TILE - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q1 2018 Interface Earning's Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

As a reminder, this conference call is being recorded. I would now like to turn the conference over to Christine Needles, Global Corporate Communications. begin. may you Ma'am,

Christine Needles

CFO. Good quarter welcome Jay XXXX and President and Ashley. call Gould, Interface's regarding CEO; and Vice Hausmann, first results, Bruce morning, you, to and conference President Thank hosted by

are During today's conference information, management's comments forward-looking not business, statements. regarding are historical Interface's call, which

interiors that in associated from during as statements statements, any industry, Forward-looking uncertainties including a to the to with responsibility assumes listeners such results actual on risks A this in statements earnings The of call number cause We involve uncertainties refer the such conditions X-K economic to commercial forward-looking and and as risks could differ well these materially the Item uncertainties listeners with and forward-looking the release filed is SEC and XXXX, discussed revise Form annual Factors reliance Management's direct to most filed or during the to remarks GAAP risks the XX, under that and no been for the non-GAAP this XA made report contained company's the yesterday. call Risk Securities any heading fiscal XX-K Form statements. not cautions measures. measures all company's December of company has in year document. undue reconciliation update the and comparable ended of Exchange the with to place which certain on non-GAAP Commission. measures

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

of your and it. consent on to confirms the broadcasting Your participation taping the call company's

to over the Now, I'd to turn Jay Gould, like CEO. call

Jay D. Gould

and quarter, strategy thanking the solid working I'd teams together to creation like Interface for the marketplace. that with our remain expectations. ensure is globally Good morning. We first our working delivering priorities around value on our focused a again, our begin are world to by very consistent Once in

the down quarter quarter net results. P&L year-over-year. our sales GAAP performance We X.X% So, growth delivered solid right first into of with let's jump first

growth Our LVT core business continues carpet tile to gain driving traction business. our alongside our customers, with

time remember, XXXX. If with line you that last Europe throughout APAC in just launched year first it was we LVT the and Americas, this launches our in had

of market we're Now, growth with our additional full half of behind our in and the the selling us, resilient largest in seeing horizon back year with designs promising innovation on XXXX. a for business

modular beautiful We carpet are the across the exit are and Organic customers growth foreign for positive in floors our are that segments up serve. core our a also spaces the we LVT sales of for and of fluctuations way with delighted we tile year-over-year. retail see using specialty our carpet and the design stores was store, adjust tile system the solid X.X% FLOR that to which as a currency and impact also together business

Turning year-over-year. our orders quarter to orders, first organic were up XX%

revenue anticipated. Our order quarter that with were trends consistent pace and first the we

This will and As year. P&L. growth were expected, quarters we see book customer help a influenced last that by revenue starting negotiated late our and translate to two order to large strategic We're three. a deal now orders the in

we quarter, growth of sales are second the For to X% targeting in XX%. the range net

as was quarter the our well year-over-year, XX.X% to first anticipated, of input higher the down retail. specialty slightly margin FLOR due As gross of prices exiting as

$X.XX. QX to XX% that's XX% EPS a The annual of GAAP line with a, over our run in spend in sales pace year, investments planned is expenses we made versus dollars SG&A increase. of anticipated of our held as That's EPS of this we compared last We was all outcome solid growth. flat growth a related up the With prior planned, increase last year. delivered rate. SG&A a EPS as strategies, year's As percentage versus of our $X.XX the the

stock our continue to In additional $XXX first million allocation, share completed Regarding million of previously execute an we quarter, $XX.X announced we program. against the repurchases. our repurchase capital

the to is the Now, Bruce, turn of of like the quarter. a over the I'd first yours. call full to Bruce call details financial for review

Bruce Hausmann

good and Jay, morning, Thanks, everyone.

organic growth sales foreign organic exiting growth impact As and a FLOR retail. and sales, adjusts reminder, exclude to order specialty organic fluctuations currency the of

