TILE - Earnings call transcript Q4 2021

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Christine Needles

Good morning. And welcome to Interface's Conference Call regarding Fourth Quarter and Fiscal Year 2021 Results hosted by Dan Hendrix, Chairman and CEO, and Bruce Hausmann, Vice President and CFO.

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

Forward-looking statements include statements regarding the intent, belief or current expectations of our management team as well as the assumptions on which such statements are based. Any forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from any such statements, including risks and uncertainties associated with the ongoing COVID-19 pandemic and those described in our most recent annual report on Form 10-K filed with the SEC. responsibility forward-looking no assumes company to statements. update The also certain non-GAAP remarks during to call this Management's measures. refer the use of Reconciliations the contained Form their measures with the non-GAAP most release SEC in X-K are today. furnished the comparable measures GAAP explanations and company's and earnings to for www.interface.com. Each of website, those found be can our on

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

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

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

Dan Hendrix

Thank XXXX you, success Interface story thank you Good and the was for joining a morning, us for today. Christine. team.

sales Year-end is both grow. to neutral. were and sign is $XXX we quarter of which increased diversification since with level times make continue XXXX, and are that our year-over-year. year-over-year, continue the XXXX. currency growth. positive million we their carbon-neutral dedication going SG&A double-digit This backlog carbon-negative year-over-year reductions XX% In up million, Fourth and strategy, momentum is and compared customers our chain the and our up through third only significant fourth lowest quarter XXXX. up $XX XX% orders Interface XX%, year-end to net they to As we the X.X products. to continues hard approximately of first inflationary Demand work leverage Americas, with fourth we history into adjusted increased We navigated and orders our to quarter consecutive for for products reduced the carpet market the feel supply In our with to to with acquiring world's made to and company. our net quarter quarter EAAA, Fourth XX%, advance continuing team headwinds, were EBITDA, confident on XXXX grow. a growth impressed and be I par XX% carbon-negative increased to nora.

strides leader Open segmentation through During our year our on Take made including XXX position companies turning carbon-neutral tech. and Major their a advance our new and expanded products industry goals. multiple continue own Significant interface customer's own with our wins the reduce focus and carbon-negative We with our sustainability on We Air we carbon meet values drove a in design Fortune for education. globe, growth We in to Climate Globally, progress customers, XXXX underpinning XXXX, product collection alight great the and our offerings on enhanced and new designed multiple across a Back our very launch diversification successful priorities their as proprietary dealer strategy. are supporting product innovation. LVT the for resilient we offerings. journey, executing after to to strategy, with drivers. line carbon launch, emissions our ongoing to Stargazing,

our sheet designs needs. new we also finally, with have finish expanded catalog weeks, glue last wood Even our care rigid core low Path product a breadth recent to meet into health we quality stone flat free maintenance. style installation high feature and three and And and year. launches nora a rigid with the expanded for vinyl an These launched And segment category of We sector. collection commercial moved LVT in high

product a global company. diversified our solutions class Interface transforming flooring success into in highlights world Our portfolio

of our sales Just for sales. approximately XXX% a few carpet our of carpet years from ago, XX% Today, tile. nearly accounts were

From our in we States, million $XXX we the our sales of non-office for XX% than XX% year, more in progress the the XX% significant and On sales our fourth segmentation sales fourth each transportation half and nora the global of where were XX% of from office year, in we our prior the were full were quarter sales sectors a reached periods. rubber Sniffly for perspective, consolidated market, growth significant of up take segments. with in outside have generated than market. and LVT More segments in basis, all over largest us. care, a XXXX United category. diversified to on of the have were up and outside sales continue quarter diversifying the And XX% full been the [ph] education, has market. multifamily healthcare in as and proven office education in for made acquisition share We compared successful Health

business our of is third in which see a continue market quarter the that office quarter consecutive there. market our sign While is smaller commercial to of Fourth a the segment, rebounding. growth is positive we the office double-digit growth now, was portion XXXX sales

open of believe XX% adapting the lifestyle that that a is also to driven degree, the States. in businesses here are by to remodel. We is floor less approach, with stay plan our an More renovation some work-from-home United and density. investing in upgrades to support business office hybrid

and less us footage companies solutions social adapt their year. our to many design people same as to challenging use to layouts As pre-pandemic during am and I team's distancing, models. sustainability flooring US, of their we achievements Asia partner. a we're And proud Outside they with increased with ideal expect and are to are the partner, largely the office important square markets the turning to work Europe them. across return

shows right evident positioned the have to of our in and mix continue needs. customer’s Interface to we strategy, products demand continued for in and the our we that segment our which we're success meet seeing product results, our range across The was increased and have future. We advance lines

go unique, We us innovation focused up I'll our leadership, design, continued to With the sustainability continue Bruce to it through setting financials. on that, and makes stay to Bruce? what us for over success. turn

