Interface (TILE) 1 Nov 242024 Q3 Earnings call transcript

Thank you for standing by. My name is Bailey and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2024 Interface, Inc's earnings conference call. [Operator Instructions] I would now like to turn the call over to Christine Needles, Corporate Communications.

You may begin.

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

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

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

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

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

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

team for quarter. I everyone. begin call, Interface to and want thank morning Christine, the impressive good To you Thank an our

we're talked strategy strong We're selling tangible strategy reinforce to we're the our global of Americas global and implemented the yield through in margins QX new seeing to is multi-year growth selling selling our in are impressive teams and productivity continuing the expanding resulting fact focused in innovation which the coordinated including and Interface segments approach the encouraged sustainability. local Interface is in in currency-neutral nora plan business. We've and healthcare teams and by working integrated These yielding across building tremendous up reduction results about results the in and results. The accelerating enhanced growth world-class biopharma Our in net functions support other of team, through on results seeing complexity team, that chain our supply sales the year, sales, commercial momentum our business, expanding nora early manufacturing. U.S. the XX% an combines in and strong quarter. We're this that leading management rubber design, into education, of stages One beyond we

progress. combined team's new is selling This across the are while and what enhancing the we're customer see encouraged teams opportunities unlocking by the we'd effectively experience. to portfolio, hope product Our

we Additionally, additional refreshed It together drive nora recently for and provides ultimately brand how attitude Made and customers. brings efficiency marketing the our consistency More. brand our brand This brands opportunities. efforts platform we closer to to up added sales our for show in creates in our

a significant delivered with sales XX% very of strong growth profitability We currency-neutral Turning results. and third to our financial quarter expansion. net

in sales offset to by year-over-year, in continue XX% gain. In net continued mentioned, Australia. up market Americas, sales net growth We were currency-neutral EAAA, in was largely as strong EMEA the drive currency-neutral and net share flat momentum lower were sales as

and up gain to which volume, price categories testament in year-to-date Additionally, great share. and is their ability and all to both product ] execute billings selling a organization were in our [

billings segments, up market our to by led year-over-year, global remain Americas. XX% Moving strong, strength the education in

Corporate higher across with our education LVT example share is gain Office K-XX industry year-over-year teams with customers where compare combined us product supporting up to continue and collection billings, nora continue our resonate market Our were Air effectively of selling when portfolio. Global you a collection, we our expanded trends. X-millimeter Open This rubber customers. overall X% and to the great full

particularly architects return their increase, growth. their care to year-over-year with strong portfolio. Overall, space are were and firms however, companies our differentiated the A with Class leverages to in to soft design As the office in product and and premium needs update design sales our we our sustainability where differentiated saw spaces, products, meet by quarter, activity leadership. Health we double-digit relationships deep their billings continues team third order

quarter installation as have our were quarters. And related care. typically health our a the sales, of Retail compared unplanned and in projects, And billings our remodel to the up to the As products longer but billings a a in can part prior healthcare experienced store period. small will expected, of periodic a is nora convert cycle to have we retail net period. reminder, in soft year deferrals year we coming which in strong prior overall sales orders

the to Asia a orders third quarter. year-over-year. In growth XX% consolidated flat. Currency-neutral currency-neutral largely offset all in flat orders, up execution was were Americas in currency-neutral Turning across Australia product in categories. commercial essentially in strong Growth EMEA the EAAA, orders by with were XX% drove orders increase with

aligning into fourth strong, the fastest our markets commercial our geographic sales and in the quarter, head backlog on the focused beginning up productivity, improving customer is remain the We experience growing teams U.S. we XX% As year-to-date. segments and with

chain manufacturing. Turning and to supply

through complexity reducing manufacturing on automation our focus facilities. in to continue We

will the to we over implement X As next mentioned, new automation and previously solutions quarters. continue robotics

plants continue will of by our U.S. and investments are funded We which opportunities, automation be through results the manufacturing efficiency savings. evaluate in these other to encouraged manufacturing

to some notable into Bruce related sustainability. to gets Before the want financials, I share accomplishments

that First, selection. we product we understand their announced of to impact are the customers carbon for easier making it recently

