TILE - Earnings call transcript Q2 2022

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Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Interface, Inc.

Second Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers’ the will question-and-answer be After [Operator you. Instructions] Thank begin Communications, Corporate Needles, your you Christine may conference.

Christine Needles

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

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

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

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

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

the Hurd, to turn Laurel CEO. over Now, I’d like to call

Laurel Hurd

regions way managing another with impressed I morning foreign inflationary continuing in to reflecting the Christine, team are currency and with our everyone. through up and headwinds. to we’re all our We Thank challenging XX% good core ongoing and environment. pressure navigate strong and segments quarter inflationary delivered growth across continue sales a you, be

X,XXX strong of Our cost gains in productivity over inflation basis points pricing mostly offset with along input quarter. execution and help to the

see half position is quarter. and segments. backlog puts XX%. market highlighted second continue quarter, strength our the We strong XX% strong negatively diversification year-to-date, the the up increased the increase in by was gains of XXXX. and during up strategies, a on Orders to in second orders and continue execute year-over-year. for as XX% negative In their us carbon were basis, Globally in was growth in neutral on carbon by quarter both a China. the backlog growing we to X% enter was Americas up key war a in of Russia-Ukraine healthcare XX%, EAAA education products in demand orders lock impacted and downs which XX% our but In back neutral COVID up XX% office we share resulting Corporate our currency

Valley range and participation the carpet at the full about Fresco team in at including results NeoCon. in events Design Week Our course Design where across rubber From products to industry The to design quarter collection, an patio world, excited host in in our tile customer as NeoCon our showcase our demonstrated flooring the LVT, solutions and Milan sales were position the with person response innovation. flooring a of flooring, We design established strong new we [Indiscernible] the interface Clerkenwell space. an American teams inspiring see of portfolio. thrilled and in sustainability was underscore integrated marketing in London, the and commercial leader around increase Week

in collection and NeoCon and the health the for including for Award industry and category leading manufacturing recognition we sustainability succumb category. our escapes products Star wellness receive world leadership. to to our At continue a Rising We

also the likes Beaumont reigns. earned award We metropolis for

the once negative to been and again and innovation sustainability from and backing. Award to our only and recognized scale this among survey tiles Interface in environment a side of the running, in type energy and XX first list the We we Judges our and of flooring leader the we because annual carbon we’re this commercially for as and Choice a Globescan years more. Patagonia, research recognized. for XXXX is decades were companies IKEA carpet development of spot list have the an On including ever Unilever, only esteemed leader to sustainability company achieve the company received this impressive and through industry maintain

quarter like legacy to that turn position our customers business to thank and Bruce? their With performing, way tireless every creates power Our in for fit to quarter are advance this financials. many our our I over I’m results climate to testament strong to also solutions. the and of an placed commitment for sustainability it our to they continued in a trust for Overall, a story, and leader a are team successes our day to deliver our high design. the life. proud of I’ll as that, through the beautiful second would our global our extremely run Bruce us flooring and industry innovative in go efforts

Bruce Hausmann

and good morning Laurel you, Thank everyone.

Americas was XX.X% which EAAA neutral sales At in were currency strength continued translation to net sales up increased excludes XX.X%. sales commercial X.X% sales XX% up Organic XXX currently up growth, net million. the market. impact driven net sales were the were in and Net of by XX.X%. the quarter Second

points year partially offset freight, higher from quarter gross see we our customers. raw as XX.X%, margin a to continue and material Second adjusted costs prior labor XXX by was to higher pricing profit period of decrease the basis

at this in over not pressure of mostly that points level we proud basis gross of haul, long team we’re X,XXX saw margins happy are over While offsetting with we the QX. in the inflationary

pricing to productivity. anticipate pressure of XXXX the and with We to will which offset inflationary continued continue also in half back we work

