Interface (TILE) 4 Nov 222022 Q3 Earnings call transcript

Good day, and welcome to the Interface Incorporated Third Quarter 2022 Earnings Conference Call. Please note, today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. will conference I Needles, to time, Communications. Corporate this turn over the Christine At Ms. begin your may you Needles, conference.

Hurd, Hausmann, and call XXXX Laurel regarding morning, third and Good welcome quarter results to hosted CFO. Interface's conference CEO: Bruce by

During meaning which are not business regarding are securities federal call, laws. today's within historical the any conference statements, comments Interface's management forward-looking of information

involve GAAP XX-K, performance, refer statements uncertainties quarterly assumptions the including with annual in Forward-looking the with non-GAAP to update Form are future any measures. Reconciliations based. team, as XX-Q management differ Form expectations of of company's The assumes furnished statements and include that described our are during on X-K of statements remarks to guarantees statements regarding as could not a of comparable the in also Management's on recent Form statements, and on number and materially risks this contained use cause no the earnings filed the company such intent, Any to uncertainties most such forward-looking and belief, risks and actual or report the current call explanations results our which to from release, the certain SEC non-GAAP forward-looking most responsibility their are SEC. the for measures measures report today. statements. and well

Interface's or without broadcasted It copyrighted contains re-broadcasted may permission. and be Interface. being for this recorded re-recorded is Lastly, call material and not expressed

questions. the After taping prepared open our up call Your will participation call, consent broadcasting and remarks, on the it. of your for company's confirms we to the

Laurel Hurd, over I Now, CEO. to call the will turn

quarter, bottom We on everyone. line. with growth and the you, Thank both and Christine, morning delivered top another good strong

including job to navigating headwinds. do sustained a environment, Our team pressure and continues currency inflationary challenging a great

inflation And our be and also we quarter, strong disciplined cost gains. delivered focus. adjusted it, continued of through and XX.X% the offset we through of pricing a management continues strong in input to sales. execution SG&A we at most persistent productivity saw While SG&A efforts, net

working, wins, resulting is Our segments. in diversification multiple market across customer strategy

trends, year-to-date market X%. focusing we differentiators, We're products Education up customer with We're XX%, see across and design seeing our these up our demand excellence. Healthcare for at that Looking is leadership, carbon-negative will strong on our customer XX% Corporate continue is growth and segments, Office base. carbon-neutral and to up confident across is service strong by

year, As of a orders X% XXXX. of as Overall, tougher with demand into QX we the of backlog that Americas entered comps, the saw and in year-over-year EAAA the down is on since we a with down and down this rates down reminder, the momentum, we QX back lapping and Even were currency-neutral headed pent-up a half, with tough year. QX X% X% release were QX beginning strong up X%. the as we COVID comps, in order

order prepared as We closely watching that experienced to have and needed. an team rates market dynamics to are respond changing management is

advantage verified manufacturers have a carbon-neutral a share. we in objectives. we on We're of enterprise, the regions well and positioned for carbon And to reduce size. companies organizations science-based these these solve bring seeing looking the strong, certified of accommodate back and scale working, huge long-term first their our important all third-party new and to enter ways continues approaches. and Companies finishing test chain. Interface looking them to represents We're We're customer their a company one year which design competitive and take challenges. support own targets. products QX to global in third-party change only across manufacturer our global few This with an are their also business, to footprint. strategy our are office the as value and also industries is their hybrid of foreign opportunities and of to spaces to the for across confident us to accomplishment we As Office our are size, help momentum entire Corporate focus as employees are

federal share, Additionally, and initiative, the continues administration funded in rubber Nora quarter which The in materials both represents LVT global lower and carpet This development. entire and for to to Interface team projects. this US innovate our range Interface operations opportunity prioritize announced help federal by to its Clean product carbon procurement tile, of will federally flooring. another gain across