sustainability achieve carbon at helps put where low a plans our embodied using the are the a data created and Studio by combination own it of data helping technology flooring. This Design carbon footprint carbon calculate we know with project's by metrics and their differentiated and Interface all to carbon we forefront to lead We delivering on floor unique footprint carbon the of goals. to products contributes customers

we've in circular the recently the and carpet carpet products announced years economy. we've now carbon our BioX expanded that turn We building EMEA our footprint. can at of Bio Netherlands, of reduce XX our us used new support into CQuest recycling on process facility in ones, backed CQuest capabilities Second, helping in to progress

pleased report to list, in to sustainability becoming added the offsets. And Interface the that our proud I'm without and Zero: decision Third, to Reuters' to Awards on our over to Leadership for the received Newsweek's carbon-negative Interface in ranking in Net Greenest over share committed we that the I'm I'll of carbon-negative financials. U.S. to forefront which Interface a to sustainability. was Sustainability go highest finally, XXXX, become as appreciate that work progress. With to is that, go the are distinction of environmental Companies to category Bruce. recognition the companies we all continues by in it be top at turn Bruce of recent

Well thank Laurel, you morning everyone. and good

quarter totaled increase XXXX. Third of of third an sales $XXX.X net the million, XX% versus quarter

year-over-year XX% X% quarter flat FX-neutral strong in Americas education prior up driven the well net in up were X%, were Third net down and an EMEA strength retail in and the primarily year-over-year, sales was EAAA was X% market FX-neutral on sales billings. FX-neutral year year-over-year by the on was as as down basis Australia comparison. strong Asia segment

were last in increased compared sales quarter XX.X% period year. or to higher in XXX gross points same basis quarter XX.X% compared fixed cost last deflation third adjusted due and year. Adjusted to absorption Third SG&A increase on of or margin the raw on volume cost profit of sales was material the of quarter $XX.X million $XX.X the expenses third million net to net XX.X%

million, $XX.X profit in XX% margins increase higher operating The net adjusted in versus quarter. the quarter $XX.X quarter was income sales income was adjusted of the last gross operating up higher by Third driven and third year. million

expense the and accelerated rate Our performance the unique XXXX U.S. $X.X QX third This release million interest is to driven strong this allowance. of tax debt benefited The not a valuation expected is and recur. allowance lower of business by quarter valuation repayment. was to effective from release from in

last Third $X.XX the was quarter quarter EPS versus adjusted third $X.XX year. in

$XX.X quarter. the line strategy, repaid Third $XX.X the quarter quarter million our in operating debt and million year-to-date. million million the from was last $XX.X In cash capital third year. allocation in quarter's EBITDA of we activities third in generated of We million third adjusted versus $XX.X with $XX.X

remains X.Xx calculated to strong was million leverage of net EBITDA. divided balance in Capital as million million quarter $X.X with sheet XXXX $XXX at Our liquidity compared the ratio of net our last quarter $X.X XXXX. expenditures by in and of third debt adjusted end, the were months XX

Turning to our strong We and XXXX backlog. results enter and quarter healthy fourth third of in a delivered with impressive quarter orders the outlook.

the $X.XXX adjusted quarter. Separately, that points of tax adjusted gross other has mind, billings of fourth in adjusted to margin sales the we interest $XX sales that we remarks. which gross lower reminder, approximately a strong profit SG&A XX%; the call in benefited slightly are last I'll more anticipate billion are Net capital $X.XXX margin approximately full million. And and and to of shares full year of effective for our reduced profit that year outlook approximately $XXX cost fiscal million concluding the to from of backdrop billion; rate share approximately the count approximately following raising fourth adjusted typical year of diluted of million; that, basis expenses profit XX.X average in year, items anticipating weighted and full and turn million; in are Laurel of products. With now As $XX fully gross of XXX expenses back continue the for XXXX. approximately margins expenditures that XXXX, quarter XX.X%; for retail with premium non-recurring quarter

today, Thank to everyone call the you, thanks for Interface especially thank extend want entire would I team. the like I my Bruce. to joining to and

