TILE - Earnings call transcript Q4 2018

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Operator

Good morning, my name is James and I will be your conference operator today. At this time, I’d like to welcome everyone to the Interface fourth quarter and fiscal year 2018 earnings call. All lines have been placed on mute to prevent any background noise, and after the speakers’ remarks there will be a question and answer session.

If you’d like to ask a question during this time, simply press star then the number one on your telephone keypad.

If you’d like to withdraw your question, press the pound key. you. Thank Corporate begin with conference. you Communications, Needles your may Christine

Christine Needles

Gould, Interface’s and regarding XXXX Thank and Jay CFO. morning President to Hausman, results, and conference Vice Bruce by year you. Good fiscal welcome call and CEO, and fourth hosted President quarter

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

on section company’s company’s contained the the reconciliation the of www.interface.com. non-GAAP with Relations not The place to of the year any to measures the and annual acquisition statements all each made economic expectations call uncertainties certain results XXXX, to actual involve XXXX this documents. and ended and under can could in that comparable heading, release Securities cause or and directly uncertainties XX-Q company’s X-K Factors commercial the listeners to The and the those quarterly revise a Forward-looking measures in no refer such systems, as risks report of report regarding website, of on risks materially conditions in any number accessed during well discussed such Management’s assumes statements. Exchange from GAAP interiors remarks the which We uncertainties associated direct during X, our cautions XX-K measures to Item as including is July of Commission. forward-looking with Form the responsibility as quarter reliance listeners Form ended with filed the of the statements risks fiscal a and the and in December undue yesterday, as statements, well forward-looking Xa comparable on the differ also for company which call update to industry this most XX, non-GAAP nora Risk the been have and measures. for Investor our SEC GAAP be filed earnings Form

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

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

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

Jay Gould

Thank fourth and quarter joining call. you morning. Good year-end for our results

four have for about strong tell us and XXXX. well it XXXX our great in results first, call: a you this to was objectives Interface for We for year positions XXXX.

an sustainability Secondly, journey. Interface’s to we the plan of share you with update progress on

Thirdly, some next objectives outlook. XXXX about we’ll provide financial about our four how for we’re to frame, lastly information the time years and that share thinking blocks the and we’ll our six over building

range. to margin our year expanding brought growth with to over of EPS accomplish These XX.X%. $X.XX, on year. up allowed versus QX Organic XXXX, X%, Adjusted from end into of gross exceeded million the delivered full-year of adjusted generating we full commitments. managed to within up that last full-year year, XX% global of jump to portfolio XXXX. we target at gross our with sales which projected strategy of range the $XXX landed executing the outlook, We XX% quarter pleased including up expenses say our sales nora. thank our year year. our by anticipated and in us I of in range SG&A adjusted in adjusted XX% margin for results acquisition solid XX.X%, EPS right was top were our and prior I’m Let’s that our full $X.X product nora, Interface in sales another net of delivering want team the our billion

of X%. year strong quarter We net sales finished up million, $XXX sales the year, with and organic fourth of XX% last also versus growth

fourth orders X% the quarter, points last XX.X% was of in were fourth delivered year. returned Adjusted and in quarter creation family XX.X% forward of first years, in XXXX. see the We of results adjusted I’m Atlanta SG&A to was quarter is versus up fourth basis cross-selling sales three over accelerate fourth adjusted sales and fourth XX our expense in year. year had really positive the XXX the into of objectives: versus territory we Our to Also, quarter and margin our gross up organization organic of one, the earnings I’m the fourth our fully nora in team They for looking share integrate $X.XX quarter. strong processes. quarter. per strategy value another recently time selling we generating to global the core pleased to the in to Interface convened and last

XXXX passion selling to a the system advance fuel that Climate the innovation in to dive excited and win seated, call for I XXXX flooring us results. engage and more we have talented mission. the in our sustainability industry. to Take Back, our our deeper was With about Bruce market I’d to the Secondly strategies pipeline activated is product promises that, transformation ensure seller and the to neutral please growth every carbon energy program. team, to Bruce, our our route through like our which was excited be couldn’t turn ahead. I’m our into that marketplace. thirdly were fully over to to help outperform also frontline go

