TILE - Earnings call transcript Q3 2021

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Operator

Good day and thank you for standing by. Welcome to the Q3 2021 Interface, Inc. Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Christine Needles, Corporate Communications. Please go ahead.

Christine Needles

CFO. to by call CEO Dan Hausmann, President welcome XXXX third and and Vice hosted results, Hendrix, and morning Interface’s regarding conference quarter Bruce Good Chairman and

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

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

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

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

Hendrix, to Chairman turn to like the I Now, over call Dan and CEO. would

Dan Hendrix

momentum we on our to year-over-year, the joining were XX% and I We should morning we a orders a regions. a to a up which we Interface companies continue in facilities. the for of saw year-over-year in and increase Backlog recovery The of quarter results delivered XX% third manufacturing is Interface, the in with for last XX% the impressed across record positive delivering manage to strong continue and most Despite their of increase Building line XX% our well debt we to activities Thank We of you, dedication million continue issues. fill by during increase in this including through for was compared leverage from demand, saw $XX quarter, XX% team a sales Like of pre-pandemic customer to in us. in commitment ago, cash EAAA. the quarter Good net customer year bode you generated quarter ratios. high signs customers. up strong were million commercial Americas thank operating other demand for working and jobs be fourth repaid the some to facing Christine. challenging and as reach U.S. $XX supply most pickup chain quarter. our we industry-wide headwinds, are to open have which the

facing from experiencing and material are and are inflation We disruption freight COVID-XX. we still raw

our manufacturing increases in partially are been environment, and targeted margins these lower we keep operating facilities were demand with offsetting this To to than pass-through impacts quarter. As freight up we the with a gross it’s result, our to respond order surcharges. price challenging difficult profit in and

increases and is acting can, price raw a take as effect. lag there but freight as when labor inflation we and are We between quickly material,

and our we manufacturing business continue the announcement times. costs in productivity close across and right-size the with control our global are lowering the I to through Thailand of to efforts recent am proud by to these footprint. our as manufacturing we XXXX, of work Additionally, end team’s increasing plant SG&A challenging

out in K-XX verticals, market activity schools aid improvements infrastructure that in funds continues market. also product to appreciate for Interface increase leadership with relief us. Every be seeing the strong XXXX U.S. pandemic are sustainability. carbon carbon also institutions educational education and foreign position program. Interface’s in investing These government’s significant our is a the from door, The market or U.S. either we are negative. to across goes healthcare Turning the neutral

We are rubber, the mix that with positioned tile carpet right LVT across to in market. range of portfolio suite a well and needs

of to collaborative office We Now, workspaces. saw the let’s in flexible renovating employees who their anticipation about as back we talk of office growth are create market. more another customers have their quarter coming

this Change renovation work of good commercial and purchases. work activity All drives business. flooring is renovation for drives

making their own needs. goals, and more us companies uniquely and and private their public sustainability positions carbon which reduction more are serve Additionally, to

dealer is promise. showing also strategy Our

might that more closely we You dealer on to quarters initiative focus a existing few and ago recall new launched relationships. this

partners, net company. promoter heading with and be for customer customers Air incredibly our scores this popular our the of direction Our with base segment our our All-in, right are end-use dealer products in Open to continue is win-win this a our and them.

replacing about Bio. the journey. bitumen area when would the was is journey. bitumen recycled for Holland want for This another truck we a on take-back that this a And process. with consummate seeing our up so using petroleum-based for pleased of step European in our for and because in There Globally, Europe, very we incredible you then are tiles all share need. pulled last to from are This planet, people particularly manufacturing in manufacturing celebration on it our the of important thank win like truck forward materials means our it’s plant There bitumen and many ever backing was this transitioned our operations. and European team new news away, fillers. climate our we knew and so far in customers, are carpet drove petroleum-based the with this thank carpet to progress last climate during European we we milestone we I bitumen our our I’d take-back we quarter, last of to bio-based now, our in tile proud And with business. We manufacture some are the CQuest to very stop

our Additionally, X as lead emissions Interface continues company first validated our further greenhouse X and Interface validation reduction by the science XXXX. to pack reduce in Interface when it commit third-party XXXX now gas sustainability. of based. receive targets goal science-based These the to has targets company become becoming foreign with to alignment commitment carbon-negative of our X, a Scope to comes to our

the innovation I the financial XXXX strengthens Bruce and third continues focus With drive and for will our position over industry Our foundation sustainability leadership for to our in future relentless quarter that, growth. on it design, turn recap. Bruce? to

