Earnings call transcript Q2 2023

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Operator

Hello, and welcome to the Q2 2023 Interface, Inc. Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

the to turn Needles. now will call Christine over I Please go ahead. ahead. go please Christine, Difficulty] technical the apologies [Technical for difficulties. My will I now turn to over Christine the Needles. conference ahead. go Please

Christine Needles

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

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

as management the the intent, on belief recent current team, could include the as are update any statements actual risks our forward-looking well of described assumes including The future statements annual statements and to differ Form statements most regarding such a company performance Forward-looking to uncertainties forward-looking cause XX-K filed and are assumptions risks guarantees expectations report which or Any such uncertainties SEC. no on involve of with statements, based. of statements. materially from responsibility number and that our results not in

also for Management's explanations of and furnished most SEC and remarks measures earnings during this the contained comparable GAAP company's to with refer to non-GAAP in X-K measures the today. release non-GAAP use the are Reconciliations their Form measures. certain the call

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

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

Now over I Laurel turn will the call to CEO. Hurd,

Laurel Hurd

pleased as in we our a up and customer morning, QX's globe. year execution that anticipated steady demand delivering solid with we that we're net saw to ongoing the given strong Currency-neutral strong for year-over-year quarter. throughout was prior thank sales macro results sales the to challenges, X% and down and XX%. Overall, with around comp a Christine, want guidance were compared the good was It net Interface you, Once everyone. on the I again, Thank expectations quarter. team line

from dynamics We and on the of market grown office unpredictable billings corporate months, XX strategy segment schools we help primary Plan in new over critical our the XX% even our to billion well has refurbishment executing funds into diversification $XXX the to legislation in to insulate global US continue our Education are further tap construction strengthen Rescue us remaining projects as American and and anticipate trend geographies. last tackle segment. this and across

bit footprint XX% have sustainability in flooring in We was carbon up product support several in spot the performance, projects Education our growth and of is driving stronger many services, goals to Germany. the education, administration especially on sales more segment so UK activity during because larger and segment, seasonally customers and sales product higher high-quality refurbishment bright we'll our a markets, The achieve saw school the out low warranties. on a this for increased in reputation top them. global quarter education in and year. and US, seek breadth quarter. And our in summer break, year-over-year invested including differentiated help their We're X% of this in us it QX, the our last across and flooring, own provide detail maintenance for overall of of

Germany. both students aesthetic carpet portfolio XX leverage such product full effectively environment and through high-traffic of K both use and and geographies of for our as well as the areas In learning up this key and segment tear for and wear with We nora positive tile teachers. LVT Ed, products design rubber stand Higher as broad to in provide in our

invested to occurs, the design that visitors interior continues digital attendance levels. of rebuild products interface had in our as floor as capabilities software also and design of event QX design allows customer our improve more experience to the NeoCon, We've share of we year history the lower and customers plate biggest showroom largest attendance to new entire enhanced the their where our in true to is is when need pre-Covid specify our studio and different to impact more in customers. projects. flooring carbon differentiator This carbon us a showcase second decisions with

And tile At Lost including Gradience of launched collection new LVT. driving course, products. Woven and growth new we we Silk are with carpet and designs, focused on Palms NeoCon, Complex impactful

features launching we collection that as modern the We also anniversary designs this this our later previewed year. on take a a new past global year, celebrate of XXth

product help a us back strategy, to progress new our market drive believe in meaningful accelerating development, making our share these key half. and component are gains the new will We products in

Turning to orders.

EAAA. demand steady currency-neutral while solutions strong soft the continued strong enter a to good to dynamic Asia. back XX% market were interface In up helped feel about order steady a continue demand were customers the flat backlog is XX%. growth year remaining see beginning of the seeing the quarter backlog. that year. enter about X% and a solid and in in year-over-year year world. QX down steady, second orders orders choose since with as in the the conditions around on we're prior offset were We with recovery in Americas X% up We their EMEA, in the while Orders continue the post-COVID We for half of comp was cautious flooring Australia strong that down Consolidated the

as I to our a outlook, update planned. strategy, provide I to Interface call over and the Before discuss results on is our One Bruce financial brief wanted to turn which progressing

