the resulting impact on sales that Vic mentioned earlier, in addition to the expected weaker home center sales from inventory build that we noted in our April call. Mineral Fiber segment adjusted EBITDA grew by $6 million, or 7%, and adjusted EBITDA margin expanded by 260 basis points as compared to the prior year. AUV fall-through was above historic levels and a key driver in expanding EBITDA margin. WAVE equity earnings were also favorable as compared to the prior year, driven by price over inflation. Our Mineral Fiber plants continued to execute well in the quarter and delivered meaningful productivity gains ahead of their targets. Partially offsetting these gains were headwinds from lower volumes and higher input costs. While we experienced energy and freight cost deflation versus the prior year, raw materials remain inflationary. SG&A in the quarter was essentially unchanged versus the prior year, as modest increases in selling expense in support of our digital initiatives were partially offset by the benefits from our previously announced cost savings initiative. On slide 7, we discuss our Architectural Specialties, or AS, segment results. With sales growth across most product categories, the rate of growth in the quarter improved sequentially from Q1 and is a better reflection of the growth we expect to see for the full year. We continue to see strong transportation bidding activity and are keeping a close eye on order intake and backlogs. We're particularly pleased with the order intake and backlog levels for our metal products, which are both up more than 20% versus the same time last year. This activity supports our excitement and investment in this growing category through our recently announced acquisition of BOK Modern, for initial cash consideration of about $14 million. Vic will share some additional thoughts on this acquisition in a few minutes. AS adjusted EBITDA margin took a step up in Q2, both sequentially and versus the prior-year period, expanding 360 basis points versus the prior-year through operating leverage on increased sales. We continue to leverage SG&A as we grow and expand EBITDA margins in this segment. Slide 8 shows our second quarter consolidated company metrics, where benefits from improved AUV, WAVE equity earnings, and lower manufacturing costs, more than offset headwinds from lower volumes, increases in input costs, and higher SG&A expenses. Consolidated adjusted EBITDA margin expanded 260 basis points, with adjusted EBITDA up 10%. Adjusted diluted net earnings per share increased 7% versus the prior year, and adjusted free cash flow increased $28 million or 64% versus the prior year. Slide 9 highlights our consolidated company metrics through the first six months of the year, where we grew adjusted EBITDA by 10% and expanded margins 130 basis points. These strong results reflect the execution, operational efficiency, and cost control discipline of the entire AWI team, despite market headwinds. Adjusted diluted net earnings per share increased 9% versus the prior year period, and adjusted free cash flow increased about $40 million or 60% versus the prior year. Slide 10 shows our year-to-date adjusted free cash flow performance versus the prior year. The increase was driven by working capital improvement, primarily in inventory and receivables, and an increase in WAVE dividends. This was partially offset by higher CapEx and higher cash interest. We are proud of this year-over-year improvement through the first half of the year, and remain focused on driving full year free cash flow growth to fund all of our capital allocation priorities. Recall that our first capital allocation priority is to invest in our business where we see the highest returns. Next, we target strategic acquisitions such as BOK Modern, that offer unique specifiable attributes and capabilities that leverage the strengths of our business. Last, we seek to return excess cash to shareholders. In the second quarter, we repurchased $30 million of shares, and since the inception of the share repurchase program in 2016, we have repurchased a total of 13.2 million shares for about $908 million. We ended the second quarter with $292 million remaining under the existing authorization. Last week, we announced an increase in our existing share repurchase program, adding an additional $500 million to the authorization and extending the program through 2026. This decision reflects confidence in our ability to generate adjusted free cash flow and our commitment to fund all of our capital allocation priorities to create long-term shareholder value. Slide 11 shows our full year guidance. Improved visibility for the second half of the year has removed the worst case market downturn scenario from our expectations. As such, we are modestly updating our full year 2023 guidance for sales, adjusted EBITDA, and adjusted diluted EPS. As I just mentioned, with the expectation of continued strong cash flow generation, we are raising the midpoint of our adjusted free cash flow guidance with an updated range of $240 million-$250 million, with a midpoint free cash flow margin of about 19%. Looking ahead, recall that in the second half of 2023, we will be lapping