Zack Pacheco

Zack Pacheco inquired about the Mineral Fiber segment's EBITDA margin, which is exceeding pre-pandemic levels, asking if there's a natural cap or how the company plans to further improve it. He also requested an update on the Geometric acquisition and the broader M&A environment.

Answer

CEO Vic Grizzle stated there's no natural cap on Mineral Fiber margins, emphasizing that continued focus on pricing, productivity, and innovation will drive further efficiency. He described the Geometric acquisition as a strong addition to the Architectural Specialties wood platform, enhancing product portfolio and geographic reach, and confirmed an active pipeline for more bolt-on acquisitions.

Zack Pacheco asked if there is a natural cap to the Mineral Fiber margin, which is currently over 43% (pre-pandemic levels), considering industry dynamics and investment levels, and how the company views taking the next step above this level. He also requested an update on the Geometrik acquisition and the general M&A environment.

Answer

CEO Vic Grizzle stated that there is no natural cap to Mineral Fiber margins, as continued improvement is driven by core building blocks: effective pricing, plant productivity, and innovation for higher-margin products. He affirmed the company's commitment to investing in these areas for greater efficiency. Regarding M&A, Mr. Grizzle described Geometrik as a valuable addition to the Architectural Specialties wood platform, enhancing product portfolio and geographic reach. He confirmed an active M&A pipeline for similar bolt-on acquisitions.

Zack Pacheco, on for Garik Shmois, asked for more detail on the Architectural Specialties guidance, specifically regarding cost control sustainability amid volume growth. He also inquired about the breakdown of the WAVE joint venture's contribution, asking how much was driven by tariff mitigation versus market strength.

Answer

CEO Vic Grizzle explained that improved Architectural Specialties margins are driven by operating leverage from volume, manufacturing efficiencies, and a better product mix, giving him confidence in achieving over 20% margins. He clarified that the WAVE joint venture's strong performance was due to growth initiatives and effective price-over-cost management, not a stronger market.

Jack Pacheco of Loop Capital Markets inquired if the Mineral Fiber guidance includes a second price increase for the year. He also requested more detail on current bidding activity across different verticals, particularly the office market.

Answer

CFO Christopher Calzaretta confirmed that the guidance assumes a normal cadence of two price increases per year, with AUV growth expected to be driven more by price than mix. CEO Victor Grizzle added that while high-level bidding data softened in Q1, ground-level project bidding for ceilings remains active and steady across data centers, transportation, schools, hospitals, and office tenant improvements. He noted the company is watching for any slowdown in the discretionary portion of this activity.

Zack Pacheco, on for Garik Shmois, asked for more detail on the drivers of the SG&A reduction and guidance on its run-rate for the second half of the year.

Answer

CFO Michael Petro advised that for modeling purposes, SG&A as a percentage of sales should be run-rated at approximately 7% for the full year, though he noted the figure may fluctuate between quarters.

Zack Pacheco asked about current bidding activity in the Development segment and for an update on the progress of the sales force hiring initiative, including time to productivity.

Answer

CEO Dale Asplund confirmed that bidding activity for development projects remains strong, with the only change being a slight delay in converting quotes to contracts due to macro hesitation. Regarding the sales force, he stated they are progressing well toward their goal of a 50% increase, with a focus on training to accelerate productivity, which typically takes 6-9 months for new-to-industry hires.