My be and Korea. in it us partnerships sales interactions visited quarter, to an they the And and decision and South teams with with with it also specs incredibly our in easier commitment make carbon-negative I the reaffirming vision. Bruce. many quarter. that were work continue our the leaders, regional dedication the LPT turn that well has to impressed and team's include Interface with customers our our our during their as customers, in I to Interface positive, I and carbon-neutral and will supplier strong align spent products I products, with their During how our of sales projects. operations our time Australia, and as over need to

you, good and everyone. Laurel Thank morning,

FX growth year, and driven level, sales company quarter $XXX versus last balanced XX.X% a up up from EAAA year. is a of neutral; that AMS, FX year-over-year. net XX.X% quarter was third sales XX.X% was the versus At million, Third neutral by an totaled the net FX-neutral which X.X% increase contribution total last

of gross Third the XX.X%, decrease profit year XX prior basis was quarter adjusted period. from a points margin only

initiatives. global pricing As Lauren productivity we offset largely mentioned, inflation significant cost input through and

below also inflation our work of we adjusted done have level teams is that the have our the profit over remember. the highest to want the business most we senior in a operators has can While and even incurred, at are long-term, margins significant a business fantastic for historical that expectations portion recognize the which that offsetting ever gross levels the

relief freight, means compared on a will for we net discipline. guide. continues little SG&A was million seen $XX.X cost sales of XX.X% period in work we've year. to materially, inflation improve of optimizing Adjusted and our productivity, very continue SG&A to strong unfortunately third through pricing same incorporated into through be work last its year team our to net inflation on is of sales focus relief globally in the exception million of expense to full As the we quarter $XX.X persistent which move and ocean offsetting we're which with that the into has some or or done area this Managing the XX.X% global and proud QX,

earnings quarter in share, was the $X.XX X.X% per up up fully income year. million, last operating adjusted of the in operating diluted earnings per was last last XX.X% Fully versus quarter versus third adjusted X.X% third quarter $X.XX $X.XX diluted versus year. QX income up share, $XX.X And was $X.XX $XX.X Third million year. adjusted in

cash third XX% generated cash Third revolver. quarter's million borrowing $XXX.X inflation. in the $XX.X the million comprised million and $XXX.X of of million material Liquidity $XX.X from adjusted $XXX.X primarily to operations quarter year-over-year the company $XX.X and end at of was million, of up Inventory EBITDA at of our the quarter. raw was due capacity million remained strong, on

as In million or times Our by was leverage cash months, remains at our net quarter. our the debt hand EBITDA debt total the last adjusted debt balance net third $XXX.X ratio strong. minus was the calculated XX million EBITDA. adjusted $XXX X.X was divided sheet end of Net and on

confidence continue sheet shortly strong closed, We capital after signed to balance facility. have to On our structure. credit quarter in an October our our existing amendment and third XX, we our

credit and that in mature of to their group our strength them set our this support. November the recall expenditures a amendment of in Full filed to our company credit is were we the in that last might XXXX. quarter. extends was in This the XXXX. of million XX. the existing environment, October Capital thank and facility our are compared You we year's Closing of million strong through tough amendment third $X.X facility, support credit on for of to syndicated $X.X X-K year's October testament October XX third banking in amendment the term a available this quarter to details of want

balanced We on share the previously and debt quarter, opportunistic of $X.X cash share we with our stock focused Interface business, excess our repurchased investing allocation in repurchases. down the program. and announced returning in shareholders through dividend our capital accordance to paying During and repurchase remain million common strategy a

our to outlook. turning Now

full million; For fiscal adjusted sales billion; we following; full million; net gross profit and the approximately $XXX XX.X%; $XX an expenses interest adjusted the XXXX, effective the other is XX.X XX.X year approximately quarter that anticipating fully count adjusted for to year billion approximately million rate that million anticipate adjusted also approximately we million; expenditures of are are fourth $X.XXX $XX of of SG&A expenses of margin $X.XXX capital share weighted approximately of of XXXX average and shares. diluted shares, and for the XX%; tax approximately approximately fiscal

sales to as as currency-neutral growth continue not expect demand year-over-year QX recent While two reasons. be we in backlog, trends strong will quarters and a robust for comparison main the net given