Bruce Hausmann

good And everyone. Dan. you, Thank morning,

P&L in which higher increased excludes profit Americas fourth the pricing year-over-year across as quarter was growth, net sales actions sales XX period. the supply quarter driven experienced up significantly inflationary increases million, offset were our $XXX.X on translation job labor Our in to and as are and across geographies Fourth strong by gross net Currency and from offset lines. growth of the fourth teams XX.X% freight company's segments total did to points XX.X% were decreased categories. All costs the region, of We net headwinds of fourth productivity year-on-year fourth pricing with product based UK, XXX our all are Fourth shortages, manufacturing, translation gains. we inputs. currency impact quarter adjusted the Europe. proud increase and raw these year growth the strong EAAA's this being our realized year-over-year, demand inflationary quarter in was an quarter that by points. solid year-over-year XX.X%, selling net basis chain rate fantastic Organic the Europe basis our XXX we X.X% successful sales particularly by Australia, rate from and prior very points, Central and across basis the material Southern year-on-year In outcome view the headwinds quarter and sales in, EAAA, XX.X%. growth sales very demand a margin to with up on

non-GAAP last dollars. year. Fourth $X.XX per quarter structural of million million was quarter area was Interface We year fourth changes also SG&A adjusted exemplifies in adjusted in sales continue continued demonstrated focus and year versus quarter our the million refer last the more prior operating $X.XX XX.X% $XX.X to of quarter XX% the for This improvement release income year. year. in measures. for efficient over fourth $XX.X Fourth EPS basis X to has to reconciliations quarter adjusted been structure the our compared EBITDA $XX.X this XXX versus of diluted our sales company's last in commitment XX% and tightening the with share per our year net cost million SG&A net earnings diluted the being increased points past through Adjusted GAAP expense the a build was $XX.X quarter power fourth share fourth SG&A, of this press which years. this to for progress Please year. in And in versus to

compared in SG&A XXX again, tightening year's at sales basis product X.X% realizing EAAA compared profit in Adjusted was to the $XXX.X gross million reflects net operating greater was gross up dollars. XX.X% and commitment year and XX.X% company's and income freight margin Net profit our last the of year. progress of XXXX. our sales labor, up structure increased or were net due SG&A pricing with $XXX.X driven to consolidated net higher prior the demand million in geographies versus cost per of Adjusted in for improvement, across efficiencies billion, point in XXXX This X.X% and our million for offset was net adjusted XXXX net the full lines. diluted productivity margin $XXX.X in results, year. expense strong diluted million X.X% net XXXX to and costs, from were partially or income $XX.X Americas and increase sales basis it compared was XXX gains. XXXX, share of prior XXXX. XX% Adjusted XX.X%, our to by by $XX.X all income in of Adjusted $X.XX or adjusted sales $X.XX share or per Looking material sales points million was $X.X down an among raw

million, XXXX at million from $XX.X Turning of borrowing $XXX $X.X was million which liquidity $XX The of and in million end versus company values our was million, quarter balance and $XXX.X generated sheet end of and $XXX end inventory to cash cash at the cash XXXX.And was year QX flows. of million the availability. of the inventory comprised of higher operations

XXXX times, $XX total During repaid cash as and adjusted adjusted fourth year debt XXXX, at leverage hand ratio the at Full debt $XXX.X calculated on divided quarter. net the the EBITDA debt and debt, end net by our of we end was was million minus year X.X was or EBITDA. million million the of net $XXX.X of

by expect continue we XXXX, XXXX. debt be versus capital $XX.X net $XX.X expenditures strategy, million approaching XXXX capital Depreciation in of XXXX. we adjusted into and move end amortization were and we XXXX, in to times our allocation EBITDA totaled XXXXs to in and million compared two million disciplined to will $XX.X million the $XX.X As

that global year particularly remember net continued continued due common QX sequentially seasonality. it recovery Looking global at year. economic conditions, the from XXXX, sales Please decrease to first of with is half for combined chain to operating quarter we and and the QX very first income full of in in the supply expect to adjusted disruption,