a period of lower SG&A incentive compensation in the prior year, as well as continuing investments to support our digital initiatives in the current year. Additional assumptions are available in the appendix to this presentation. Now I'll turn it back to Vic for some additional thoughts before we take your questions. Thank you, Chris. At the halfway point in the year, I'm pleased with where we are, and I believe we're well positioned to deliver on our outlook for 2023. The resiliency of our AUV growth, our productivity gains, and now the meaningful contributions from our digital and Healthy Spaces initiatives when we need them the most in a weaker market environment, are clearly shining through. Our digital initiatives are on track to be EBITDA positive for the second half of the year. As of yesterday, sales through Kanopi have already surpassed total 2022 sales results. Our Healthy Spaces products are also gaining traction, with sales up over 20% on a year-to-date basis, and we're pleased with the regulatory support they are gaining. Many of you may have read about the 2 new bills lawmakers are bringing forward in New York City that would require the city to create standards to measure, monitor, report, and enforce air quality inside schools and municipal buildings. These are bills that have been in the works since the pandemic, but due to the Canadian wildfires and the impact on air quality inside buildings, these bills have been accelerated. These proposals follow recently updated guidance on ventilation in buildings from the Centers for Disease Control and Prevention, and adopted by ASHRAE, that the air and spaces be changed 5 times per hour to help reduce the number of pathogens in the air. These are all positive trends that support our Healthy Spaces growth initiative and the role ceilings can play in creating healthy spaces. Overall, I attribute our year-to-date results to 2 things. Number 1, our team's strong execution being demonstrated through the up and the down cycles. Number 2, the resiliency of our business' core attributes, namely our strong market position in this uniquely attractive ceiling and wall category, our best-in-class exclusive distribution partners, our ability to deliver consistent AUV growth, and our proven ability to achieve consistent annual manufacturing productivity gains. All contribute to the extraordinary resilience of our company and our ability to expand margins and deliver free cash flow growth in all parts of a normal cycle. This resilience and the resulting free cash flow growth allows for the deployment of free cash flow for both direct returns to our shareholders, as well as on the growth initiatives and complementary acquisitions that deliver profitable growth. Just last week, as Chris mentioned, our board of directors approved a $500 million increase to the share repurchase authorization, a shared confidence in our ability to sustain strong free cash flow into the future. Our acquisitions continue to help us build the broadest portfolio of specialty Architectural Specialties solutions in the industry, importantly, get Armstrong solutions into more projects and into more spaces. Our latest acquisition, BOK Modern, we announced yesterday, does exactly that. Focuses is a growing and profitable business focused on the design and engineering of architectural metal solutions for a wide variety of applications that are a natural extension of what we're doing in Architectural Specialties. Their solutions have patented designs that deliver project efficiency benefits by reducing material usage and installation. The work they do will help us respond to the desire among architects and designers to have a seamless flow between the interior and exterior look of a building. Additionally, their facades and rain screens not only add aesthetic interest, but they also reduce the energy load of the building by deflecting solar heat. This will be an increasingly desired design attribute as the embodied carbon and emissions of buildings becomes more and more in focus. We're pleased to welcome them to the AWI family, and we have every confidence that we will be able to leverage our platform to accelerate their growth and increase their profitability. We're excited about the momentum overall in Architectural Specialties. Our expanding portfolio truly distinguishes us from our peers in terms of being a single source provider for complex projects, such as those in the transportation vertical. We continue to see increasing bidding activity for airport projects. This increase in demand has been fueled by the recent infrastructure bill, which includes $5 billion in spending specifically for airports. We've previously discussed our significant win at the Pittsburgh Airport, but recently we've also been awarded jobs at the Seattle Tacoma Airport and the airport in El Paso. To date, we're tracking at least 200 more airport projects, ranging from new terminals at JFK in New York and Chicago's O'Hare, to work in Nashville, Orlando, and Jacksonville, just to name a few. These opportunities are growing and often involve a wide range of materials from mineral fiber, wood, metal, and more of Armstrong's complete portfolio. Given the scale and complexity of these projects, and now Armstrong's size and capabilities, we expect a tailwind from transportation to last beyond 2026. I think it's fair to say that five years ago, we wouldn't have been able to compete for these types of projects. We wouldn't have had the right portfolio or the capability to do it. With the capabilities that we've added now, with our unmatched scale, we are well positioned to capture the opportunity in front of us. With that, we'll be happy to take your questions. Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment while we compile the Q&A roster. Our first question comes from the line of Keith Hughes with Truist Securities. Your line is open. Keith, please make sure your line is unmuted. There we go. Sorry about that. Question on input costs. The lowest number we've negative, but the lowest number we've seen since 2021 on Mineral Fiber. Could you talk about what you're expecting in the second half of the year, and what costs are moving in the right direction and what are still in the wrong? Sure. Keith, Chris, you wanna take that? Yeah. Hey, Keith. The input cost side, you know, we saw effectively, you know, we were flat on total input costs in the second quarter. What we're seeing is continued inflation on the raw material side, with some offsetting benefits from energy and freight. I think in the back half, we'll continue to see that inflationary pressure on the raw side and some continued moderation and deflation on the energy and freight side. You know, all up, all in, we're looking at for the year, call it high single-digit inflation on raws and on total input costs, you know, in the low single-digit inflation range for the year. Continued back half pressure on raws, with continued deflationary benefits in energy. Yeah. Just a question on demand. You've highlighted some of the trends in the prepared comments. In terms of the guidance for volume and Mineral Fiber, low to mid single digit declines, do you expect office to get worse in the second half of the year, or what's kind of baked into that number? Yeah, what we've, you know, we highlighted, as you noted, Keith, there's some good activity still out there in some of the other verticals. Office, we're still expecting to be softer in the back half than we saw in the first half. This is based on a couple things. We remember in the back half of last year, we were tracking bidding activity, in particular in this segment, and it turned negative in the third quarter and fourth quarter of last year. that's informing a little bit of the pipeline of activity that's gonna come mature in the back half of this year. The expectation that economic activity overall continues to weaken in the back half. Now, it's less, less bad, if you wanna say it that way, than what we initially expected. vacancy rates continue to increase in office, although at a slower rate, and that supports, I think, a softer office segment in the back half. Okay, great. Thank you. Thank you. Thanks, Steve. One moment for our next question. Our next question comes from the line of Garik Shmois with Loop Capital Markets. Your line is open. Oh, hi, thank you. Just wanted to follow up on the last question with respect to office and some of the verticals you highlighted. Just to be clear, are you seeing a weakening in the office demand environment at this point, or has that stabilized? I wanted to ask you highlighted strength in airports and in the projects that you're bidding and you're servicing currently. Should we assume that the volume from the airport and transportation bidding work, is that largely going to benefit our Architectural Specialties? Just wanted to be clear on that. Yeah, let me add to the, to the comment on office, because the things that I described in my previous answer really are around some of those leading indicators around projects, major renovation, new construction. We have good visibility, from those leading indicators, at least as a, as an indicator. The part of it that we experienced last year, and we're continuing to experience, is that discretionary part of the market, smaller renovation work. We refer to it a lot of times as our flow business, that kind of just shows up through distribution, cash and carry counters. That there's a lot less visibility there, and there's a high level of discretion there. As we expect the lack of clarity to exist into the back half of the year, I think around interest rates and around the depth of the landing that we're expecting as an economy, I think as long as those remain or exist with lack of clarity, I think we're gonna get a holdback on those discretionary type of jobs. We've been experiencing that, and I think that we should expect to continue to experience that in the back half. Now, it does seem like we've experienced the depth or not the depth, but the worst of it. Our guidance is built around an expectation that this could continue to drift a little bit lower before it gets better, and that's what we're expecting in the back half. Your question around transportation is a good one that, yeah, the majority, you can imagine the surface area and the amount of square footage that goes into these