quarter and progress areas Interface demonstrate of I'm made proud and this the we've strategy, of Our effectiveness our results strength of our business. incredibly across the One all

focus in our on delivering investing ahead, business, our and remains look both customers we shareholders. value and As excellence to operational the

our the will Operator? in it seizing that, questions. of with We navigate dynamics opportunities are while confident ability current that up align I to vision. With our to our open long-term market

of [Operator of from TRG. Instructions] the Our comes first line Thompson question Kathryn

would same at into health XXXX time you momentum? leading going last to it as year? non-res it want year of remodel. few to and a be growth we've First, in bigger talk you focus that this season And education improvement non-res in activity -- quarter next this of and the and now state and in current pace -- repair year does to the past and going year last in earning compare repair companies remodel, into the about about what's well, characterize non-res orders how the seem and think does to repair compare and heard pace quarters remodel how into I and really few you care. How the as very the seeing given on an So

Kathryn. Thanks,

the sales First, of say teams good. growth made. our the Americas order quarter. strong in as said, I'm also is I'd XX% looks really really proud net that progress book you And really, the a

outpacing So I market more more we're are continuing work. respect more and think We're total to definitely associates about is saying, as good back market. the environment to the activity see corporate we're really to feeling we're with bringing the people

So ago. projects I think, those certainly a stronger year than are coming,

Our is respect with optimism building to that.

remains as education strong As our well seeing the full higher lot products across in business nora ed. we're and very both you education, a selling portfolio, in product K-XX of said, growth as our

is that share. proud team's the ability think that are take of building. we're optimistic to momentum we I And within the So

Kathryn, agree. I

year-to-date earnings our The all on that price up other interesting and couldn't thing really this and that, say X we quarter product me volume lines that's year. last in were is both to

another just it's we're testament momentum ago. that the now So we're momentum the in that seeing seeing to versus the a year business,

business the the able inside as momentum see the price great volume market. to well us hold great as in So and being up to

on a verticals And across Americas, to can products? anything that's there or order detail give the any leading the Is growth? growth on just that on in you breakout follow

quarter, in business. that those the We health don't optimistic care up is that our And the double in we're of really breakout. coming a prepared orders that over in were the did will give -- don't health that orders quarter. digits The care through about we we so ton mention yes, feeling remarks read thing detail one

for momentum Some those future. good in take read that's the of longer to so through, us

of next comes the from question Paris with Research. Your line Barrington Alex

beat and on another Congratulations raise.

Alex. Thanks

of on had a following Kathryn's billing. question kind regarding up I just

a health made some XX%, So up kind trend, the color about X was up just return of thought X% again, Office very those strong, industry categories, whatever and I talk was you care. comments up retail about additional can office. also I to bucking little bit education get but and on Corporate wanted favorable to

So retail? going delays, start project there. last retail year is finally up I'll from in due what's down to on so

project And this come did was year. we Our delays as retail business again, really last had back expected.

So were we year, in pushed through those that this and quarter. the and into last back read the remodels half delayed back half several had of year, of store the in

look at of about was comeback, growth the XX%, then Americas that had example of for of points XX growth expected you market. an across which If that the business X as and rest we the the points retail

strong for a quarter which what expected. So we exactly retail, is had

We expect forward really Office does Corporate also up in quarter. And mid-single to that carry it the well, actually fourth our was into the somewhat perform digits continue Americas. business, to then

as growth. said, -- stronger globally across X% our Bruce really teams our So even our categories. winning than And all projects, are

rubber. across selling tile nora selling products LVT teams they're job full So of an doing carpet Interface these One also suite of and the incredible with

So well. strong as corporate in growth

said is in do great. nicely, revenue net were And down health health What care, then -- which to? that you were care you up slightly. attribute that But sales orders

health those the Yes, us, end is and over for period. to market the a projects to the in really in testament selling installed projects projects and Again, and so read we sometimes bigger over through. expect but the get focusing double-digit years. The over come health in read they team. chunks to care a X orders combined chunks, the also bit The in those teams horizon bigger really encouraging billings X different. time the growth Those care through bigger time, longer order is installed a on get orders get

which of So level we're care sales that momentum will health growth future. up, net encouraged shows strong. quarter while not as to that saw in then And that we care through the continue in was health read the orders

health in fourth Does in health into orders care in quarter? net translate in care the sales that strength higher