Bruce Hausmann

morning good and Dan you, Thank everyone.

prior the EAAA, foreign across Europe, all sales fluctuations $XXX.X totaled recovering China, sales commercial with a up growth, were orders the Southeast by impact COVID increases XX% regions million Currency against lockdowns. were new up in lines. EAAA’s market. quarter as U.S. XX.X%, year-over-year. driven were which up net $X.X net Organic Asia due up markets of and certain an relatively flat impact dollar. year-over-year in America however, on pent-up and faced both translation, various strongly in EAAA’s from the as waves the year positive currencies resulting Third currency period, XX% Orders, had saw of like XX.X%. approximately strengthening were of India XX.X% release Eastern third to government orders million, of up in Americas of sales Sales In a was product quarter excludes demand up

the same Third for period in during last million XX.X%, a quarter to last a in the global year. had quarter chain of adjusted quarter same company the sales, percentage almost year. this quarter. outcome company adjusted compared crisis XX.X% solid margin to the global gross compared profit $XX.X in the through SG&A navigate our SG&A was quarter as And was other and expense supply third $XX.X face million in which of every was net the XX.X% was to Adjusted

company’s we attention paying As tighten SG&A. continuing to efficiencies you gaining note, the will structure we cost to are our are particular in and greater up

operating quarter million Third $XX.X the adjusted up last X.X% year. third in quarter million, was to compared income $XX.X

$X.XX adjusted the quarter. Third adjusted million million $XX.X quarter EBITDA net $XX for income diluted share XXXX was was and or per

in quarter, a million manufacturing our the our During we with announcement, charge restructuring prior closing third of facility line Thailand. related to $X.X recorded in

facility manufacturing approximately and to increased $X.X result this efficiency of annualized We complexity decreased manufacturing in our of project plus expect savings and million, is XXXX in of expected stop the footprint. QX to at global

the of flows, million and our $XX company end million, was $XX.X cash quarter the borrowing of from cash cash balance $XXX operations Liquidity third year-to-date. in the comprised $XX.X million we sheet $XX $XX our we availability. year-over-year was and X.X% on of meeting to million and million paid focus of down million generated we the Inventory customer focused and or Turning working million de-levering, third while quarter of at $XXX the $X debt managing be million of in to continue year-to-date. paid up demand. with Consistent capital on down quarter, as

to with last metric very leverage of as is third brings X.Xx EBITDA or adjusted pleased for XX achieving calculated We be of track debt This In pre-pandemic a $XXX.X net adjusted divided us reduction goals. the the ratio milestone total that the minus debt significant back months quarter. million million was of on a cash were it $XXX.X net are as at levels. to hand debt by Net our on end debt EBITDA.

third XXXX million quarter expenditures non-cash interest our was that rate XXXX Capital period. to in quarter the a discontinued were XXXX. in expense in million to year million Third swaps mentioned $XX.X in million the and $X.X compared that to $X.X compares the including interest were $X.X $X.X of million, charge previously related prior quarter third

an the with persist be that as their of the of fourth more expect XXXX, combined more of significant level a into and and Looking chain and COVID-XX global believe supply environment at to people will remainder disruption quarter global the economic XXXX we XXXX. throughout we receive recovery ongoing likely inflationary vaccinations

$XXX XX.X% other end year quarter back tax of The anticipated SG&A situation. to that, And percentage of with interest we net at diluted look $XXX quarter I’d We’re approximately XX.X and XXXX, fourth XXXX million, as the to adjusted $XX expense for the the adjusted to and Dan year quarter XX% continually $XXX XX.X%, be full $XXX of remarks. rate sales Fully capital to to year it $XX of concluding the to for is fourth was of expense count expenditures anticipating full for for full gross profit monitoring like million, are million in effective And share in million the we of shares. the approximately third million million. the the adjusted approximately to approximately finish hand for the XXXX. million year full

Dan Hendrix

entire to Thank for Interface with that was one and again quarter significant team Bruce. strong want you, thank strong, I filled the a milestones.

chain leadership our like As see, we in in despite strengthen we the see in future. up supply healthcare, hope through, to is unique vertical of positive Operator? momentum not the and we continue in for remain by open And increasing are the segments broadening everyone business and, the very navigate I’ll leading which that The about questions. issues to to optimistic our design course, lines, that, encouraging. it Interface, position With company leading can global sustainability. product education