large airport projects. The majority of that is Architectural Specialties, That's where we see a large benefit is on the Architectural Specialty side. With that said, there's a lot of Mineral Fiber that goes into these spaces as well, Leveraging our entire portfolio is a significant advantage for us in the specification process to get all the spaces covered, including Mineral Fiber in these jobs. I think your premise of your question is correct, that this is primarily a benefit for the Architectural Specialty business. Great. Thanks for the color. Wanted to follow up on pricing and if you have any thoughts on your ability to get pricing moving forward, given some of the choppiness in the end markets, and, you know, any color around your plans here in the second half of the year. Yeah, you know, I would point you to the second quarter, just to start off with that, because, you know, we. It's a pretty choppy quarter, a lot of ins and outs, base period, noise and so forth. Market did get softer. As we alluded to, the majority of our AUV growth was like-for-like pricing. So, I think that's, that's a good signal of confidence that even in these kind of conditions, we're gonna continue to price ahead of inflation. As Chris outlined, you know, going into the back half, we still expect some raw material inflation, and we'll be pricing into that to make sure that we continue to expand margins. Understood. Thank you very much. You bet. Thank you. One moment for our next question. Our next question comes from the line of Kathryn Thompson with Thompson Research Group. Your line is open. Hi, thank you for taking my questions today. I wanted just to clarify on your guidance for today. With AUV up 7% quarter, implied that volume's down as much versus expected down with single-digit. When you blow that into the implied guidance, it appears that Mineral Fiber volumes are gonna be down low single-digits to mid-single-digits versus more solidly mid-single-digits. Could you walk just through your stair step in terms of expectations for Mineral Fiber volumes as we head into the back half of the year based on what's in your pipeline and any type of expectation you may have beyond that? You want to take that? Yeah. Hey, Catherine. In terms of the back half of the year relative to Mineral Fiber volume, you know, we're looking at volume down in the high, call it high mid-single digit range in the second half of the year. As Vic mentioned, you know, the backdrop and the overall uncertainty tied to the macroeconomic still exists. You know, cautious as we approach the back half of the year, really monitoring the market. As we noted in our guidance, you know, that improvement in volume was really due to the fact that we removed our worst case market scenario and took that off the table. You know, that being said, you know, still a lot of uncertainty as we head into the back half here. I'd just say, you know, on AUV, you know, continued to point to, you know, the above average Mineral Fiber AUV growth and continued focus on expanding margins in Mineral Fiber. You can see with our updated assumptions there, we took our Mineral Fiber EBITDA margin up with that revision. Yeah. Shifting to Wave, really, wanting to understand if there are any meaningful differences between your Mineral Fiber volume trends and your Wave volumes, coupled with your overall. We are seeing, you know, you benefited from lower steel costs, where you also see steel trending, as related to those Wave earnings through the end of the year. Yeah, on the WAVE, Catherine, you know, we sell it as a package, right? We really, it kind of follows each other very closely. WAVE volume and Mineral Fiber volume should be pretty well linked. There's some base periods, noise given coming out of the pandemic that have moved that around a little bit, but I think the general assumption is gonna be right more times than not, that these kind of follow and track each other very closely. Okay, great. Thanks very much. You bet. Thank you. One moment for our next question. Our next question comes from the line of Philip Ng with Jefferies. Your line is open. Hey, guys. Vic, I guess you Hello. -how your bidding activity helped inform your view on the demand outlook this year. Curious, how's that progressing so far this year? Do you have enough visibility in the call visibility to have a view if the second half of this year is a trough in Mineral Fiber volumes, or could we see another shutdown in 2024? Yeah. Phil, the bidding activity I'm referencing is the Dodge bidding activity that we track on a quarter-to-quarter basis, and was referencing that Dodge bidding activity in the back half of last year. If you remember, and I think this is where you're referencing, in the first quarter, after the third quarter and the fourth quarter turned negative in the Dodge bidding activity results, the first quarter was surprisingly positive, just ever so slightly positive. I noted that as being noteworthy, but we weren't overweighting that because you can get some quarter-to-quarter noise in there. In the second quarter, that Dodge bidding activity turned negative again. What was interesting, when I tried to compare kind of the rate and