and of the end XX.X other the of count million to $X.X and of of at million fully expenses anticipating first first $X of are we SG&A sales adjusted adjusted XX% adjusted gross XX%, profit million, expenses of the to For to $XX of quarter of $XXX approximately million interest XXXX, net diluted approximately million, approximately average million, margin quarter share $XXX shares. weighted XXXX

approximately we approximately For XXXX, full net net X% sales that X%, adjusted are of to year expenses approximately be other expenditures rate $XX XX.X% year to million $XX are adjusted expenses and of fiscal XX% gross XX%. the for growth of year full adjusted sales, and of of full to adjusted interest approximately XXXX of of anticipating of million the the XXXX. are approximately effective SG&A an expected XX.X%, margin year-over-year profit Capital for tax

Russia Ukraine exposure and we're in very and Lastly, situation monitoring small, closely. is the our

We Russia. employees have XX in

are million. Our million. Annualized adjusted in annualized approximately in sales Russia assets $X $X million. our approximately Russia Russia net And in operating $X are net is income approximately

sales negligible. net are in Ukraine Our

the remarks. it back know monitor will might needed with While changing effects Russia, situation call Ukraine as and economy, we how to we that, broader play the turn do intend on to closely the ripple I'd adapt Dan to like to situation concluding And the or conditions. out possibly for have not what

Dan Hendrix

again it Bruce. their XXXX strong position. Interface We're and to entered with and set up to I momentum, to increasing in to and arise. With future open on including for Operator? growth our as and We capitalize acknowledge execution opportunities thank will for win you, strong they Thank achievements want questions. up I team XXXX. great demand contributions financial the that,

Operator

And from comes from Instructions] question Nolan line [Operator Joseph Longbow Research. first the your of

Your line open. is

Joseph Nolan

Thanks, MacGregor. congrats David good for having on on me and Nolan quarter. Joe for is This Hi. a

Bruce Hausmann

Thanks.

Joseph Nolan

rubber if was I possible? if versus yeah, by the I - if break could carpet flooring guide you wondering wondering LVT you tile down XXXX just growth was just versus

Bruce Hausmann

product break Hey, Joe. strong gave blended And really number. is more of optimistic. you continue is we're XXXX as a can the into Obviously, we see, to a It's and with Thank don't for lot enter in. of have we strong optimistic in line. we into down you really results momentum XXXX, going as XXXX. really we're Bruce guide Hausmann. the by dialing But that we it This

Dan Hendrix

just We're competitive Joe, about concerned Yeah. data, on that.

Bruce Hausmann

Yeah.

Joseph Nolan

Makes sense. you. Got

port LVT just been And extent just given how in how into quarter, are trending XXXX? what and the the has and on has headwind that just product, growth availability a Okay. to that congestions of and thinking been and then fourth within logistics rubber wondering you

Dan Hendrix

not [ph] standpoint, that class we of Yeah. coming but would didn't same and of of We benign chain a some a issues a we but out have And and a supply chain then had out delays LVT coming some I world had on course, world rubber of supply lot Asia, thing, say with lot. lot had issues, and that. from really have class world we not some, a a class of issues.

Joseph Nolan

I'll all it, Got along. right. Thanks. pass it

Dan Hendrix

you, Thank Joe.

Operator

the from line Kathryn question Research Thompson of next Your from Thompson Group. comes

Your is line open.

Kathryn Thompson

today. questions my Hi. Thank for you taking

unintended price some of disruption supply more an prior experience Based how spikes in can region, right to in sufficient Europe a where now? experience, seen how have current but cost and energy Russia do this consequences general, the seeing event? are you've that the we happening similar are Just your cost on you event that managing Thank and similar increases manage between from or the that and a - in Ukraine. essentially just Domino from [ph] - overcome chain come you you. on follow-up that headwinds And we're really

Bruce Hausmann

Appreciate Kathryn. the you, Thank questions.

you in navigate think of of at can were just around team to QX that well inflation inflation, that we the a freight we're productivity seeing activities as great back as half as and into what also of optimistic those the same. seeing. supply And can things line material chain through we're continuing possibly management environment great to materials activities, raw We're around a the well strong good to you mitigate inflationary energy, little mentioned we are QX, that as As get We job. planning run a But continue [ph] XXXX, QX GP we guide see our continued a into up And course, in we our around - labor relief more on QX line of And in enter have we'll the having bps XX around doing in pricing around we we then that rate as you'll XXXX. everything we'll even on did we're on from were are as year-over-year. we XXXX. GP sort the freight, we raw QX see, shortages. and job and, in that go that a did nora