Operator

[Operator question TRG. Kathryn comes of Instructions] Thompson from Your first

Brian Biros

Thank Hey, Kathryn. for start, you for and good price on how This morning. guess can to I in my the the is across touch actually trended two taking questions. segments Biros volume on Brian quarter? you

Bruce Hausmann

activity. morning. Hausmann. pricing line A was the saw that top Brian. Bruce more volume of is you This Good the volume-based. had We on Sure, some lot

in remember more rest the in and that we’re might We QX, activity to – pricing some we and more did going did of in pricing we activity we activity this do You of will and some more did QX QX. year. pricing

on seeing products pricing to adding we’re as well that Some of in the on the line. our that’s surcharges offset we’re some freight as costs freight coming increased

Brian Biros

I the sales Maybe then flat. in guess, were EAAA segment,

Any that down. so assume that those two magnitude of like I could up, was you So pricing share? implies volume

Bruce Hausmann

Asia most in attributable waves was That was to saw most XX% – accept due EAAA was in – we Southeast or we COVID new orders what other – the in India. That had that billings mostly hand, the ship. materials couldn’t to we of the China, were reason had first inventory ready particular, customer COVID Eastern bring delayed could that in flooring issues needing EAAA. was due bring in saw Yes. the to orders Europe, that were product either job the site lockdown we And the to supply need was And because job to before chain in and it in up just the – the site flat was saw had why were delayed they we products. they the

ease. job thing So was actually, as soon strong those EAAA ship just very COVID lockdowns just sites will had region quarters. and all a the the those reopen it’s between as up orders and on really timing balance, quarter – those a It

Brian Biros

those Got Or it. they Has how that has that continued lockdowns, trended QX? – into sequentially? have

Bruce Hausmann

mean I’m case had increased sure for had increased you’ve I Germany Russia, seen in has example, Yes. counts the case counts. newspaper, and

And so ship had are for borders just product example, any couldn’t wave is into their different in there We entirely. there Malaysia QX, Malaysia. – closed

flows And so it by and week. just ebbs goes and it week

the I think We we’re put can the matter to is it’s to can that good customer on just open and down getting know actually we’re and share get a getting we the the of business. we’re orders, news taking job the product when the the floor. sites

Brian Biros

year. would bigger a thinking guess, last the maybe quarter characterize maybe picture, and biggest you Got how change I I How to quarter currently, kind out bottlenecks it. guess, this of into sequentially into play next then this year? from next And biggest the little

Bruce Hausmann

mean thing that’s we’re saw the we’re we’re QX. – the think thinking certainly our assertive I price thinking on and as to Yes. passing mind very we because with that about around to we’re to. our we’re I price seeing see we next have costs And being going And inflation increases increases. in biggest inflationary customers for that about year

about the the heard of week it’s QX. that guide. saw some that’s We Fed don’t short-term we we going be this I’m will first in some well. QX, know that stuff certainly that QX, see normalize I next XXXX, question from see year should sure that as you think in of inflation in of timing. the you as but And QX the our half to or talk of if may And

And navigating through so just we’re it.

ease and example, for into we we now sure We’re are so like, change things the cost later in that things surcharges can next can if year that that making freight do and freight

Dan Hendrix

Yes.

biggest fighting labor, the is the in of United States. One things actually, that we’re

trying are of in a facility. We our to hire people lot La Grange

Brian Biros

is question ‘XX labor. guess, my [indiscernible] at think I gets just or that into better Yes, just... And do any all you

Dan Hendrix

Yes.

hire to people. starting We’re

people La We’re Grange. to trying XXX hire in

Brian Biros

on. Good pass will luck. it I Thanks.

Dan Hendrix

Thanks.

Bruce Hausmann

Brian. Thanks,

Operator

from comes question Truist. the next Your Keith of line Hughes of

Keith Hughes

terms growth? on question think quarter their of out A regions contribution fourth revenue you you. how Thank the between break going guidance, to that’s to do the two in

Bruce Hausmann

Yes.

I Keith. evenly be fairly think it mixed, will

in next well to year. I positioned think both regions frankly, are and strong really the growth growth have into strong QX

Dan Hendrix

Yes.

We record in have both backlog regions, actually. highs

Bruce Hausmann

True.