Let's first dive quarter into results. XXXX

benefited X.X% First FLOR across LVT. dollars period our growth Interface X% impacts, in local tailwinds. net strong taking currency in exit by as year-over-year. net the based with regional from U.S. last closer specialty Services look the enhanced momentum at in a sales QX the were in up sales year-over-year X.X% to our we was prior-year in compared retail. the momentum by solid X% EMEA U.S. EMEA's grew net broad and sales performance Americas region and year quarter In GAAP Growth Organic were currency, currency partially America. up in QX, of continued Latin in year-over-year, positive XX% over million, business business business up sales $XXX sales offset sales on and was growth were up while also continued in net net And

Asia China and last XX% having with net growth. year, sales were India both double-digit Pacific up compared QX to

XX% we In quarter, basis higher $XX expenses sales. FLOR to growth million, for in SG&A non-office which plan an well first up organic by QX retail, terms period particularly was retail. core exiting was year-over-year, government, as the points of as which prior-year input our XX.X% double-digit decrease office flat on year driven costs were healthcare. of global specialty anticipated gross XX.X% over reflects segmentation, XX over and see the at of the period market and segments same continue margin were last orders saw and increases

income XX.X% and margin XXXX. year. year's of asset income excluding to was charges, compared margin in QX And operating last X.X% operating restructuring in quarter last X.X% of First adjusted impairment QX was

net $X.XX $X.XX XXXX. Our of down to XXXX, the in tax delivered income and QX rate million enacted or XX% $X.XX income or compared due and We per prior effective net million Cuts or to charge, U.S. QX the in net was share, Act adjusted diluted million primarily compared $XX.X of share. XX% to restructuring $XX.X Tax Jobs impairment of per December which per asset share diluted year and was income, diluted excludes to of $X.X XXXX

compared Now, moving sheet with revolving in $X.X was the Depreciation to statement. XXXX for And hand ended amortization in and with and the was cash million of quarter $X.X $XXX $X.X like of last with an compared million our QX of cash the fiscal QX XXXX. million expense compared million million provide $XXX first $XX.X XXXX same first we $XX million now, quarter I'd for on We of balance on period XXXX quarter debt to and million, Interest were capital last liquidity, of call over total had of million $X.X expenditures outlook. year. year available first flow QX under as to credit with facility. Jay the million $X.X update in the our turn back the for And to year. strong

Jay D. Gould

on our are the world's services execution the products of We become agenda most and interior focus to continuing company. valuable strategic to

As we for into close XXXX. move are out our the we first quarter reaffirming quarter, the and outlook second

effective million of organic to this million higher continue fourth to a be XX%. are quarters. and rate of XX.X%, profit SG&A flat in are Based achieve current to and be $X We last million. year, are quarters margin percentage and to that as targeting X% prior seasonality, we XX% an second third of operating year expenses softer income and projected are to projected $X Interest than in and tax to sales the to forecast first growth million gross net other capital $XX expect our XX.X% growth, of historic expenditures operating $XX X% the year, sales, growth strongest to the and on comparables, to income expenses with

the that, open I'll call so questions. with for And

Ashley?

Operator

you. Thank

Thompson Our Research. Kathryn first of question comes from Thompson

line open. Your is

Kathryn Ingram Thompson

Hi. Thank taking for today. my you question

a the the For that initiative through of discussed one-time larger in you is customer commentary, beyond event would a a possibly order that out prepared part the year that? for or large and play this

Jay D. Gould

our during which P&L customer, resets seeing Well, primary third will on that although of second their and quarter, initiative broader behalf part of impact. it's the have stores we're strategic major of certainly

Kathryn Ingram Thompson

And on so with appreciate that. two follow-ups orders, Okay. things on the color that,

the also orders trends? – LVT first growth? order for any that Thanks. few of weeks of quarter then tile terms on make carpet order versus XX% of in First, the up And the color this

Jay D. Gould

the Yes, seen We've Kathryn. quarter. And carpet in of really the second order it's tile balanced that XX-XX between weeks early strength continue here LVT. and

kind So, we the very with now. right of are robustness pleased of demand

Kathryn Ingram Thompson

particularly finally, to And year a more inflation then in help what building $XX raw Why in million quarter? much materials? entire the for still been you on inflation your have you inflation what materials. think little bit season, done doing inflation thoughts your earnings and give the products that in impact specificity Could is pretty And in are and you intact? of a core full cost combat this you for theme has

