Executive Summary

Q1 2021 revenue was $148.9M (+7.4% YoY; +3.5% QoQ vs Q4 $143.9M), led by strength in China/Australia and stable North America with residential growth and commercial flat .
GAAP diluted EPS was $1.23, driven by a $46.0M gain on the South Gate property sale; underlying adjusted diluted EPS was a loss of $0.38, reflecting operational headwinds from raw material inflation, shipping costs, and Winter Storm Uri disruptions .
Adjusted EBITDA was a loss of $7.6M; deterioration YoY vs Q1 2020 (-$1.6M) but improvement sequentially vs Q4 2020 (-$14.5M). EBITDA headwinds totaled ~$6.9M in Q1 (incl. ~$2M production inefficiencies from Uri) .
Liquidity improved to ~$104M and net debt fell to $36.3M following the South Gate sale and debt repayment; customer orders heading into Q2 point to further sequential momentum, particularly in residential new and remodel end markets .

What Went Well and What Went Wrong

What Went Well

Top-line growth: “We delivered 7.4% top-line growth… led by sales in China and Australia,” with stable North America supported by residential demand and improving commercial transaction activity .
Balance sheet and liquidity: Completed South Gate sale ($76.7M purchase price) transforming liquidity; net debt reduced to $36.3M and total liquidity ~$104M, with a required $20M term loan prepayment completed .
Go-to-market and product momentum: Launched Armstrong Flooring Pro (builder/multifamily) and Signature (distributors), added >15 sales professionals in Q1, continued Quick Ship traction, and received industry awards (e.g., BUILDER Magazine, ADEX) .

What Went Wrong

Cost inflation and supply chain: Adjusted EBITDA loss widened YoY due to higher raw material and shipping costs and Winter Storm Uri closing three plants ~3 weeks; Q1 cost/freight headwinds ~$6.9M .
SG&A trajectory: SG&A costs rose $1.5M YoY and are expected to be sequentially higher through 2021 as sales/marketing investments ramp, partially offset by a $2M sequential decline from Q4 .
North America national accounts timing: Residential national account sales were down YoY due to a prior-year major program load-in that did not repeat, creating lumpiness in trends despite robust end-market demand .

Financial Results

Consolidated Performance (oldest → newest)

Metric	Q3 2020	Q4 2020	Q1 2021
Net Sales ($USD Millions)	$156.6	$143.9	$148.9
GAAP Net Income (Loss) ($USD Millions)	$(11.7)	$(32.4)	$27.2
GAAP Diluted EPS ($USD)	$(0.53)	$(1.48)	$1.23
Operating Income (Loss) ($USD Millions)	$(10.1)	$(32.7)	$27.8
Adjusted EBITDA ($USD Millions)	$2.8	$(14.5)	$(7.6)
Adjusted EBITDA Margin (%)	1.8%	(10.1%)	(5.1%)
Adjusted Net (Loss) ($USD Millions)	$(11.4)	$(30.1)	$(8.3)
Adjusted Diluted EPS ($USD)	$(0.52)	$(1.37)	$(0.38)
Gross Profit ($USD Millions)	$27.6	$7.9	$19.9

Notes:

Q1 GAAP profitability reflects a non-recurring $46.0M gain on sale of South Gate property .
Q1 adjusted EBITDA headwinds: ~$6.9M higher raw materials and freight, incl. ~$2M production inefficiencies from Winter Storm Uri .

Balance Sheet and Liquidity KPIs

KPI ($USD Millions)	Dec 31, 2020	Mar 31, 2021
Cash and Cash Equivalents	$13.7	$16.7
Total Debt Outstanding	$79.8	$53.0
Net Debt	$66.1	$36.3
Total Liquidity (Cash + Availability)	~$52.7	~$104.0

Cash Flow KPIs

KPI ($USD Millions)	Q4 2020	Q1 2021
Net Cash (Used for) Provided by Operating Activities	$(11.9)	$(27.8)
Capital Expenditures	$(7.6)	$(7.0)
Proceeds from Asset Sales	$1.6	$65.3
Free Cash Flow	$(17.9)	$30.5

Segment breakdown: No quantitative segment revenue/EBIT disclosure in Q1 press release or transcript; narrative indicates North America stable with residential growth and commercial flat, and international strength led by China/Australia .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2021	“Expects revenue to grow compared to 2020”	Directional outlook maintained; no formal range; strong Q2 order book and continued recovery noted	Maintained
Adjusted EBITDA	FY 2021	“Expects adjusted EBITDA improvement… supported by top line growth, transformation initiatives, manufacturing productivity”	Maintained directional improvement; near-term weighed by raw material and freight inflation; price actions announced Q1 and additional in Q2 to mitigate	Maintained (with cost headwinds)
Price Actions	Q1–Q3 2021	5–9% price increase enacted Dec 2020, effective Jan 15, 2021	Second price increase announced end of Q1; first largely completes in Q2; second phases through Q2 and fully implemented in Q3 (US and international)	Raised/Phased
SG&A	FY 2021	Investments to support transformation (indicated in 2020)	Sequentially higher SG&A expected for remaining quarters due to product launches and newly onboarded sales/marketing hires	Raised (spend)
Corporate HQ Lease Expense	FY 2021+	~60% annual savings with relocation (effective summer 2021)	Project on track; relocation in mid-2021	Maintained

No formal numeric ranges (revenue, margins, tax rate, segment guidance, dividends) were provided in Q1 2021 materials .