Keith Hughes

chain some and And talking about raw early the been next year, have at about ‘XX? think others continue of material you supply of inflation parts early to that’s Do the least you talking disruption. going that into

Dan Hendrix

I significantly, the peaks peaks raw that, I’m as have I’m think Container that from biggest well. I’m hoping know. our actually you and up quarter. is yarn gone input. material hoping as freight in peaks charges – that hoping first

Keith Hughes

carbon? to had you issues across obviously. make the We’ve and ingredients of in main materials cost, had some world, Have the inflation any getting

Bruce Hausmann

our few U.S. that labor has on where through manufacturing The that that shout really our open Keith, get The mentioned to great. quite no that raw questions, this had is production which to fill we’ve they really would they they big looking products, earlier sure we we our We bottleneck, been issues our not in create fortunate we’d increase like short navigate materials draws capacity. out the having is been and really Brian have and the in to operators, no. due have ahead that to making been just And answer we need. facilities that a to did a to them jobs regard.

Keith Hughes

in off LVT LVT, lot you Did port being miss on not to Okay. obviously. – congestion get quarter due ship? sales and to sale able the of Final it the question a

Dan Hendrix

chain. pretty we and going been good No, had we a very inventory have supply fortunate position into it, our on

Bruce Hausmann

Yes. have That’s demand. sure to have been that amount we making striking the invest the of we on make a to customer great in where capital example hand right product balance meet sure working of enough we

Keith Hughes

Okay. Thank you.

Operator

of comes question Samuel next from Darkatsh Your R&J.

Samuel Darkatsh

Bruce. morning. How Good you? Dan, Hey are

Dan Hendrix

Hi Sam.

Bruce Hausmann

Good.

Samuel Darkatsh

today, and what price to questions. cost turn labor XQ that your that pricing actions do as A you cost on get a when your price XQ, see you neutrality? neutral announced you Is it timing? have What’s you? constraints – One, couple inputs do already based and when the of when will you question, clarification have imagine expect

Dan Hendrix

My sense is QX.

We see at of of are some chasing that In can we it. input QX, am material actually price increases peaking flattening raw least should costs. as material raw they I said. hoping if And I QX, we freight get are than kind in just

Samuel Darkatsh

be effect And there What over year much then year raising ‘XX a rollover that Got is been on progresses. pricing you prices growth you be ‘XX what to how quantify have since would sales favorable get – the Bruce, you pricing the going for sales next would rollover. sales, as it. can Obviously, from rollover?

Bruce Hausmann

now are to pricing question, we meaningful the interesting doing should the through be in an We that through because Sam, flow. back next flow It activity half. AOP should As of our around are year. and how of working some will much get we pricing right here good pretty that all

Dan Hendrix

on to price people Yes. inflationary, like when have we Sam, increases down actually usually, tend that. go market this

And line because changing the mix. are actually the don’t see in so growth you they the top really

what hard that’s So, really that would to quantify be.

Samuel Darkatsh

normal, occurring wrong? degradation at now, or Do you backdrop no activity or maybe that am or at least would anticipate demand inelastic though, than somewhat have that you I think I least mix more a backdrop

Dan Hendrix

is we are price, same lot the that. we lower a of but at margin growth introduced that’s lower dealer price. Open a seeing And which Well, in Air, Yes. program product

year of kind price increase to what to hard really sales out will next it’s that. So, due figure impact

Samuel Darkatsh

with last and question, bearing for me. Got it. My thanks

you cut expectations. bit based year and like XQ next that that a looks of assume terms more maybe what – So, where came realistic XQ structural SG&A from? your specific versus discretionary kind of of Can in and we digit in much How SG&A growth? original be mid-single versus was the footprint a if

Bruce Hausmann

are are the look And company globally. take and each direct – around or or spans layers, for of a cost example, the at looking we at work Sam, of manager to just reports the hard her Yes. that a continuing been the to of structure mix has we in doing Director him being we and meet have is it’s and number lot done also that regionally most while we SG&A. looking so that globally right we or or the sure customer we at demands that get leveraging work whether where to done, And make corporate. locally efficient the trying our can also be

just are just emphasize. I – that area this We want is an to

We at and management it SG&A bringing really strides work as the of focus that proud be real have down of a are us. for great we team revenue and a percentage great to continues done our

our so – able sort that Regarding for can making permanent will metrics, think I of through. rates be of reductions year, will think GP the growth, revenue are cost guidance now, our we next provide the reductions flow to some that run you when SG&A that lot QX guide our we and earnings, our frankly, tax for our we more the structure are rates. But will and we all in release quite about of we around to a

Dan Hendrix

Yes.

the XX%. on of Sam things that really getting to we is One it are focused

Samuel Darkatsh

over a million think rate is near do $XX the workable you the intermediate-term? to So, number run

Bruce Hausmann

Yes.

of revenue. We are as SG&A on a focused percentage more

to, over XX to next it it, we XX% the focused on are getting so. call months months, XX between time, So, down

Dan Hendrix

Or lower.