Bruce Hausman

good and everyone. Jay, morning Thanks

nora the date. nora of August As into acquisition XXXX, a completed incorporated that on X, reminder, as our since metrics we we’ve of

SG&A press addition, on to accounting $XX tables purchase in In impacted included million and of GAAP results profit on the Fourth line. release the call. figures to quarter our amortization that nora expenses line, refer of reconciliation nora to $X referenced million please gross recorded this the reconcile non-GAAP transaction

$XX.X recorded restructuring asset further December. restructuring in our we that In I’ll discuss the the of shortly. of plan plan part in as announced addition, fourth charges quarter in impairment detail restructuring and we million

$XXX SG&A sales QX as contributed we prior compared results. are sales, an million, in expectation QX which last year-over-year. global future we QX as adjusted year-over-year. between fourth which improvement gross XXX of $X.X to EMEA was accretion. point local quarter $XX year-over-year in let’s our line. year line the Fourth the $X.XX improvement of balance up Organic of margin $X the we’ll compared up diluted be operating operating share of which organic a revenue by X% expenses at diluted XXX represents share the $XX amortization. or compared strong, basis SG&A, quarter. Adjusted was Pacific adjusted margin organic providing of right and track was detail, tile compared strike million with excludes per spend. last per income Adjusted in million Australia a the quarter recorded income some dollars. Asia the million our net and on income and $X last our Now XX% office, transaction margin investing XX% margin. incredibly net quarter million but growth in currency, up sales in versus QX This for in year, year. more or or and over quarter and in of in prior LVT million strong or sales XX.X% drove in grew productivity Later adjusted growth also to LVT of carpet guidance, carpet of year. EPS last net organic challenging in down and to were XX.X%, quarter our last was a points was this increase $XX in the income of in managing X% XX% nora QX growth with look closer was the $XX million, million million while market nora lapped and corporate in year take sales XX% the included of $X in $XX increase fourth hospitality nora quarter very that optimizing and quarter. net driven million year, is million $X.XX XX.X%, is core net million In $XX period. increased of sales was $X.XX a business, income our Breaking education, compared $XX we segment, million X% last of XX% of $XX year. adjusted Fourth into adjusted in in QX, year-over-year comp sales X% Americas nora call, EBITDA fourth SG&A million double purchase down of in were year In were $XX in accounting X% per was was diluted million the of sales share fourth represents in and adjusted sales Adjusted last the in fourth in million lapping U.S. or driven to was margins year. costs, $X.XX QX digits gross Organic on the with $XX were basis or by compared last to initiatives in $XX share EBITDA diluted our business, per EBITDA income quarter Again, XX% continue or year, headline which gross provide fourth business a to

XXXX. in compared the XXXX $XXX net in Turning X% year nora were year prior results, XX% contributed million full and was in sales margin the the in year. up million organic that $XXX up sales to with was of Gross over - XX% were sales billion $X.X XXXX.

income year-over-year expenses per adjusted million were or adjusted in in of million or was amortization, $XXX share which with XX.X%, XXXX, sales, million $XX consistent was Full Net $X.XX $XXX consistent million versus accounting million net nora $XX in XXXX or year were sales, million $XX operating or income income was our adjusted XX% to XX.X% million This $XX compared adjusted margin Excluding per per adjusted $XX in income million XXXX, SG&A million earnings of $XXX share per up million in $XXX compared or was of again XXXX, of share. and in which income nora XXXX our income adjusted in $X.XX which XX% and SG&A represents with $XXX share $X.XX in XXXX purchase was share per $X.XX or net operating million a adjusted expenses, compared in of XX.X% XXXX. expectations. was expectations. transaction and operating gross increase XXXX. $X.X exclude was expenses, with with

on strong balance hand, million debt, credit Moving million cash $XX the to facility. with $XXX revolving of cash sheet under available and our with flow ended $XXX liquidity of the million we statement, year and

net for million nora was XXXX, see as in can and EBITDA XXXX As includes our we adjusted in income release, million. in only period for press contribution you This the stub from our discussed, owned nora which EBITDA XXXX. adjusted $XX our was $XXX