Dan Hendrix

is Yeah. Kathryn, see lag have I'd typically, direction the But we through we marketplace, so. that say three that month you get a generally, in I'd prices say what to to when there's Bruce to energy the says are. where spikes

Kathryn Thompson

also seen what I as product global you And the like of pandemic more standpoint changes have we, Helpful. the dare Okay. come standpoint? say, ongoing reality, managing a from regional out a and demand from

Dan Hendrix

the to growth LVT growth. that tremendous would say I continues opportunities, double-digit have

healthcare, and office is for really as surprisingly, And Our as and back. business market the education well. rubber carpet we growing see geared that growth good continue the tile a business is comes business to

of seeing So benefits three those. we're from all

Kathryn Thompson

Okay. that, And years leading change competitor you your of was pandemic, to biggest actually into the a that? for polished just concrete for an said you follow-up any in previously, one office couple trends in seen Have space. that

Dan Hendrix

It's you. very LVT polished honest think was category. concrete over its think bit taken little polished and with I a to be [ph] product, niche product, expensive that of I a very has

Kathryn Thompson

right, great. so All Thanks Okay. much.

Operator

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

line is Your open.

Keith Hughes

end that the you for margin low first guide quarter, Question the could particularly Can about quarter? to Thank talk the wide the of a push some end, first quarter. on things is you the high gross of you.

Bruce Hausmann

is of There that number, Keith, a you. as Thank I'm in parts are Bruce. Hey, this you moving appreciate. lot sure can

on play the we should high. some don't costs, at to One to be how that time, relief that. they biggest see of is point freight are we know variables going it's But continuing some around out in

the effective that other obviously we to saw we that, inflationary to is then the sure and - to our a how first raws piece and half we're you - that. of what the that passing into make we is The these on Kathryn in done kind affecting of we're of costs also, that have P&L through just QX. we the lot some the that what are purchase obviously goes continue customers And want that that we seeing can costs on in But we that stays mentioned, environment that as navigate energy is another in.

we to labor also down that Just manufacturing and continue in margin that line. impacts our slows around lastly, we I'll some gross with, - just environment obviously particularly have US, the shortages close us have

Dan Hendrix

we're would US say is But our manufacturing encouraged. better. I getting

Keith Hughes

some revenue second the to growth strong in going across fact in surprised And part inflation from orders, in to addition of good revenue through the that fourth guide, Americas you question, flowing the Sure. guide higher. just quarter. for really revenue in particularly Little a be the Americas, had not year, is the is just that

As you unit out? play - you anticipating think the Or year? given, is you about this during a is do guide to this think how this slowdown going do you've

Bruce Hausmann

know, from Yeah. for you Keith, very for we're happen. go guiding down QX sequentially to and that's it as to to common what exactly revenue QX, it's

Keith Hughes

was year? the to I'm the for referring to year. X% I growth I'm talking year, to X% referring [indiscernible] The the specific. the

Bruce Hausmann

macro see things And be very fantastic. how business which play that you is digits now, robust, growing is our I We're tell a growing healthcare we strong have to the It's way Yeah. a corporate of standpoint. And days, office to a going XXXX our out. education early our of sort is and entering with strong going right. digits. still double will really in backlog, a position All from even double lot right. to continues year business,

of things a All our favor in XXXX. strong those play for

Dan Hendrix

Yeah. I sure. us. it Keith, could would say for That's be conservative,

Keith Hughes

organic A feel units some you year-over-year? price growth the sort and question how of final and growth, us much the give quarter, how Okay. on can that much of was was that the of

Bruce Hausmann

about we so about was of Keith, on P&L, - growth saw X% by Yeah. driven the about in QX, volume. XX% and price the

Keith Hughes

you. All Thank right.

Bruce Hausmann

Thank you.

Dan Hendrix

you, Thank Keith.

Operator

I no for call this to remarks. questions back final at some are turn Hendrix. Mr. time. there you over Dan And further the

Dan Hendrix

to can't not and Well, quarter our first quarter fourth - quarter Yeah. to Thank wait you talk thank listening call. call, I but on quarter for you. our the to first call first you

Operator

for participation. concludes call. today's you Thank your conference This

disconnect.+ now may You

Interface (TILE) 1 Mar 222021 Q4 Earnings call transcript