Jay D. Gould

think that's of because really I impacted competitors. is materials, our some by of Kathryn. any of competitors, of question, that our are inflationary our And of the how than we use we distinguish great less ourselves a it's recycled pressures some from

So, are rate increasing as at same -- products we costs virgin. the are not seeing that recycled input not are

products. long-term our strategy to off of get it's virgin So,

we $XX originally million seeing be the our said, of cost said some we for will are competitors. think the it to than So, primary input year, less That I outlook pressure $X million.

Might that's on be higher feeling of range. We are still the the that. right end

for ourselves productivity the and with that XX.X% our input that offset our inflation our XX.X% initiatives. cost combination protecting of margin to target. the we and still We We achieve can are confident feel pricing gross still

lower the on be of might we that. However, end

right So, now. business we modeling that's how are

Kathryn Ingram Thompson

Thank Okay. much. so you

Jay D. Gould

Kathryn. Thanks,

Operator

from comes Nomura. question Wood next Our Michael of

open. is line Your

Michael Wood

Hi. orders. Good morning. Congratulations on the

about wanted are the rolled at trends question on? terms gross of high LVT. you you of versus any performance profit offerings that and that of more can on later us the in year First in last design update you curious more that in I'm the details you designs, I some in some out your ask had seeing what practical the LVT ones offering, margins earlier beginning to

Jay D. Gould

look designs. Well, Yes, got a our Mike, see because still designs starting early. more at the your the traditional sampling new at you to been revenue, But, to reaction specification the market mean lot into designs, process we designs question. are the higher they our the are simplistic driving encouraging. I for thanks And revenue if very those done more have

second the be through to So, in and that in third P&L the I we'll strong continue Margins think LVT. quarters. see

X We are so still is gross margins, a with that starting on in, solid.

a that as it we some are into to globally continue hedging quarter. roll for we still but margin first markets, moving accretive more competitive are the out bit We little was

Michael Wood

to rollout advance update manufacturing, any are on the great ERP And County you Troup hear. that's of that initiatives do? expecting Okay, some and your to

Jay D. Gould

in the ERP of quarter States floor implementation to scheduled next is the factory down year. So, first the United for our

to planning track, done of So, kind good about there. It's feel get it. on whole you got a year of I

That's We instances instead The in the our we much pretty will us good track; to that are the three years of implementing ultimately right one of them. actually four feel ERP on move down three system. system are over allow granted. LaGrange did Europe, instance initiatives in to next about productivity really or which

still $XX productivity there expecting year. of are million our benefit to We harvest this

Michael Wood

Okay.

Finally, focus year ask this set launches are of to emphasis this about the launch you products of fit when expect product they for new can that your any might where you direction I planning strategic we some or initiatives? year? how in of just And your terms go into your new

Jay D. Gould

question. great Yes,

got that We product NeoCon. exciting to we're launch line really have going at

over Mike, the is, price things, we that few designing across have are we the points. our doing launches, with been of last product One years

we've So, to price which up yard price designs call we from got $XX around a which category you what a $XX can square – is and category yard, square go two, margins. kind value point growth to seeing has at tremendously us acceptable market and still well in received those ourselves. allow categories, lower of engineer we're been in the That nice price

have got appropriately our the system innovation we in think balance I So focused.

Michael Wood

you Thank much. Okay. very

Jay D. Gould

Mike. Thanks,

Operator

next SunTrust. comes question of Our Keith from Hughes

Your open. line is

Keith Hughes

Thank you.

to? comments dig what half does would to you you And wanted saw your compare Just double-digit second growth last in the on strength How year? the that to attribute into of in office. what

Jay D. Gould

have the U.S. particularly since budgets, seen the year, releasing companies in last of summertime their Really we capital

the this Europe the really it's had so, in approach quarter. order almost only think I we growth to want growth, that, U.S., just Keith. And XX% And in I order that's first broad brush renovation in X% don't driving to say

capital released. are being starting renovation this people in in The and the to is we their So, between year year releasing also difference see last Europe earlier budgets are budgets year.