QX turn top are demand. are on And strong headwinds benefited COVID release QX challenging continued XXXX that line second, approximately Despite significantly given we pent-up highly of foundation in the our comping a a points deliver dollar and against XXX FX strong and anticipating confident First, the from the our differentiated to we of leveraging concluding we US strength. basis financial strategy on creation remarks. are year environment, in back call With brand by to value that, for strong products. execute ability our I'll our a our Laurel strong

Bruce. Thank you,

published highlighting also are milestones titled XXXX our with Design significant We our proud to ESG report and achievements. Purpose have

that XXXX momentum in solid also well-being. we impact navigated in will we global stage the and In and set and environment. in efforts support environmental XXXX dynamic third XXXX towards we made for we geopolitical strategies further Overall, to advanced a our quarter initiative and a delivered results health challenging XXXX. we employee addition inflationary continue and well march to our reducing DEI strong The implemented as

in for team we the that for ready our to execute challenging our market Operator? out open customers. execution Importantly, deliver Session I'm that our strategy environment. we on it of demonstrated Question-and-Answer how continue remain with, and a to disciplined I'll and to questions. continues in volatile proud strong. We finish up we are year this And focused

the with MacGregor first Research. David of Your [Operator question comes from line Longbow Instructions]

Yes. Good morning, everyone.

Hi, David.

Thanks of and order or decelerating for of that on North helpful if can And you I as breakdown the call. orders Did provided quarter? would morning. through wanted see Can the between you quarter? detail just about America the October anything the say about you the cadence Good you accelerating EAAA. orders well? the to you through kind talk that be about Yes. ask

the throughout were to we actually we If And the look we no of some orders persistent out leveling Sure. quarter. quarter. anticipated. was the pickup would deceleration saw we in lockdowns Australia, market-by-market. about really there. In orders think did And I a in really see Americas I slowing say than Europe so really have the China Asia, then happening more actually

depends So durability October market-by-market, and closely of it overall, in from but order pretty honestly but October. it we're about good we October our see nice when steady then watching really the what encouraged momentum about we really And some long-term in trends we sequentially the We're see quarter-over-quarter. business. feel look and

Great.

they're you the like I for every margins pressures are specified go these these the the guess and seems that that. with days. wanted ask call the associated earnings wanted lag you talking and some cost just through, negotiate gross amount and to much having I a maybe be which takes pretty deals complete Thank of mean and I people deals But being that whether so pressure of move extent because function to ask just evident it's on passing you And may well don't pricing. to – talked as Okay. it back I reset trouble have you it about you heavily about inflation. or them. on days and Costs that's concentrated about a then you cost everywhere to those to time competitive ability

pass-through price why cost a escalators. You the the have better price doing Help on me and the not little inflation. understand don't we're on

turn I Bruce. this. to Yes, that maybe then say I'll it and start would

I I energy with think on pricing continuing nice some in And we're especially to say the in double-digit chase lower. in pricing. we're cost others markets continuing side, it's little the bit to prices really will Europe escalate. seeing a

so the add say I chased get And chase. think that's that saying in most. continuing do place and to as our would So market you're Bruce to I to orders a that? the we're you locked that's want we've

I'm probably our I of question. David, like world management love going different you around pieces information. are me. the sound our team to give your chuckling two And and because operators you

down quarter, in On points basis we're was year-over-year our happy the the hand, with. which not one margin XX gross

basis $XX flip operating in cost input X we offset we range side, would X,XXX like done the inflation. On not million had generating instead something of of of we more points have of million. to the that, Had $X income

fantastic done there mentioned. large our a just the just it's and persistent you have and is job at operators been price lag that So inflation passing so – that we're that so has on

a so tale And two of job done not price. we've continues. and done costs One that great they've a it's is unfortunately stories. accepting of the done and we're yet passing to a that a different tale job success our great inflation it's customers on persistent But

Everything coming. else the remarks, place just we've prepared on is seen of freight. in kind that relief only the kept ocean has in mentioned we As

we're onto our continue operators, we order to to because margins. to good customers have as going those – just our pass it preserve costs to in So

much Thanks luck. good very and Okay.