I it would expect to.

through next flow year. I think will it into also

projects So in the some quarter. again, those of will small turn medical buildings like are and those

health large Some may of multiple XX have months. installed projects those get buildings floors over that are multiple and care XX systems that to

it, X, you year-to-date LVT they missed rubber? think have product said might in I comment categories? were carpet I but then billings tile, up And did and across on you all

right. That's

great up were billings a with in our X Alex, volume, product all and price which year-to-date, is categories sign

they third or in up or Were just up year-to-date the quarter both?

they X were were with out volume. of and up X the up

volume an much to while again encouraging it's to So, that hold really back able yes, that's encouraging price. how sign we're see has come

stuff the line. encouraging top on all So

Then versus me. gross the final on question outperformance Great from adjusted the margin your guidance.

your approximately I or get that? get sort think What thing, you it will you it XX%, how bps is it take What target to in sooner? a XX faster, long-term to then you came is like to year had levels. XX.X%. long is of I want it guided And Is pre-COVID per to there? think there? at back

Alex, you're exactly. right,

really get and by to is we're making. ambition encouraged XX.X% XX% progress Our back to the that we're to up

there as trying timeline. encouraged progress. the a get to by haven't fast can just and again, We as specific honestly given We're we

We good QX Alex, the that, and up mentioned and news would just for margins it. profit you our gross in brought is say, year. full I the

and for think you brought So And now our basis our guide prior our if in QX you prior it as around of points year, XX.X%. XX.X%. was QX, brought it XX% that full up We to sort guide. pointed about XX to was the for up XX.X% midpoint out, as guide we

that on profit gross momentum strong good really So row. line

comes Your David of with the next Longbow from question MacGregor line Research.

months progress, KPI So have the just ago? and or a might've this see. ago guess, percentage nora the stood point include versus to how wins more than what the all year XX that carpet on Congratulations I tile? of tremendous at LVT

what David, I question, disclose sure. great that regularly. initially a -- the ed. we're would just We it's not K-XX, to say it's example An had education say and where LVT both I would something we we carpet space higher tile selling included carpet for education we also is, selling were those as increasing to our primarily Yes, in space. And in in standard is nicely in tile that but and education. nora broadened is include now in and finding also pretty

getting had portfolio we we're example, of for spaces So part in as past. which ed, that and spaces higher hadn't maybe other in the lab

by So we're increasing what there. encouraged definitely and seeing it's

I there's think to go. more

this taking all not with And increasing It's guess, you're Interface. evolving it's share the in One just is categories preferences I more with an necessarily customer, those presence?

was coverage and brand Yes, about compensating actually selling about in in nora we we're changing starting it's and model. What street what make for round we're selling part team. the seeing combined our teams as in interesting, of hit, model put hands you that as execute the enough of sure teams, out as by we also think our that so our we that is had with which we XX% our sellers now that, Interface brand one the structure on feet all know, when nora did compensation by increased One to Interface that to the really January, we of one nora selling team the

on the that increase And flooring great addition lot energy we've got around really so team solution that nora. to to of in and rubber across Interface entire selling for street is feet our -- the a specific in an amplified opportunities a effort

there seeing multiplier stronger So anticipated. we effect that's than a we're really

existing support available care, base, growth the about capacity just to of with and much addition when do Do have in capacity to start and growth in to beyond you and stand nora? you terms you're penetrating in you to expand capital deploying do in so And and then nora, of how health your growth talking have how that, in that? terms

about that. lot and great a we're it's a talking Yes, question

throughput. invested nora automation that's us now, the that live think helping our is good I really equipment now news to in increase is some we in right

need. So we what we have

you more that support and see in grow. people to and continuing invest I to some growth in we're investments more space continue to, nora invest the we as we'll continue to of, on automation. to think kind additional may and But bring continue also in