Keith Hughes

Okay.

did how you first raw inflation hurt material dollars? Second question, in quarter much the in

Jay D. Gould

between million. million About $X.X and $X.X

Keith Hughes

for expect end if year? going So, that how would at you every of something the this Is we range view it? range, in be you the quarter that for are to remainder to high see of the

Jay D. Gould

that's about – think roughly, Mike I right. Yes, Keith,

Bruce Hausmann

And for the sort what thinking there thinking a the $XX so to earlier, a year. around you $X we're crystal maybe if for there's year. of Keith, why to range inflation, inflation, total million out the mentioned higher Certainly, now, end our little Jay ball of on of were are remember that noise we for lot million says of that's sort ask

Keith Hughes

For the input cost...

Bruce Hausmann

XX.X% is GP, best we Which say be range. on to lower on -- is probably why when the XX.X% Exactly. guesstimate going ended softer our to the that

Jay D. Gould

second We pretty be good we And quarter. would have the visibility enter that a in range we in as quarter.

improvement the XX XX basis expecting year-over-year basis points to points quarter. I'm So for second

Bruce Hausmann

Yes.

Keith Hughes

pricing? pretty from meaningful second Or – going the year-over-year. back imply the to you half that it? some drive should what's Does year, of for that come see improvement So, the would for

Jay D. Gould

It's and really productivity pricing. of combination a

good We are feeling funnel. productivity really about our

on always a if is to cautious pricing are it hit. to see little We going

use So, And pricing in how quote market adjusting we're dial. we jobs. reading going we a constantly how as bid, on the quote and what's we

Keith Hughes

you. Okay. Thank

Jay D. Gould

Thanks, Keith.

Operator

next our question McCall from of comes Matt Seaport And Global.

is open. line Your

Matt McCall

Good Thanks. everybody. morning,

Jay D. Gould

Matt. morning, Good

Bruce Hausmann

Matt. morning, Good

Matt McCall

front. first the inflation So on maybe

address think derivatives. said that high lot a the you is training of -- what's it is on of is you What is all there of your I it's specific of above? about the PVC, it is with towards it transportation. concern of it you the about, because addressed that just nylon, end range, any input, going And kind there your risks oil there? are Can

Jay D. Gould

are we Well, we because highly our first pass not a customers. all, of influenced along issues some our use as transportation as on as competitors just transportation of to

So costs we directly get -- through those P&L. passed the

cautious cost seen more up because on we being primarily have input tick to are inflation We oil $XX.

not little the hit are cautious but we yet, for are it being half. we So, seeing back a

Matt McCall

Okay.

SG&A. over So maybe jump to

you there, wanted little was know QX than to Just patterns seasonal about a higher we expect expected. the had

your we about you QX what or you You outlook. pattern full-year the anything Is there what QX? reiterated QX, given in your seasonal in should know saw did

Jay D. Gould

of net XX% year. roughly million the sales, seeing for we're gross roughly Well, -- $XXX so

We earlier are making initiatives our the growth year. in investments in

I had we saw little more anticipated demonstrates we filled of did got the bit the doubling filled process It One U.S. good I a we Interface frontline first still amount anticipated. thing the SG&A the of people I quickly. jobs of things talked a we quarter, place That's and were about spend an manager is more jobs actually that because the actually. I on more we sales in than these for quickly than attractive work. to in

be, And so, on the intake, the We've be transformation that our early seem no had to yielding kind I'm we of the actually losses were plan. encouraged results and seem sales with results based order initiatives initiatives regrettable of to the expecting. the

Matt McCall

Okay, all right.

Okay.

but better some have large comes but also gross lock to have Is with pricing referenced, is I that it's long? you situation to accelerators that maybe it the could have going because any there, a getting little what customer, margins for not only is know So, a risk work? because in you large Do sounds like this order gross you margin (XX:XX), there you that to stretch order, there is I'm where a How contract? XX-day at. pressure out the does

Jay D. Gould

to dilutive the pressure Well, yes. with job, overall margin big there It's gross is that some average.

no have is input already raw that risk acquired make inflation it. we required cost on there the However, to all material because

is no that. factor associated be going So, there with risk to

Matt McCall

Okay. Thank you, All right. Jay.