year X, see XXXX, interest million million nora year. as last nora Interest year million in XXXX adjusted full and with financing in to with acquisition expense the of to in our compared includes can As which was $XXX of These EBITDA, to last end $X if $XXX year. in million for was the adjusted $XX fourth XXXX Depreciation year, $XX last pro $XX amortization XXXX. full January year Net was due year. press increases closed debt. quarter million the EBITDA $XX million were we million had Capital XXXX of expenditures $X forma QX of at the the in $XX you million compared last million compared was $X compared with release, and million. were on our was debt for expense

little going I’m the restructuring talk plan. bit about Now to a

XXXX, in that quarter. million the of we restructuring December of we $XX.X previously The part asset a in as impairment $XX.X and As and announced, charge of other million write-down a of fourth charge and adopted The certain and plan restructuring new asset was recorded manufacturing charges, plan charges. the under-utilized of assets. impaired severance, impairment of million of million information and technology comprised $X.X obsolete, $X.X includes plan

are strategic CRM is IT continue implement is modernize On we system, re-engineer and work to our as this old with closely our includes with our the initiatives and our people Interface strategy, side manufacturing eliminating our XXX variety supply transformation approximately of identified Through this nora need we this the offices chain positions Part related relocation and and a we new also our the in manufacturing platform excellence resulting U.K. located of where a all process, few of and to as in key the we’re align globe of and realignment more around and and areas globally, the functions. consolidation our review on sales obsolete operations. retire CRM to in we side, the specifically a in our reduction roles our keeping

We are plants. not closing any

an back closer are former office We Yorkshire. still at This U.K. relocating office in but our a factory goes had in West customers. we the Shelf to and site sales an some located in get time, to resources

to relocating to streamline those optimize those but to strategy, align this this redeploy operations by office to Birmingham There resources to dollars to our as continue savings essentially and are going London plan, of closer we’re will the closing anticipated and delivering These customers. company’s on generated positions pillars. to gross and We’re we yielding all going from savings these XXXX, SG&A, we’re reinvest strategic in and get income the growth and incremental actions to that investments drive company company’s statement. start of areas hence savings on the the can negligible net immediately our

addition, as in will we reinvest levels levels to In XXXX staffing remain our overall flat essentially growth.

of questions portion on the our XXXX be first topic to half we’d of happy the more to be call. during plan expect this with Q&A take this and We substantially in complete

to like I’d turn Jay. back Now call the to

Jay Gould

Bruce. you, Thank

XX negative impact customer choices, simple we We and and use of even a and a as the warming. ago, years eliminate bringing new question and created carbon practices, small we’ve by mission time, of launched In to XXXX, first. is flooring has made globally. eliminate footprint around supply as emissions carbon industry XXXX, Mission Interface we global aspiration In footprint What become and promise back Back, intend the the work we’ve this wind projects mission, XX gas world energy From our how XX% reduced of of capture sustainability focus it launched we our to to product neutral. carbon forestry, includes for - has X, nearly we’ve make that world, We’ve hard customers, serves carbon and the and Over in differentiation seemed Over amount our offsets January of also point literally sell matter Zero in our XX% we material market. greenhouse impossible the optimism the years nora we of a carbon core on an part to the products movement reduced industrial earth. a and remaining on past management. renewable XX%. Every globally Twenty-five thought to our to to chain a core change to manufacturing from been about by we increased producing on we’ve years, sustainability a a and purchase our voice conversation. this plan a products. and sustainability in more, Take are Climate XXXX, we a

getting program flooring just a and us neutral carbon provides Our great start we’re started.

innovation issues, customers provides that building world can positive are climate products. The embedded our from Our the awakening to go about warming. reality we our no global in to doing harm products. Increasingly, impact, positive of environmental carbon is pipeline talking promise having

and services difference. provide make products will We that a

help life. will We climate create for them fit a

over income we’re we business progressing to margin next plan adjusted In XX.X% going income the XXXX Now expand a end XXXX, I’m six margins XX% I’d XXXX the X% to gross out discuss XX% adjusted by of these to set to excellent like XXXX when from operating and on the talk back gross and of from pleased current financial XXXX at goals to and of where targeting increase by adjusted say to about we take ending how operating to and arrived, first years. on goals, margin that also I progress see making a XX% XX.X%. we’re step with in our four XXXX. margins