I So good it think about day. talking We're in every shape. we're

first -- materials, to cost have the much raw price that achieved how can just well, of gross of margins? the you might the you contributed what On about maybe benefit talk all,

higher between or a contribution absorption the of revenue part it margin was was our higher it of look was you unit raw a And blend David, on basis we beat fixed deflation and the cost at of gross points actually that Yes, if expansion in QX, per in also material cost of QX. XXX volume. blend lower that cost -- number

toward So on to thought in we we where which through a throughput deflation out be a are lift start of QX, leveling lot standpoint, that's side, our absorption. And all bit plants, on helped And year-over-year would compared built the inflation, QX fixed as in QX. will cost to of little did had moderate things raw we move from guide. get but the more into us we that we

that that helps I'd as mix Americas that David, When well. through regional up also. And also just business benefit us a impact XX%, add to our as flows so is

That's true.

get versus around benefit guess, the a themselves of to of factors material procurement? in a from much paying and markets on I sense some raw in of bringing for trying with these process-oriented leader the there new just price I'm how supply more getting chain you're the movement associated really much benefit is terms

things. the a retail that into of all in of a us geographic bps, those helped positive all really those by it's little well, XXX had a mix. offset blends Laurel a put And mentioned. as the point mix as Laurel good bit and lot it combination the think you I pieces

So there. lot there a is in pieces of

come. to are of our lot a seeing to think in the that I things respect yet we're investments automation And with

out machines I'm and I going the X fourth year. that's now running. by As that'll pleased really up next we've help our there, automation We to progress. think, said, have, over Maybe Georgia the the in continue facility the but live with to is with play it's now

you last I versus quarter? think and up that's one And had line running

David. right, That's

'XX of there. next margin automation, ability just based I you've move just there's obviously, interested market as on in not One place, based the a to I'm contribute in remaining Interface progress you progression, bring. good on bring, But progression -- So year? much the and gross uncertain. XXXX, maintain a be because with gross so may what what think procurement, through lot that the regard said, thoughts of that's that uncertainty But I'd to guess as your we've you sure to kind initiatives, terms got the drivers idiosyncratic still what do the may could thinking in the your margin of into not to

As we've and is know, ambition, said, XX.X%. you to get to our as back XX%

we'll timing this I be we where thought. year, I think standpoint ahead think from of a

don't that is by yet that to still encouraged I'm through yet. the a So and have think we P&L yet reading lot I deploy

that to I'm continue is the what so we ride to the So But which we've through do market that said, also doing, all to not to we're we're and is you within as market that. drive said just continue we'll share gains us. that and chain and pay the growth control going that progress. And supply can then drive to make will initiatives our market takes everything to this, where -- much going encouraged attention see of to all

feeling good. we're I think So

on wrapping just question the I then me, guess up And SG&A. for

how some guiding guess there you're revenue much that but How will of growth that to with in you really can kind take level? $XX I'm questions inflation maybe But an have ability some cutbacks SG&A. couple level spending question you non-growth, inflation terms I on You're a XXXX. of to offset SG&A going is grow this $XXX of revenue your to in based off is in maybe and with not here. upside left of of increasing guess approach growth extra I'm get million X% much next support SG&A. guessing year you be productivity to spend? million, sure how SG&A the I to just that. offset, before

efficient in focused investments, The investments As make the on SG&A growth. intentional read we believe through very we'll the in to we've thoughtful business, expectations we're anything that XXXX we'll we've development. yet feet in on great paying being that have innovation and of to of more the nora which our all product or is adding dividends. really we we very and that will be to doesn't is to need deliver for back example that on that and touch the the much And diligent see said, customer, been design do And street analyzing how growth ourselves. the the

dance a the you see know, sure that do pay intentional. it's fund as So right? and We things learn We need to be lot we not test whether We'll a really of back. make to growth. or

putting anything and on doesn't really really for customer. the we're then being money to work touch efficient So us that good

are back Laurel call time. closing Hurd, further to There will the over for this questions I at turn CEO remarks. no

great thank entire day. Congratulations I have the team to a call to and for and listening excellent Interface quarter. Well, an the for team want everyone to the thanks

does you. call. today's conclude conference This Thank

disconnect. now may You