Philip Ng: Okay, that’s more than fair. I guess from a cycle standpoint, Vic, it was really helpful to kind of us some color on how you think about the free cash flow and the durability of AUV. Does the play look any real different this time around? I knew in the past volumes would fall and pricing would hold and you would mix up gross falling. This time around I am curious how does mix holdup given some of the challenges you are seeing in office and retail which assume the higher mix and potentially weakness in places like San Francisco, New York, and help us think through the mix dynamic going forward.
Vic Grizzle: Yes. I think the best proxy is to go back and look at what happened in 2008, ’09, and ’10. I don’t think it can get any worse than that. And in that case, we didn’t see the trade down on mix. So, we are not anticipating to see the same kind of or a different kind of a trade down activity on mix. Again, everything that I am reading is that the highest demand office space continues to be class A and trophy buildings. And the vacancy rates are the lowest in those buildings as people trade up from older buildings through the years and older. I think that dynamic is going to keep the mix appropriately sized for us in our outlook. And again, mix happens across the country not just in the major cities where there is offices.
And then, the final point I’ll make on this is that new construction is what was positive in the Q4 of 2021 and all of ’22 could add a positive tailwind in the back-half of the year and into ’24. And again new construction tends to higher AUV products based on the nature of the new construction and putting in the latest and greatest technology. So, that’s kind of a longwinded answer, Phil, but I don’t really see a dynamic here that should change our expectation on driving higher AUVs and higher mixes. And maybe, I’ll just make this longwinded answer even longer by when I talk about the focus of this business now that we have an international division, we have a tremendous amount of focus on this Americas market where we are innovating and bringing products to market even faster.
We have talked a lot about those with you. I think the work that we are around healthy spaces, the work we are doing around sustainability, all of these are bringing higher AUV products into the marketplace even faster. So, there is a lot of tailwind to AUV growth just through the innovation that I think offsets any of those minor dynamics that you are alluding to. So, again, such a longwinded answer, but I do believe we have a positive AUV story well into the future here.
Philip Ng: Okay, super. Great color and I appreciate it.
Chris Calzaretta: Thanks.
Vic Grizzle: You bet, thank you.
Operator: the next question comes from Stephen Kim with Evercore. Your line is now open.
Stephen Kim: Thanks very much guys. I appreciate the help so far. Just wanted to touch on the Mineral Fiber volume first, I guess first of all, the extra shipping day that was actually not something we had expected. So, can you help us understand — just foresee, are there any other future day adjustments we should be thinking about later this year? And then, with respect to your volume I guess inclusive of any shipping day issues, I think previously you had talked about your outlook for the year that kind of have shape of year-over-year changes kind of being like down low single digit in the front half. And I think down high single digit in the back-half is what you had previously talked about. You are not changing your guidance now, but you had a very strong 1Q obviously. And so, I am curious is there any help you can give us in terms of maybe a change in the shape of that sort of first-half, second-half kind of year-over-year comparison?
Chris Calzaretta: Hey, Stephen. So, for the first quarter obviously up one ship day, the only other ship day dynamic we have this year is Q3 where we are down one, so, overall, flat on a ship day basis for the full-year. In terms of volume, we do incorporate kind of that shipping day dynamic into our guide. And again, we outlooked Mineral Fiber volume being in that mid single digit range for the year. First-half, back-half dynamic, we are expecting positive first-half volume for Mineral Fiber, but you are right, the second-half is in that high single digit range in terms of year-over-year comp. And again, that’s due to the progression that I mentioned earlier with just sequential deceleration starting in the second quarter, and again, really pronounced in the back-half there due to the expected recession that we have incorporated into our outlook.
Stephen Kim: So, I am guessing because the first-half is not going to positive, it sounds like your second-half outlook is still down high single digit and maybe more high single digit than previously thought? That would be a fair guess?
Chris Calzaretta: Yes, I think that’s fair. High single digit in the back-half is fair.
Stephen Kim: Okay. And then when we think about WAVE, I think typically it’s stronger seasonally in 2Q and 3Q. Any reason why the seasonality might be different this year?
Vic Grizzle: While the seasonality pattern WAVE follows Armstrong broadly, right, because most of the construction activities in the third quarter — second and third quarter, so no change in the seasonality there. Again, I think the third quarter is part of that back-half uncertainty where there is not enough clarity around our customer’s backlog going into the back-half. So, certainly I think with the uncertainty in the back-half, we could see a dampening or a change in the seasonal pattern given our outlook for the second quarter and the first-half of the year. Again, a lot of this first-half volume that we are seeing, Stephen, is carry over project that didn’t get completed last year or got delayed last year. That’s probably kind of eating some of this, addition to some of the favorable comp in the base period that we talked about.
So, I think, of course, there could be something macro that dampens the quarter in the back — the strongest quarter which is the third quarter in our back-half.
Stephen Kim: Yes, for sure. Okay, great. That’s very helpful. Thanks so much.
Vic Grizzle: Great.
Chris Calzaretta: Thank you.
Operator: The next question comes from Rafe Jadrosich with Bank of America. Your line is now open.
Rafe Jadrosich: Hi, good morning. It’s Rafe. Thanks for taking my question. Just wanted to follow up on the like-for-like pricing and mix impact for the quarter. Could you sort of break up what the like-for-like pricing was either year-over-year, quarter-over-quarter? What the expectations are for the year? And then, did you see normal realization on the February price announcement?
Vic Grizzle: Yes. Our like-for-like pricing was expected in the quarter. I mentioned earlier that our February price increase we got good traction on as well. So, I think where we want it to be or where we expect it to be on our like-for-like pricing objectives, obviously that was offset by some of the timing related mix headwinds in the first quarter that dampened I think the overall AUV growth, but like-for-like, pricing is where again where we expect it to be and where we are comfortable.
Rafe Jadrosich: And just as we think about the AUV cadence through the year and you mentioned that we expect some of the mix headwind to reverse in second quarter. Should we expect outsized, positive AUV in the second quarter because of that?
Vic Grizzle: Outsized relative to what, Rafe?
Rafe Jadrosich: To the full-year guidance?
Vic Grizzle: I couldn’t say sitting at today.
Chris Calzaretta: Yes, it’s hard to call. I mean obviously in our guide for the year, we assume we got to have this back in February positive mix. I just go back to we saw in the first quarter on the mix side, it was really timing related and expect that to kind of reverse itself as you think about mix for the rest of the year, and again, still looking at positive mix for 2023.
Rafe Jadrosich: All right. And then just very quickly, on the retail restocking that you saw, can you give some color on what you think drove that? Has sellout improved on the ceiling tile side at some of the home center channels? I think that was a big — one of the drivers to the volume upside in the first quarter, and interested to hear what you’re seeing in that channel?
Vic Grizzle: Well, there’s some resetting going on at one of the big-box retailers. Sometimes it’s a bit of a mystery on why they take their inventory levels down as far as they do and then build then up so quickly. As we’ve reported a number of times, that does occur. I would say that’s more the dynamic in the first quarter activity with one particular big-box retailer. So, again, I wouldn’t point to some large outsized point of sale data, for example, that drove that. This is really inventory levels getting pretty low, some resetting activity going on there, which we normally do and work with our retail customers throughout the year on, and then a rebuild of inventory right behind that. I think that’s more of the actual and practical application — or answer for what that activity is about.
Rafe Jadrosich: Okay, thank you. Good luck.
Vic Grizzle: Yes.
Operator: The next question comes from Adam Baumgarten from Zelman & Associates. Your line is now open.