pace of this Dodge bidding activity trend, and in the back half, if you look at it at a half, it was more negative than what we saw in the first half. To say it maybe better, the first half this year, the level of negativity decelerated and improved, the rate and pace of the softness. I'm not sure exactly what that means in terms of a trough, to get to the second part of your question. I think, the jury is still out, I think, on the timing of the depth of the economic activity overall. I'll stop short of forecasting that. Certainly, I think in the back half, we feel like it's gonna be a bit softer than what we've experienced in the first half, as informed and consistent, I think, with some of the leading indicators that we're referencing. Then where it goes from there, I think we have to wait and see as we get into the third and fourth quarter further. Okay, that's helpful. Mm-hmm. Given a soft demand backdrop, I mean, the ability to grow EBITDA looks quite impressive, Vic. The team's done a great job on the AV side. I was quite impressed by the SG&A manufacturing line, especially from the Mineral Fiber side. Can you expand on what's driving some of that upside there? Is that level of contribution sustainable as we look out into the back half this year, and is there more to do, I guess, perhaps in 2024? Do you want to take this, Chris? Yeah. Hey, Phil. Yeah, on the manufacturing side, yeah, we expect to see, you know, probably, you know, continued productivity in the back half. We had a really strong productivity performance in the fourth quarter, so we're gonna be lapping that in Q4 on the manufacturing side. Expect a strong Q3, a little bit of flattishness in Q4. On the overall, call it, you know, SG&A, just remember, we had some timing items in the back half of the year, as I noted in my script. You know, we were lapping some adjustments that were made in the back half of 2022. Expect to see us to continue to, you know, invest in our initiatives as we finish out the year. We'll be very mindful of the rate and pace of our discretionary spend and investments, given the overall playout of the economy and the volume. Gotcha, Chris. Yeah, Chris, is there more you guys could do potentially in 2024 on the productivity side if demand remains weak? Yeah, I'll stop short of commenting on 2024, but we look at productivity every year and continue to drive, to try and drive productivity improvement year in and year out. That's part of what we've talked about in terms of our overall productivity goal of, you know, 3% improvement on adjusted COGS in Mineral Fiber. Specifically to the back half, yeah, there's more to go here. We, our teams are really focused on, so have really good line of sight projects that they're working on. Yeah, we're not done. I think really good progress in the first half of this year, but the team's not finished. We've got some more to do in the back half. Okay. Appreciate all the color. Thank you. You bet, sir. One moment for our next question. Our next question comes from the line of Susan Maklari with Goldman Sachs. Your line is open. Thank you. Good morning, everyone. Good morning. My first question is, you know, Vic, you mentioned that you're seeing an overall improvement in the projects that are coming through for Architectural Specialties, just the mix there that's moving higher for you. Can you talk about the sustainability of that trend and what that will mean for the cadence at which you can continue to see an improved margin in that segment as you target that 20 or low 20+% range? I mean, we're, as you know, we've been on this journey to improve the overall EBITDA margin in that business to what would be a really world-class level of greater than 20% and get to that level. We were there before the pandemic, as you'll remember, we're working our way to get back there, bringing some of our newer acquisitions along the way. You know, we had a 200 basis points improvement in that EBITDA margin last year. We're on track with a terrific performance in the second quarter on that, to get back or to gain another 200 plus basis points of improvement this year. We're well on our way to being there next year at that 20% EBITDA level. What's driving that, Susan, is really a combination of really good operating leverage on the investments that we made. Remember, that was one of the headwinds, is that we invested ahead of growth. That put some burden on the business, and we had to grow into those investments and get really good operating leverage. That's probably been a major driver of it so far, and there's still more to go. As we continue to get tailwinds from some of these larger projects like transportation, as we continue to do a better job on specifications so we can continue to take share in this category, there's volume opportunities to continue to grow that's gonna continue our operating leverage part of that equation. Again, we're confident. I think the team is focused on this. We're demonstrating to ourselves we can get this good operating leverage. We're doing a good job on pricing these projects with this new operating model in mind. We have confidence that we're gonna continue to march toward that this year and