XX.X changes and to we on XX.X% SG&A the or last power period in making quarter net years, are For the two have structural of XX.X% fruits of or our sales P&L. of Adjusted million seeing the same for the we efforts sales, in XX.X net compared was focused past by million these to expense year. second building SG&A earnings

continued Second versus of up sales growth, adjusted XX.X management. fully operating share diluted quarter million Fully the sales was second year. adjusted supply $X.XX the operating per and our versus million been XX% And SG&A that operators high year mostly is was our to quarter $X.XX up last result great income income offset by This a QX year. XX% has in earnings up XX.X $X.XX adjusted strong in team was $.XX in year. focus XX net X.X% vigilance and share earnings inflation second excellent per chain versus on work last diluted last quarter on

quarters of adjusted increased to million Second EBITDA XX.X% XXXX. second the XX quarter in

cash sheet cash the million used company operations of from balance and half our the first of XXXX. XX.X flows, to Turning in

reminder, generate our a in As at first cash cash. cash the customers the of material seasonality Inventory the Liquidity year use on of comprised to XX% and and primarily in capacity up million XXX of million the borrowing bank half XXX at million to the remains of XXX year-over-year inflation. was quarter of million, raw is revolving. due XX our cash strong end

XXX.X strong. in EBITDA months the hand X.X the and second at as million balance leverage sheet net adjusted adjusted times end ratio total was debt with of quarter remained Our million the divided debt to minus XX last debt by Net of cash our was calculated XXX.X on net EBITDA.

million expenditures structure. to strong of sheet announced May, Capital confidence were X.X the capital in last and our we balance in to authorization. quarter $XXX We the million repurchase X.X second year. a quarter compared new second our have share million in continue In XXXX,

common repurchased During of million Interface the second stock. $X.X quarter, we approximately

business outlook, negatively partially into to the we into in continued position be the demand foreign education including denominated At the the while by rising manufacturing the where we present the economy. are those challenges market, in half geopolitical and backlog back challenges time, sales as there our same U.S. a sales of rates generate commercial Persistent our to to inflation continues FX Turning headwinds related and translate year. we currency outside teams, macroeconomic interest and dollars. when of significant by impact leadership a strong have global U.S. these strong sales net execution we move and being the uncertainty and healthcare, the offset office,

sorted through anticipating expect are and what we to following. about As factors half these back think in we the

million fully FX to the For on X%. inflation. XXX of profit by year-over-year Adjusted XXXX To third of and X sales we approximately interest effective growth quarter XX.X decrease SG&A approximately third sales end third quarter anticipating at of other adjusted rate expenses XX% approximately million. are persistent of our shares. million. count weighted XX.X% of approximately quarter of Adjusted net note, net approximately Adjusted tax margin of XXX gross to the and of million and million average share rate XX expenses approximately the diluted

the average billion XXXX are approximately fiscal XX.X% to approximately of at of XX XX rate capital diluted of shares million the share expenses interest XX%. margin Adjusted other of adjusted the net of million. approximately X.XXX anticipating approximately of end million. and million approximately XXX sales SG&A year full and counts X.X of XX.X Adjusted of tax XX%. to For expenditures we approximately year gross and profit Fully billion expenses adjusted weighted effective

will in the the not second very achieved half as business, net of strong first to of results in sales sales continuing growth While strong half look we year. second we’re half XXXX last net comp see the our left the as solid in

our increases productivity we will to strong value continue initiatives opportunities and our manage inflationary remarks. our price capitalize manufacturing Laurel We foundation the I’d like continue allow call are by leveraging turn on back growth to ongoing will to By And executing engaging to brand, strategy. confident in to and financial selling in also and our headwinds us expertise our facilities. creation for with that, concluding execute

Laurel Hurd

even second everyone you thank on of XXX will share and quarter outstanding with results to days I’m for time focus relatively short the On And with Bruce. this a our gain you, and company, over and who our just very market XXXX. grow for our expertise, enroll design contributed innovation, to continue we after confident Thank sustainability.

spaces our our growth I in to we to sustainability out our the manufacturing I from the including at on a the with critical team tile of the weeks. Germany. product in Troup a with To Netherlands. who sites chain meet commitment deeper into teams It’s rubber tile, Interface. innovation. a global with that understand me to with and that to few in over by the trip each rubber operations visit navigating manufacturing our way. to beautiful us nimbleness the well It’s to was Overall, key closely global I supply has been gain into operations our our have in action. important design I’ve continue their to challenges understanding months, of that a few the spent our are I the us also and core Australia coming to months Nora our to and marketplace. in get carpet capabilities allows County, team of struck a how I innovation amplify our as operations designers time observations work business first continue accelerating our Mannheim, system and deep our our manufacturing to see customers. the in come and based and and also It’s global I in for integrated designs LVT learned latest what work Georgia, leadership. an leaders our few chain supply Let dive across Scherpenzeel and carpet, truly spent their deliver time I’ve and also share to initial did on