Interface business, is and pillared world’s the products we’re company, the our we’ve strategy: all resilient valuable most supply out SG&A a grow and investor our optimize productivity, our through flooring build running laid of deck, our on and execute through business, to tile a do movement. the carpet services vision five company As in underpinnings at sustainability become this changing chain core leading resources, world interior the a

simple and in strategy and the is Our working clear, it’s marketplace. it’s

tile. We have in gain carpet share market been

us. the in moves nora and launch flooring profitable, scalable, that resilient we’re our a highly gross of on has dial strong really the that’s margin, for well With LVT the business building and acquisition, way

has billion today. estimated from couple approximately years to served billion of In expanded fact, market an $X.X $X.X ago our a

are the pleased efficiency our also P&L. effectiveness of the through we supply on We’re delivering global of consider that We’ve spend. SG&A doing driving of industry to part and warming. the reverse our Climate truly very that, as to with the the resource significantly our progress chain On improved and initiatives our Take mission, Back top are a carbon

we the four and XX% where operating years we’ve and margins, XX% EBITDA today the will we be planning over XX% strategic to Given margin, set achieve goals are to gross six margin. forth, next

our attention turn let’s Now XXXX. to

As strategic and our growth, and of agenda X% the we LVT achieve are integrate our from X growth and of carpet in to following XX results total XXXX: on nora continue build sales business, to sales nora, we XX%. to to into organic targeting net including

of be to XX SG&A XXX margin Full other Secondly, adjusted basis and million gross million, and will represents by to three are to XX.X%. year profit this fiscal XX.X%, expansion, like $XX our $X.XX versus to factors. down looks capital will and gross $XX projected and that of be XXX that of which expense capital rate $XX a acquisition. year margin full to $XX to points $X.XX, investment related margin expenses adjusted approximately million tax full be fund delivery is I expenses year interest expenditures which yield initiatives P&L. million quarterly for last attractive EPS additional initiatives funding year, year plus we our other the Capital approximately the expansion, adjusted $XX full XX% solid; is strategy. includes choppy. of to to sales to productivity effective interest includes productivity, of creation however, year to value of forecasted incorporate to fueling the year say by on The QX driven million. nora are very would maintenance anticipated be as be that This are XX XXXX prior nora

First, is expense we $X.XX This held global non-recurring that a a sales one-time per share. cost us in SG&A. summit

$X.XX quarter Secondly, versus nora in the us cost last year.

the full quarters nora. $X.XX For in expect will EPS from two nora $X.XX year, through that so we incremental EPS, four generate an means

to Our full including first versus to will XX%. X%, the to quarter X% and year organic of in our X growth full growth total be year of XX outlook X rate nora

promising. The many shows our really attending James, you analysts Builder’s building Vegas, XXXX for Given looks up I but EPS our in could are of of the momentum, please? growth. know midpoint double-digit blocks questions, line our open Show the Las

Operator

instructions] please, [Operator ahead, comes Thompson Your Research first Thompson the question your line open. from from Kathryn line is Go Group. of

Brian Biros

morning, good for on Hey, to for the Brian taking Wanted this questions. is LVT Thanks Biros year. about my for Kathryn. ask

previous little XXXX, and was think track that think quarter last said million guys $XX a on ahead even you for I I pace. or maybe of guidance were you

Just full maybe would wanted to how for the that shaped be assume color year. it. out where out you see even on hit I appreciated. that came target, exceeded the Any

Jay Gould

exceed did we Yes, it.

that us, know for a but couple a I’ll data so category you give triangulate reporting product can you aren’t probably You lines Brian, that. points,

this that our I $XX $XX million did we call previously LVT think roughly half roughly growth so year, of of that XXXX LVT, said X% and represented million. that organic we’ve in

those a pretty you $XX you up is guess. If of which numbers add a come two million, good neighborhood together, with

Bruce Hausman

to want a so We is - look add extremely confident line now. prospectively really you to LVT kind are for Bruce, business well. about as we right business goal. track doing achieving straight on you mean we the feel $XXX goal this XXXX. to XXXX this that million be just be XXXX, does in think business where can here what a our The by forward to I’d from LVT is as continue Brian, And of we draw Interface, We

Brian Biros

Got you.