into next year. Okay. Following up on that a bit, it was good to see you back in the M&A market, in July with BOK Modern closing in there. As you think about capital allocation, you know, what are you seeing in terms of the M&A pipeline? I know that you also increased your repurchase authorization. How are you thinking about the balance between the different uses and how that could come together? Yeah, we're really pleased with the BOK Modern acquisition. It's a great fit for our business. The leaders are staying on with this, which is, you know, a huge plus. They're very talented designers. It's gonna be a great add to an extension of our business, too, so I'm really, really pleased with that. I would just say, you know, we never left the, you know, the acquisitions or the business development game. This has been the first in a while, so I understand that. We're actively involved in this. We still think this is a great use of our cash to accelerate our penetration into the specialty segment, especially at a 20% EBITDA level and higher ROICs. I think this is, you know, it's our number two priority after, as Chris outlined, our number one priority, using our free cash, is to invest back into this high ROIC business of ours. Secondly, using acquisitions and cash to bolt on more and more capabilities to make us even stronger in the marketplace and more valuable to our customers. Third, with the authorization, we have even more headroom here to continue to buy back our shares and support a growth dividend. No change. As you're probably hearing, Susan, no change in our priorities in terms of our cash flow. I think there's now that we're coming out of our July meeting, which, you know, we typically review with our board our three-year strategic plan. I think there's a lot of confidence coming out of that room with the strategy we have in place and the projected cash flows, that we can continue to do all three of these priorities. Again, we understand fortunate position with this business to be able to do all three of those capital allocation priorities, given our strong free cash flow capability. Yeah. Okay, thanks for the color, Vic, and good luck with everything. Yeah, thank you. Thank you. One moment for our next question. Our next question comes from the line of Adam Baumgarten with Zelman & Associates. Your line is open. Hey, good morning, everyone. I think earlier in the year, you guys talked about a return to a more normal price increase cadence of usually February and August. Is there an August Mineral Fiber price increase out there in the market? Yes, there is. Okay, got it. The magnitude, if you could share that? Oh, sure. It's. 7%. 7%. Sorry, I want to make sure I get the right number out. Yeah, it's 7%. We, we were successful in that February price increase. We're in the marketplace with the August price increase, to get back to this normal cadence with our distribution partners in particular. Yeah, again, as you know, at last year's price increases were much bigger, right? We, we want to get back to our normal cadence and then price these or, size these price increases in relation to the level of inflation that we're seeing, to make sure that we cover inflation and are able to expand our margins. Yes, the August one is been communicated. Got it. Thanks. If I just look at the revenue growth guidance, you maintained the midpoint, you did take up Mineral Fiber volumes modestly, and you do have over 5 months of the BOK Modern acquisition. Is there maybe a modest offset to those tailwinds? Yeah, no. I mean, I think, you know, as I outlined earlier, you know, the range was contemplated in assessing, you know, multiple potential scenarios. You know, as we look towards the back half of the year, I just continue to point to the uncertainty associated with the broader macroeconomic environment, and, you know, continue to drive AUV performance for the year, and looking to expand margins in connection with that. You know, that's kind of how we're looking at the second half and the implied, you know, volume down, you know, high mid to single digits in the second half. Okay, great. Thanks a lot. Thank you. One moment for our next question. Our next question comes from the line of Stephen Kim with Evercore. Your line is open. Yeah, thanks very much, guys. wanted to follow up on Archspec and the, and particularly the acquisition pipeline. You look at BOK Modern, and it seems like, you know, they do a lot on the exteriors of buildings. I was curious as to whether you could talk about whether you see an opportunity there to maybe get a little bit bigger on, in terms of exterior versus interior opportunities. Then also, could you describe a little bit, when you look at that business, sorry, not the BOK Modern business, but the Architectural Specialties segment overall, has the mix of product that you manufacture versus source, has that changed over time, and do you expect it to? Yeah. Stephen, let me take the BOK question in particular and the fit. I think it's important to take a step back and recognize what we've been doing in Architectural Specialties over the last 10 years is when we acquire these companies, we're acquiring capabilities that allow