Our decades, neutral so the sustainability negative people than pioneer that carbon culminating been in introductions are more and of products. has two in our proud Interface for carbon

the of business, purpose. boundaries in bones feel of with our the push you can sense pride belong to commitment of it Our is everywhere an and incredible sustainability

to are to focus customer our Interface spaces I beautiful redesigning return innovation encouraging More future. and spent there’s me their carbon and spaces. much design, to customers our companies their and time office, and them. the on never in intense for positive Interface sustainability system build objectives to Finally, strong been with leadership Helping more turning and defines witnessed in has world and collaborative around best on teams relationships urgent. our so for designing very the leaders clear with and our that sales class meet It’s to more

will Additionally, actually help we that tailwind see us. some

approved strength. First amount there’s market government spending a into has have significant significant the deployed of where that we but been education not

more us. I’ve and look operational with for strong employer’s potential of the more into have shareholders. to collaboration means many carpet confident it a that means the almost to time XXXX. will that with always to Overall, back back office of working employees believe employers mean the employees you us support forward that, their to you, great spending to give will financial office. enable return with and and get enjoyed a open I’m that in With entice ability work renovation, know discipline also fresh We speaking shift value into which to We been an beautiful our which excellence back them for and their of really hybrid is the up I’ll and recession spaces increased commercial to half grow questions. which may to paint. and Operator? This more continue market, renovated our

Operator

Thompson comes line the question first Research from from Group. Your Instructions] of Thompson Kathryn [Operator

is line Your open.

Unidentified Analyst

actually for full that taking Thank questions. just for morning. there the good year is is the This Hey, Maybe you or impact, is in on guide anything all Kathryn. adjustment, FX Brian update? else my embedded starting on

Bruce Hausmann

Hausmann. very we quarter. think strong well. year perform really with guidance Brian, FX. robust the this very And how that is continues we the we’re Good half on as very biggest the is entering largest activity the change and to backlog. the about the impact thing move in changed second very, Bruce Commercial a full that’s through The business morning,

last the it’s this is really quarter. differential FX So quarter truly biggest versus

Unidentified Analyst

just the the others pretty the from through drop rate have trends kind quarter, near saw case. quarter? I seen the then momentum We’ve exit monthly other figured or companies you was of end. about talk that the accelerated and Can sharp

characterize would So just curious, how you seeing what would you guys are it?

Bruce Hausmann

is had a again. really this Brian, Bruce Hi, June. strong We

to QX. So how moved if business. And of we saw strength the as about quarter we throughout. you business strong no continuing in sort And was deceleration into the see think in really, it the we’re enter

Unidentified Analyst

signs. Encouraging

market just, one any down people higher guys I products. kind and last me the higher projects interest you now, anything’s delayed on impact being if right think, going Any are or scaled for different inflation impact I choosing there, guess rates or hearing. on from of in seeing

Bruce Hausmann

Bruce it’s Hi again. Brian

rising is have say one nor We seen Fed robust. slowdown temporary any remember, not have listening seen you very that now commercial versus rates might six We’ve that we from months we inflationary The go inflationary seen the were changed have remains half again, thing about interest ago I the activity, the wane. be think not we the to inflation pressure and back would seen into here. has

that. guide. headwinds. dealing move premium price to customers a inflationary into built accepting to increases. that half still we’re of So lot as back good news and we with is continuing get our The are into fight our we’re brand able we’re And with price, that’s our the our But

Operator

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

open. is line Your

David MacGregor

when to of ability were some we the the does talking it positive for you? gross What about fourth prices. just margin cost. Yes. Good the brands just now. I look where think terms your in the morning, or are talk you how to Is flip early we question everyone. in it, us in know cost guide I ‘XX, like to continues do of last price give and raise price timing responding premium quarter if sense Bruce of negative about wonder And can you

couple quarters. that, assuming maybe here I’m of the that you it’s speak in not next can please? to So But