Samuel Darkatsh

you. you, both. Thank Thank

Operator

MacGregor comes Longbow from question David next Research. Your of

David MacGregor

versus but yarn I got I percentage know have your by could is remind to everyone. remind you you morning us us you just your the Good of a if wonder What fiber, start asking fiber? high virgin just recycled Yes. could costs. percentage on very I proportions. recycled on costs, fiber off

Dan Hendrix

about half, David. Yes, it’s

David MacGregor

Okay. And recycled costs? fiber with what’s happening

Dan Hendrix

A is going That up lot for than less sure. virgin less.

David MacGregor

Yes.

stable fairly yet? it not So, inflation that it hit relatively fair characterize it to or maybe be would just – is as

Dan Hendrix

and Well, inflation as well manufacturing is are energy, and now in if Europe. yarn labor in freight actually you

not. the the but process pretty So, are input were costs costs stable,

David MacGregor

on a Maybe the – couple Okay. your you of of qualitative sort made in remarks. prepared just points

about that’s there I unique Are the European on Congratulations you differentiated in you are in on milestone that sense, product? the Bio that competitors and big or to CQuest talked that. any on are industry. left You that? moved have of product. a know a your bitumen also bio-backed the behind How

Dan Hendrix

in Tarkett are as unique that. product say that a unique of very would has are that. we That’s in well one We competitors biggest bio-based in our but I Europe. there, very

Bruce Hausmann

is the a unique the of that is product. out things every bio-based goes door product One now that

the door in every away tile on accomplishment. is goes huge has manufacturing carpet gone that bitumen our So, out plant, entirely which the a

Dan Hendrix

place. Tarkett is not And that at

David MacGregor

into where benefit? market the market spec is or it pretty Is – Right. out just now? that writing, they you have is your that, the front you in in Are product really specking think and future will hard this are leaning something

Dan Hendrix

It’s in up to specs United show States. starting particularly in the

David MacGregor

are the that States, on in dealers? of of this? fact office K-XX, seeing in Is helping you Is you just With to market, you it just that a growth in the maybe drivers about being the United as there in progress. initiative distribution dealer adding I maybe share the always help that are more But talked here us what of strength sort number could Congratulations can growth healthcare. understand have market behind an dealer that’s thought you market regard the are your line just but there. you

Dan Hendrix

Yes. It’s simple, pretty David.

on the We dealer. are focused

now by that are lot like And the are not customer of the And We market. having a like a very are way. segmented and they enemy. we acting are in an are they dealers success

David MacGregor

sense? what In

Dan Hendrix

on focus They the market. healthcare, education office No. and

David MacGregor

Right.

on So, it is this largely at market point? still office

Dan Hendrix

our half business. That’s

David MacGregor

Within dealer the channel?

Dan Hendrix

installed everybody product – it. and Dealers dealers segmented. installed No, it’s has

David MacGregor

much here be versus spec numbers demand I on the in would you offline – how you growth about seeing your recovery related on dealer commercial you or order then guess you occurring. with numbers talked that. I the follow-up Okay. backlog market recovery just in cited And business? earlier Maybe market the are can the the to of about growth

Dan Hendrix

of business and know It’s on business actually focused quantify XX% that, really difficult. to would discretionary the dealer just the hard winning are market. – dealer. that’s through are quantify But be because of to We we we goes out our the it very dealer,

David MacGregor

thanks much. Gentlemen, Alright. very Okay.

Dan Hendrix

Thanks.

Operator

there remarks. Hendrix I for will At no closing conference this are time, now Dan turn questions. further to the over

Dan Hendrix

you I Well, our Go for say to quarter. going call. And just Braves. am you listening thank to at to next Talk

Operator

This call. concludes conference today’s

You may now disconnect.

Interface (TILE) 5 Nov 212021 Q3 Earnings call transcript