us to participate in more spaces in a commercial building. For example, way back, and you'll remember this, when we bought Tectum, you know, that moved us to the wall space with a very unique product. It really gave us a platform to expand our wall business beyond the ceiling plane. Similarly, when we bought ACGI had terrific products for the walls. They had microperforations that allowed these products to go on the walls. Our capabilities, through these acquisitions, have allowed us to extend our business to new spaces. When I think about the BOK deal, it's very similar. They have very unique metal design capability that are not structural in nature, that extend us into a new space on the building, which is in the exterior building, primarily for driving sustainability solutions. It's a real natural fit with our metal business overall in terms of capabilities and with their design expertise and their creative problem-solving on the exteriors, it extends our reach into that exterior space, if you will, an additional space in a commercial building. I'd say we're gonna continue to pursue these spaces just like we have with from ceilings to walls. We're gonna continue to pursue these as we have success in demonstrating our ability to win in those spaces, leveraging these capabilities. Overall as a mix, you're getting to our supply chain and as you know, we have a hybrid make sell, buy, sell model. We don't make everything that we sell and have specified in the marketplace. That mix is evolved over time, you know, around that 50% in and out type of level and proportionality. Again, as we buy companies, it kind of moves, and then we continue to flex in our third-party network. With this BOK Modern acquisition, we're gonna continue to leverage their third-party network, as well as opportunities to move some of this new business into some of our existing factories, to optimize the supply chain around the capacity inside, being able to flex into our third-party network. We're committed to that. Steve, that's kind of a long-winded answer, but we're committed to that hybrid make-sell, buy-sell model. It's evolved over time, it's not far from the 50/50 in any given period. Gotcha. That's helpful. Well, can you quantify the opportunity, you know, the broader opportunity, or the size of the market, you know, for these sort of decorative exterior-type products, versus, you know, what we generally would think of as sort of more interior, type, opportunities that Archspec has historically targeted? Also, can you give us a sense for, I think you mentioned that there would be an impact from a lower incentive compensation kind of coming last year, I think in the back half. I can't remember whether it was third or fourth quarter. Could you just sort of remind us, you know, sort of how that's gonna affect things, as we, you know, go forward over the next couple of quarters? Yes, Stephen, this is Chris. I'll take that last question first. Yeah, we saw the benefit in 2022. My point in looking at and kind of modeling out SG&A is that we're gonna be lapping that tailwind in the back half of 2023. As you think about SG&A progression, that was just one thing to kind of remind everyone about. Yeah, Stephen, on the first, the sizing, the opportunity, I think right now we're gonna stick to the incrementality of this new space, as we go with this new acquisition, and then maybe over time, this will become, you know, clearer for everybody. It's obviously. I mean, you could pick any numbers, right? I'd rather not get into that at this point, but it's incremental to our existing business, and we're excited about that. Okay, that's fair enough. Thanks a lot, guys. Okay. Thank you. Thank you. One moment for our next question. Our next question comes from the line of John Lovallo with UBS. Your line is open. Good morning, guys. Thank you for taking my questions as well. The first one here is, you know, how are you thinking about Mineral Fiber mix in the second half? I mean, it seems like it may have been a bit below expectations in the first half. Just curious if this is timing and, you know, do you expect improvement as we move into the second half? Yeah, let me start, and I'll let Chris add some color. You know, mix, our mix up has been a very important part of our overall AUV growth story over many years now, right? Because the industry wants to naturally mix up. Every time it does a renovation, it puts new stuff in. As long as you're innovating into that design curve, you're pulling the latest and greatest products that drives a positive product mix. Our mix continues to be our product mix, John, continues to be positive and has remained positive even through the downturn. The one thing that happens in the mix that we end up talking a lot about is the mix between channels, right? That can... Which is very timing related because the patterns in these channels can be slightly different depending on inventory builds and so forth, and we end up talking about that a lot. It's one of those things that's more difficult to forecast, frankly, because as you know, customers in a quarter, if they decide to build inventory, we're gonna support that, and that can outsize that