Bruce Hausmann

David. Good Yes. morning

that you at We’re closer front. a getting with we’re parity closer lot about pricing on if think inflation, getting getting on

half that continue were in we the continue know, has pricing to the in more hoping not wane back happened. as half and activating persists. back the inflation you we inflation as pricing the Unfortunately, would in to marketplace We activate plan

products are so But freight to And combination price good core increases as on it. we continuing chase well of getting It’s a as surcharges. we’re results. our

our regarding pricing I And half, inflation regarding next to is of move rein inflation for first into one a business. then difference think to three on, waning, going looking a it’s lot things and back as close big on versus we of eye differential inflation parity. in because half of we’re that then to And what that the and in. we’re start that we’re keeping the obviously, which obviously make saw Fed to we on try the of year, to action taking a top see lot the crest,

David MacGregor

growth And then of any assuming specifically end tracking at secondly, on X.X% EAAA the July and I year are speak as basis. this just And incoming orders to how guess, daily of quarter to guidance? segment trigger looking the improvement? be Can and respect you with the your up currency for EAAA how that were orders might a neutral full in the a you what signs

Bruce Hausmann

Thanks, X% it’s it locked with The downs extraordinary Yes. Shanghai example, Bruce. XX that order to And million Again in that China. you rate David. of lock in saw those was over EAAA really the related people. might down in recall, for was saw QX, softness we related was we COVID

go We just affected believe did we certainly rate. deferred. Now that away. order that business it business not was But the believe

in new the strong anticipating in not in our strong with, Construction of the of is orders Asia back to as working The as of We’re That’s billings enter half and through. But sites on are same the the back activity be commercial are products. as job delays been backlog. that thing just a news. The that’s that And the we Europe for more the fair we’ve exceeded well remains strong half EAAA. delay dealing there which that robust. is can quarter. one we activity installation

region. We’re optimistic EAAA very about our

David MacGregor

Bruce. along. Good. I’ll pass much it very Thanks

Operator

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

open. is Your line

Keith Hughes

have assuming pretty Are the or Question price coming those Are heard in would factoring implied in margin gross more the the in second fourth saying are on low. released margin. earlier, impact what you the be you you in does particularly I and guidance gross quarter? increases? half

Bruce Hausmann

is Bruce. Keith, Hi this

in price increases. We factoring additional are

factoring we you’re in can’t get persistent for this the probably don’t inflation. the why mean back also reason see We’re we pre-COVID haul, long We see, don’t way, to what thinking by does the levels. any

that and of the at And works what the you it obviously high price, year work, materials through, eventually the We’re just very becomes at to flushes high. finished inflation process, a process goods P&L. working way is a buy XX raw working a we’re then sort through into goes this through

that seen inflation is haven’t you’re down. And not go seen we So cycle. what have we seeing

we’re what to customers. And so And we’re environment the through we’re doing is that inflationary price through to to revenue. continuing cycle finished raw to goods to our continuing from and materials work natural

Keith Hughes

assuming you in today? to are you more so relation And have we’re input saying what

Bruce Hausmann

Yes, we’re assuming that.

going assuming half. to at first saw year-over-year we on We’re the be similar saying we’re they’re what to rate increases

Keith Hughes

And rates. the on just back building order

the You in reasons. talked outlook China the And Europe? what’s year, about the being Europe? a for quarter second the the the of weakening there, given obvious in for half Or all is problem situation

Bruce Hausmann

way Europe currency, high single The think digits. is mid for we in plus digits specifically local single about should see we numbers some that the

mid and So we’re is digits plus FX P&L that parity. Euro due about pardon you to to it’ll single the inflation sorry, U.S. know, on probably dollar the the seeing, around inflation. be not as haircut I’m a X% due me

translate right have now. X% seeing Euro we we’re those, haircut it’s when that you a in based sales the U.S. so dollars, about And

Europe. FX the strong quarter dealing is to in What activity robust. So related a obviously commercial Again, headwinds. with is good anticipating because we’re we’re

Operator

comments. And no final turn to closing Hurd I’ll over some for questions back the further are this Laurel at call there time.

Laurel Hurd

thanking as world around all your efforts. and their with working for forward ongoing to to customers Great. Thanks, forward. of all the as close of by support, just you well everyone. our you continued want associates look for going interface Thank our I

Operator

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

You may now disconnect.

Interface (TILE) 5 Aug 222022 Q2 Earnings call transcript