XXXX, at next XXXX, would the Is addressed million would guess think XXXX. this have way I in $XXX think would that my question, that line year, for to been straight I target rough $XX be a about million it? be for $XX what that looking million the but

Jay Gould

be and think on it, way good on those we’re I think about well that numbers. to a track That’s to

Brian Biros

really me, the add that’s look two carpet guide you. any carpet, between LVT question, the one that organic out or you Got the XXXX, to between for does guys? similar Last and breaks is that from like could and whether you driving the how LVT same color for for is sales steady? on even What

Bruce Hausman

Brian, It’s and expectation, Hausman. growth our and get half half half going this growth relatively of carpet out is that That’s is about Bruce to half. that we’re our LVT. out about

Brian Biros

Sounds you. good, thank

Operator

Your open. comes Research. from is of line line Longbow the your from next please, ahead, MacGregor Go David question

David MacGregor

provide questions. morning first back guys. come the we have in Can you Q&A to good and you’d then the quarter and you I’ll Yes, investments Could just section? that on some dig the elaboration, in said follow-up some

Jay Gould

Sure.

that there means in selling. are of In drive in around said, in our reason. One markets this so organizations I three structure. we still Interface world, but selling have was the and As China, the we was our into fully together Germany to from really EPS fully first brings the separate delivered integrate family, That brought actually in working things to integrated that so U.S., one $X.XX the that outlook collaborative nora the down year. we together markets processes are quarter most the global scale, people people were so did the we our summit, last sales nora

is call showing the progress make we’re we’re using reason our great and our I’m which driving second which market the selling super on promise is productivity excited through really Interface new The our strategies about Advance, route to selling we way, by how to organization. methodology, that

this in David. the talked You and past, I about

three year step full expect and nora’s of a quarter thing over first $X.XX, operating year. the generate achieve fully nora Again, $X.XX second four, share that’s we’ll incremental so for impacted a expense, $X to that’s interest of the cost driven we income quarters which us in two, combined. back Thirdly--sorry, that year, $X.XX means quarter the in and we quarter over us no nora have makes seasonality. and was off that million

some year overlaps X%. just slower The year core X the the in we’ve in big growth expect year. Full impacting year, third growth got because is last us core we from thing over to

Bruce Hausman

it’s QX just So $X.XX to QX, difference year, just a we in related it’s we’re due nora a that and inside if $X.XX seasonality going QX recap the business. David, made again, seasonality the huge from $X.XX Recall lapping. one-time legacy non-recurring investment that the which summit to global pick quarter, that, - we to I and a QX, of in we’re temporary year then in for had the up back last Interface

We are still quarterly growth the when projecting for perspective of just timing coming solid from this to have core the it’s good in It’s spread in year. the a year.

David MacGregor

Okay. you’ve acceleration talk seeing deceleration? just whether gotten I trends about would general from realize away you’re and orders, but reporting or you

Jay Gould

We actually reporting got our orders, put quarter-- in that not fourth lot we in press so a because pushback of release did

Bruce Hausman

orders end fourth were X%. up the At of quarter, the

Jay Gould

Yes, organic. quarter X%, quarter over up

David MacGregor

percentage Okay, does year would how and ago? of that what your from wins have differ quarter LVT, this a and included

Jay Gould

that say I’ll a starting - grow point. to continues as it Well,

in doors, things is open the One LVT particularly of finding we’re helping really is education. us

expecting have we a into which second we’re to reasons wins seeing we’re of We’re some the as bullish big early head the on year that. more in why one quarter, XXXX, and is education

David MacGregor

expectations talk free you cash your for XXXX? Can about flow Okay.