channel in the quarter, especially if it's a lower AUV channel. It's one of the harder things to forecast, just to be honest with you, and that's probably some of the variability that you're alluding to. With that context, let me just, because Chris is. Yeah. Yeah, additionally, add just a little more color on the timing element of it. You saw, you know, kind of the timing in the first quarter and then again in the second quarter. It just speaks to the variability and the challenge in forecasting that element of AUV. Again, you know, just highlighting our AUV guide for the year at being, you know, above average Mineral Fiber AUV growth is really what we've incorporated here in terms of our full year revised guidance. Okay, that makes sense. I guess what I'm trying to kind of wrap my head around here is that if you look at the full year Mineral Fiber adjusted EBITDA margin outlook of 37.5%, it's about, you know, call it 300 basis points below the second quarter result of 40.4%. It just seems like that's unusually wide, you know, looking historically. just trying to figure out what's sort of driving that? I think it's the level of uncertainty in the back half, frankly, John. Absolutely. I think, you know, we're still keeping some wide ranges where we think it's appropriate, just given some of the lack of visibility in some of these areas. I think we're managing the business on the to grow our AUV and to make sure that that falls through to expand margins in the Mineral Fiber business. I think that's what you're seeing so far. I think that's what you can expect in the second half. Okay. Thank you, guys. Yep. Thank you. I'm sorry, one moment for our next question. Our next question comes from the line of Rafe Jadrosich with Bank of America. Your line is open. Hi. Good morning. Thanks for taking my question. Just. Sure. I'll follow up on the Mineral Fiber AUV. Just what does the guidance imply for realization on that August price hike? What's sort of been the acceptance of the channel and the installers on pricing, just kind of given the softer environment that's out there? Yeah, I'd say, Rafe, this is Chris. The expected realization is really in line with our historical price realization, so no change there. Nothing really to speak about in terms of standard receptivity in with our channel partners. Got it. Okay. As we think of the Mineral Fiber volume guidance for the second half of the year, obviously, you kind of raised the high end of the target now down low to mid-single digits instead of mid-single digits. Like, what's the kind of specific thing that changed, that kind of gave you Like, where are you getting more visibility that's giving you the confidence to sort of increase that? Can you just talk about the cadence between 3Q and 4Q on a year-over-year basis? Like, you have a much easier comp in the fourth quarter, but I think the outlook has kind of softened through the year. Just how should we think about that in the back half? Yeah, I'm gonna stop short of giving quarterly, call it, volume guidance. I mean, I talked earlier about what we'd expect in the back half, and really just keep in mind the seasonality associated with the business with Q2 and Q3, typically the strongest quarters from a seasonality perspective. Again, you know, a lot of uncertainty associated with, again, the back half. I just point to, you know, the second half volume comments that I made of being down, you know, high mid-single digits in the second half of this year. Vic, did you wanna talk more about that? Yeah, and Rafe, on the confidence or what we're seeing, you know, we're now into the third quarter. I would say the biggest change really, for us, versus where we were at the beginning of the year on the back half, is the on-the-ground sentiment and conversations with our customers and the activity they see, some of their backlogs that are building. They have better visibility to their backlogs. Not great, but better than what we had at the beginning of the year. That's given us some confidence that kind of the worst-case scenario that we had in the downside of our guidance wasn't likely to happen, given what our customers are seeing now in terms of their activity. I would say, you know, we're looking at all the indicators. We really triangulate a lot of different things to try to get a read on the pipeline of activity coming into the market. I would say that's probably the biggest change, is what we're hearing from our customers. That's been encouraging. Okay. Thank you. Thanks. That concludes today's question and answer session. At this time, I would like to turn it back to Vic Grizzle, President and CEO, for closing remarks. Yeah. Again, I wanna thank everybody for joining our call today. Again, I think we're in a really good position for us to finish the year out and deliver on our guidance ranges. I'm really pleased with how our teams are executing and how the resiliency of our model is coming to light and shining through. Again, we look forward to talking to you in a quarter now on the continuation of good execution and the resilience of our business model. Thank you all, have a good week. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Goodbye.