Earnings Call Themes & Trends

Topic	Q3 2020 (Oct 2020)	Q4 2020 (Feb 2021)	Q1 2021 (Apr 2021)	Trend
Supply chain & costs	COVID-related disruptions; improving productivity; reduced input costs	Tariffs/raw materials/freight headwinds; price increase effective Jan 2021	Cost inflation accelerating; Winter Storm Uri plant closures; ~$6.9M cost headwind; availability improving into Q2	Deteriorated in Q1; mitigation via price
Price actions	Noted transformation; focus on mix and pricing	5–9% increases enacted Dec 2020 (effective Jan 15)	Second round announced end-Q1; full implementation by Q3	Incrementally stronger pricing
Residential demand	Stronger sequential vs Q2; home centers robust	Residential growth; de-urbanization and low rates tailwinds	Continued strength; orders heading into Q2 strong in new/remodel	Positive momentum
Commercial trends	Slower recovery; project delays	Sequential improvement, still below pre-COVID; ABI improving	Flat in NA Q1; expecting positive in Q2/Q3; more transactional work; Quick Ship helps	Gradual recovery
International	Not highlighted	—	Strong recovery led by China/Australia; some pull-forward ahead of price increases in China	Improving
Transformation	Expand/simplify/strengthen plan; added CFO; investments	SKU rationalization (~30%), consolidation, HQ relocation savings ~60%	Go-to-market expansion (Pro, Signature), R&D Technical Center opening; supply chain alignment	Execution progressing
Quick Ship program	Introduced to accelerate timelines	Increased Lancaster capacity utilization by 33%	Early-stage momentum; expected continued improvement	Building traction
Sustainability	—	Awards and #1 sustainability ranking	2025 intensity reduction goals; SASB report upcoming	Embedded focus

Management Commentary

“The positive momentum in our business continued into the first quarter… led by sales in China and Australia… customer orders heading into the second quarter point to further sequential momentum” — Michel Vermette, CEO .
“Adjusted EBITDA was a loss of $7.6 million… raw material increases and higher domestic and ocean freight were $6.9 million headwind… about $2 million production inefficiencies caused by Winter Storm Uri” — Amy Trojanowski, CFO .
“We introduced Armstrong Flooring Pro… and Armstrong Flooring Signature… accomplished several key wins in our Asia healthcare channel” — Michel Vermette .
“We officially opened our Technical Center in Lancaster… first of three buildings we will open in 2021 as part of the headquarters relocation” — Michel Vermette .

Q&A Highlights

Pricing cadence and inflation: First price increase from Dec began mid-Q1; second announced end-Q1; first completes in Q2 and second phases through Q2, fully implemented in Q3 domestically and internationally to offset rapid raw material increases and contract timing constraints .
SG&A investments: Go-to-market hiring resumed in Q4/Q1 after COVID pause; displays and independent retailer programs ramping; SG&A to be higher sequentially as programs mature, with expected sales follow-through .
Commercial recovery: Increased transactional activity and quotations, Quick Ship enabling deferred projects; expectation for positive commercial growth in Q2/Q3 across education, healthcare, hospitality, and corporate .
Residential national accounts: Q1 YoY decline due to prior-year inventory load-in; inherent lumpiness around major rollouts despite strong residential market .

Estimates Context

Wall Street consensus (S&P Global) for AFIIQ was unavailable due to mapping limitations; as a result, estimate comparisons could not be provided. Values from S&P Global were not retrievable for AFIIQ at this time.

Key Takeaways for Investors

Q1 showed healthy revenue growth and sequential improvement vs Q4 despite significant cost headwinds; underlying profitability remains pressured absent the South Gate gain .
Pricing actions are stepping up and should partially offset inflation by Q3; watch the timing of contractual pass-throughs and international implementation .
Liquidity and net leverage improved materially post-asset monetization, enhancing flexibility to fund transformation and manage supply chain volatility .
Near-term margin trajectory hinges on raw material availability/costs and freight normalization; management is actively repricing and claims supply availability improving into Q2 .
Commercial recovery is emerging with transactional wins and Quick Ship momentum; expect continued improvement into Q2/Q3, albeit uneven across verticals .
Residential tailwinds (new construction/remodel) remain robust and should sustain top-line momentum; national account timing can create quarterly lumpiness .
Transformation execution (SKU rationalization, plant consolidation, HQ relocation, salesforce expansion) is on track to improve structural earnings power over 2021–2022; monitor SG&A investment ramp vs revenue capture .

Armstrong Flooring, Inc. (AFIIQ)·Q1 2021 Earnings Summary