Instructions] [Operator Thompson from line next Thompson the Research question with Your comes Kathryn of Group.

you my Thank today. morning. for taking questions Good

first chain broad Just supply transportation the And into the just you situation other you. with are where issues be that in raw of clarification, on access stand in to mainly kind supply of chain there? products terms just materials? given any Europe just running any Thank actual to could you

from take really can say an Kathryn. would this that. standpoint in I we're Yes good I Hi, availability shape.

we've well. of secured on the to cost we've flowing concerned to pressure the what Bruce, if raw were need don't It's about. So add anything things that. side continue. know really that we that seen I have materials been have you to on we pretty And any the

supply right. is supply The has a exactly cold about business so And some it loosened been in another certain which winter thing. price in which just Supply fact Kathryn order up to from Yes supply really fantastic. in more there. in a chain increased it's general standpoint And is in case mainly has ensure one actually Europe. areas now. is in But in chain right so-called flow continuity note positive we've there's

absenteeism might to returned You has now high plants pre-COVID remember levels. in were rates our our back and pretty that during COVID

have the thing impact we our inflationary with to plants. the that run only dealing The we're raws that some So around inflationary is labor impact need we and really around just labor.

challenging terms that rail how getting of bit of is. Okay. – from other we're ports in as tracking it And any a far transportation just as little any But is finding goods. transportation more guess what change

good. We've container been say. in pretty good shape I would The flow has been pretty

that's think challenges from before. transportation. don't up where availability certainly an So been loosened any experiencing from I we're of it's

Okay. And then...

And I would add.

gotten really that built challenging over such I COVID, a was so operators muscle. all at have are managing Because our think during good it that. They We it. time

the getting So to we need not been – haven't risen something that around we that's concern go a stuff to by has date. where promised

on getting on better? top your Thank to the to maybe know based perspective. Interface you your and three to of from team two And or Laurel, greatest days If network you've for early a can the What company get chance from the you. focus opportunities or the your areas better. the growth perspective are had of

impressed Sure. with first team brand strength. And for just and months. continue the It's or be awesome and customers an sales thanks our This time our six the quarter, suppliers, question. to with spend especially, and and team been I so the our got our past I to organization seven

come rubber maximize separate across together that all opportunities starting sell I offering the and and we the tile, LVT together beautiful think full those selling whole systems. solutions Nora really a one have, we portfolio of teams selling premium product across our are And to carpet and really of floor. the to portfolio rather biggest have Interface, than rubber brands to

real we that the some and So There's Nora unique help And design the I real continuing and team, so And plate And again, strategy, floor to design been we're Office, where work diversified think sale. I sell and and products to now. taking just future. design the concept with with much in past, those design. real for team the Corporate to not corporate at customers the markets, a hybrid continuing And continuing full area are And office, designing which seeing then a the and have other our then think, and do opportunity. of full whole think clear of continued only Education. really on into in I in absolutely which is was a our with of that's more which really to had technical de-densification Nora, strength, portfolio with that, our continuing to has spectacular our is is the strength that back segmentation to push solutions lot Healthcare selling biggest leadership our lead you again, Nora of we're design more the the really will focus as really look more opportunity example to be and and the if an opportunity. drive beautiful in business, largely office opportunity, our but

Okay. Great. Thank you.

Thank Kathryn. you,

There any of the Laurel are time. at turn remarks. will call no to further Q&A now questions Hurd I End for closing this over

Thank investors customers all all of the to work associates for they for today. you day. do to I listening every want to their appreciate you thank you. say support. of And our our continued great and And to just our Thanks thanks

Thank you for participating.

time. You at may this disconnect