Bruce Hausman

David, number, as building what Sure. the don’t give but is normally we we we blocks. guidance give a do

up but of and growth, you roughly capex as $XX margin obviously the flow cash Depreciation year, cash and that can item to how that’s the obviously the to the roughly we’re blocks to the around SG&A, and structure, expense, gain. that year investments add the in top take you line $XX in come you’re going $XX that is be of with next the release a income million the amortization statement building million part maintenance that’s million million our business is interest next Jay making $XX that obviously to of--that’s rest - back, and hits will spoke productivity a the generating is that If number. income the item, this net then obviously of then capex non-cash press build and

David MacGregor

and targets you deleveraging the are Okay. about sheet, for balance How XXXX? thinking are there future XXXX and of

Bruce Hausman

balance Yes, in strength of and structure, the I’m the ratio revolver, sure a sheet. and of of of well We good really type our of to to availability be a forma number good about the that, we ability the great On basis, year. invest simultaneously. de-lever the X.X, to a the the pro that is about we down the position continue really by our liquidity business We did leverage delivering you X-ish feel continue optimization capital really, to have, math. around strength our end about feel really around the and as capital in as the good our feel we

David MacGregor

Okay, much, guys. great. Thanks very

Operator

question is from the from line line next Your Instinet. comes ahead, your Go Michael Wood open. please, of Nomura

Ryan Cohen

This is Cohen Ryan Mike. on for

year order a Just quick or over clarification. quarter over The X% organic growth, that was year? quarter

Jay Gould

quarter. over Quarter

Ryan Cohen

perfect. Okay,

Jay Gould

of of fourth Fourth quarter ’XX. over ’XX quarter

Bruce Hausman

growth. year over year so Yes,

Ryan Cohen

order is in January it February? improving say fair you’re and to so trends seeing Then Okay. far

Jay Gould

on They’re yes. track,

Ryan Cohen

quickly on just labor? Okay, maybe price thoughts your XXXX, then what’s in with benzene going on and and cost

Jay Gould

yield is of the combination productivity I what will say Well, about would $XX pricing million. and

those about things three about improvement. so we’re the combination million $XX of net-net of $XX million of anticipating We’re from expecting inflation,

Bruce Hausman

all raws. the all-in that’s number. our benzene, Ryan, And that’s of That’s

We’re looking to--as Jay with offset at going just about going which we’re mentioned, million a and to number, productivity other $XX we’re initiatives means.

Ryan Cohen

you. Thank

Bruce Hausman

pricing. things Yes, like

Operator

on as press star number telephone your like keypad. you’d reminder, the to ask Again question, a one if by followed please

comes Keith next the is Go from open. please, ahead, Hughes SunTrust. from Your question line your line of

Judy

Judy Thank for Keith. this actually is you, in

you question, XXXX? around similar to was it $XX about was cost where input XXXX, to inflation the Just in last on expect million, to follow you million $X for thought up what you

Bruce Hausman

were outcome. Obviously, it you on input able that right I’m offset thought and to initiatives, to was came in Bruce. was which you see track, delighted inflation this would productivity pricing were exactly gross where tell we great in that that cost again we can surprises. Judy, Yes through and no is We a be. on XXXX line. There our margin

Judy

for Okay, the on quarter, to and getting accretion. you nora you XXXX? also productivity, goal for highlighted the ’XX the fourth margin see improvement, the the In what major Can gross ultimate great. in the expand you XX% XX% and drivers

Jay Gould

primary U.S. years actually that in of year big the now project, for which of driver optimization our is three driver a to so savings our Well, year. we doing third project. complete that, manufacturing plan and next we’re is our That’s

Judy

Okay, great. Thank you.

Jay Gould

Judy. Thanks

Operator

no further the to turn call over There at our back questions time. presenters. I are this

Jay Gould

Well, your Thank off we another participation. a your think XXXX, year in excited for for thank you us. we continued Very XXXX, you much. very to it’s how Appreciate at and start investment going good once ended be company. solid the very again into to

Operator

concludes today’s conference This call.

You may now disconnect.

Interface (TILE) 20 Feb 192018 Q4 Earnings call transcript