Jay D. Gould

it, Yes. Matt. Appreciate

Operator

of question next from Research. Longbow comes MacGregor And our David

Your open. line is

David S. MacGregor

Good everyone. Congratulations. quarter. morning Good Yes.

Jay D. Gould

thought that's what good like. a going But the these calls Thank thing. I'm to was year guess, on just I you. I reiterating we look because sound boring

David S. MacGregor

LVT Yes. unbundle like you it. the tile? carpet growth Can just X.X% between organic It and sounds

Jay D. Gould

Yes.

it So, on the revenue XX%/XX% side, tile. carpet was about LVT to

Now, I the in that say earlier call XX%/XX%. did were orders

increase dramatic a activity quarter. the part saw the definitely in we of first the So, in order latter

David S. MacGregor

Okay.

you about Can quarters first LVT that had few Just in price you business ticket of I the you – mean, you average jobs to just job, how now of is thinking win does driving pitching into on of could kind the experience and you business LVT guess, where I'm place the this to – the both because average the or that business surfaces. rate provide the to sort of kind talk your close the that surface going help were extra incorporating are into about win increase the into were was your the going that average the investment thesis ability per revenue to I rates, at?

Jay D. Gould

Yes, well...

David S. MacGregor

rate I drops win Your guess.

Jay D. Gould

rate has our win Yes, increased.

are because insight market really think from we gaining And that you. our I'd good market a I share, that's share. say

indications are It's the market soft to what gained half we we've share. we but saw trite, hamburger. I All sale as our with selling jobs surface include like our felt compete add-on fries really as well it's on the of and this, surface. markets, in nice key sound a hard into in like that, hate that getting we about

we offering were both. of supplier the able hard by having so And one surface, to meet a could provide that expectation

And David. out to proven be so, that has true, really hypothesis

David S. MacGregor

talk on be progress power we these raw is versus days, given that Last pricing about that question people's about the perceive the going to to, Could should that for America and pricing how in material Asia all think in with power there. forward? Congratulations the PAC. me how minds Europe regard on inflation seems you you just just and

Jay D. Gould

a pricing we premium is at do there the Well, do to and have market. power no question sell we

price that monitoring gap constantly are We competitors. versus

power than category two U.S. of little particularly we have we but that categories probably the Europe, nicely. have growing bit in pricing growth across our We pricing, have and are three seen a less all

And first exciting about of quarter order there. It is Europe. in the or since X% price has X% with robust environment XX% long the seen the kind across is parts -- again all time the a that growing we seeing one business have points been there. However, of growth real

encouraged we So, year. Europe as the for we full are look at

David S. MacGregor

on all Thank quarters. Congratulations Okay. you.

Jay D. Gould

you Thank much. very

Operator

We of of do have line the Thompson a Kathryn Thompson Research. question from

open. line is Your

Kathryn Ingram Thompson

Thank you.

quick and inflation. follow-up productivity Just a on question gains the

in million inflation for $XX roughly year. So, the

planning in fiscal of in million XXXX? You're $XX terms productivity million to realize or $XX gains

Jay D. Gould

about combination we Well, productivity, and $XX yield anticipating are the to pricing of million.

Kathryn Ingram Thompson

Okay.

and pricing it's productivity? So

Jay D. Gould

Yes.

Kathryn Ingram Thompson

Thank you much. very Okay.

Jay D. Gould

Yes.

You're welcome, Kathryn.

Operator

showing time. the I to further back this closing no to questions call turn at And I'd Jay for am remarks. like

Jay D. Gould

We a quarter. having again the Well, your to the during forward for again. thank year. of the you Thanks first in support look course conversation

Operator

in conference. you does disconnect. program This Ladies all the you and participating a for have today's thank day. conclude Everyone, gentlemen, and may great

Interface (TILE) 26 Apr 182018 Q1 Earnings call transcript