John Lovallo: Got it. Thank you, guys.
Vic Grizzle: Okay. Thank you.
Chris Calzaretta: Thanks, John.
Operator: Our next question comes from the line of Susan Maklari with Goldman Sachs. Please go ahead.
Susan Maklari: Thank you. Good morning, everyone, and congrats on a good quarter.
Vic Grizzle: Thank you, Susan.
Chris Calzaretta: Thanks, Susan.
Susan Maklari: My first question is thinking about your guide for Mineral Fiber volumes to be down low-single-digits. Can you give us some sense of how much of that is driven by the underlying market and the conditions that you’ve talked to relative to some of those organic initiatives and the benefits that are starting to come through from those?
Vic Grizzle: I’ll take it.
Chris Calzaretta: Okay.
Vic Grizzle: Susan, yes, the volume I think the way to think about the volume build on this is we have an overall, I think softer, level of economic activity that is going to impact the overall business. And I can, across all of the verticals will be subject to lower levels of activity. So, that’s kind of the backdrop. We’re going to partially offset some of that with our growth initiatives, like we did in ‘23. We feel really good about the progress and the traction we’re getting there. The other thing that is going to come out is some of this retail inventory build that we talked about all through 2023 and we were expecting some of that to come out in ‘24 didn’t come out. And so, we’re factoring that also in, coming out in 2024.
So, you’ve got a couple of puts and takes there. It’s not all market softness. Again, we’re out looking a modestly softer overall economic backdrop and again partially offset with our growth initiatives and then a little bit of headwind from some of this inventory coming back out of the system in ‘24. Does that help?
Susan Maklari: Yes. That is helpful. I mean, we’re trying to understand, it sounds like a lot of your organic initiatives have been gaining some nice momentum over the last couple of quarters, and just how does they go about the continued benefit of that over the coming quarters and where that can go relative to a softer market?
Vic Grizzle: Yes. We expect that to continue, that traction there to continue in ‘24, for sure.
Susan Maklari: Yes. Okay. That’s helpful. And then, turning to the Architectural Specialties margins, you’re obviously continuing to make some really nice progress there getting close to that 20%. As you think about this setup for this year, how are you thinking about the ability to actually get to that 20% or really within striking distance of it? And what are maybe some of the puts and takes that could come through in terms of the margin in that segment?
Vic Grizzle: Yes. We’re really within striking distance, right. I mean the path that we’re on is very encouraging in terms of getting the operating leverage that we needed to see from the capital investments we’re making in the business as well as some of the SG&A that we were investing ahead of growth a couple of years back. So, we’re on the, I’d say, good path there to get the operating leverage there. And then our pricing initiatives too, we’re doing a good job and making sure that we’re pricing projects the right way. We’re getting some of the acquisitions on our pricing platform. So, those things that we’re doing and we’ve demonstrated for two years in a row now that’s what we have to continue to do in 2024. And, we won’t make any short-term bad decisions, to artificially get there.
I think that’s the discipline that we’re using. Some of these large airport projects that we talk about, one of the things that we did in ‘23 is, and late ‘22 is, we invested in some additional resources to create multifunctional teams to go after some of these larger complex projects. And that’s an important flex that we were able to take so that we could better position ourselves for winning some of these large airport projects. If we see opportunities to do that, we’re going to continue to do the right thing in the short-term for our business over the long-term. But we’re in striking distance and we’re pushing to get there. I really like the path that we’re on.
Chris Calzaretta: And Susan, maybe just to call out too and build on that a little bit is, in the appendix, we have the adjusted EBITDA margin assumptions for both Mineral Fiber and AS, and we’re out looking about 19% EBITDA margin for AS and about 40% for Mineral Fiber.
Susan Maklari: Okay. That’s helpful. Thank you both for the color, and good luck with everything.
Vic Grizzle: Thank you.
Chris Calzaretta: Thank you.
Operator: Our next question comes from the line of Keith Hughes with Truist. Please go ahead. Your line is open. Please go ahead.
Keith Hughes: Thanks. On the guide for Architectural Specialties, what’s the revenue guide, what’s the breakout between organic and acquisition?
Chris Calzaretta: Yes. Really, I’d say within the, AS segment, we’re guiding, 6% to 9% on the topline with, I’d say, really minor contribution from inorganic on that. It’s really the market and continued market penetration that’s driving our growth and expected growth in ‘24.
Keith Hughes: Okay. And one other question. You talked about there was an inventory adjustment amount in the fourth quarter. How much was that? What segment did that show up in?
Chris Calzaretta: You’re referring to inventory valves?
Keith Hughes: Yes.
Chris Calzaretta: Yes. It was small. It was small. If you remember back in 2023, we had in the first quarter a pretty sizable valve impact. And in the fourth quarter, it was a much smaller amount. About half of the input cost line on the bridge was valve related in Q4.
Keith Hughes: Okay. Great. Thank you.
Chris Calzaretta: You’re welcome.
Vic Grizzle: Thanks, Keith.
Operator: Our next question comes from the line of Rafe Jadrosich with Bank of America. Please go ahead.