to leverage focused and of to improve is a our model company this on accelerate resetting As profits. a entire power growth the our operating effort multiyear reminder,

teams, and strong accelerating expanding functions to support to building designs global chain selling and margins and growth. our We local world-class global products new are drive productivity management incremental through supply improved

complex to XX us leading experience Chain week, Earlier Officer Bill efforts his roles improved to Supply us the and leadership the lie global to expanded will profitable chain opportunities help that better Chief organization. and chain operations. I'm joined now extensive this to ahead. we my team global international chain, on managing executive pleased Blackorby a responsibilities, this initiatives team's our excited margin. strength and year, that Bill new distribution shared our supply our highly future entire this supply to and margins leverage and that of across share our in brings announced organization the our unlock lead the filling leverage teams supply role growth drive business. leadership to for increase executive successful I'm changes role, our across Interface of experience years we of ability important leadership confident across manufacturing productivity optimization I'm more accelerate and in created in Bill place, have and and team. gross agility than I With

With turn over Bruce go that, I'll it the financials. to to Bruce? through

Bruce Hausmann

everyone. and Laurel, morning, you, good Thank

sales a year's down a the versus X% sales a up strong X.X% down last comp were that decrease net year-over-year X% X.X% very second FX-neutral that year on quarter prior year-over-year. XX%. $XXX.X net comp prior XX%. million, Americas Net was which net sales of quarter, In XX%. Second EAAA, up strong was were on in totaled up sales declined was year

was EMEA basis, Australia FX-neutral up On year-over-year. Asia and X% down was down was XX% an X%,

with that quarter. we comps, year-over-year results saw challenging demand sales pleased net customer we the throughout and were steady the Given QX's the

was of our pricing margin but adjusted of which lower the gross than from a XX%, fixed XX.X%, points mix. period XX quarter profit was guide offset favorable prior due product Second cost and absorption, higher stronger year partially decrease to basis by

QX's raw saw deflation we quarters, many X% that in QX's incurred overall time material we to raw the year-over-year purchases. year-over-year. as purchases in compares pay first for the we That in For X% raw decreased material material purchases our inflation rates

of into deflation. year-over-year the half second we XXXX, expect further raw move we As material

were $XX.X net the quarter expenses SG&A million of Adjusted XX.X% sales in net due was quarter inflation. or second of sales last of primarily million year. the increase to or $XX.X compared The second to in XX.X%

Second million, sales income to in XX% quarter adjusted volume. operating of million $XX.X year. $XX.X was operating net The income lower second decrease versus due the last quarter mostly adjusted down was

quarter, versus quarter EPS year. generated last Adjusted $XX the $XX of $XXX capacity. cash liquidity million million, from the was of of versus Second in second of $XX.X in quarter-end, was million quarter totaling was which EBITDA at consisted and strong $X.XX second this last operations and adjusted revolver year million We cash $X.XX second the $XX.X $XXX million year. quarter in million

at debt second was the totaled by the We end months million cash million EBITDA. as leverage the quarter, repaid hand of in our net total less adjusted debt resulting divided EBITDA on or of last $XX.X X.X net million, $XXX.X adjusted calculated of $XXX.X and ratio XX times, debt The quarter. debt of net in

approximately is $XX top averaged all Our to generation, our strong with we and interest on per required cash payments a sheet allocation outstanding balance and debt paying and continue principal quarter down debt priority. strong million plan capital our

Capital $X.X in expenditures million compared of million second the XXXX to quarter XXXX. in $X.X were

outlook, we the look remain optimistic year. cautiously our of the at As about half back we

supply sales increasing ongoing Asia, outlook chain our calibrated improving while recovery have actuals guidance based our accommodate slow the environment. net post-COVID to We half the first on and profit our in gross

the that, following. with now anticipating we're And

of million. other to approximately expenses interest For and XX% approximately million. the effective average approximately of third fully An profit million weighted of net of tax $XXX $XX margin XX.X XXXX, Adjusted approximately million. and shares. $XXX of million SG&A share rate XX.X%. quarter sales adjusted approximately of Adjusted gross of diluted $XX Adjusted count expenses

gross the adjusted anticipating of million, $X.XXX approximately XX.X%, XX% and billion adjusted expenditures and billion, other of million, we XXXX, expenses XX% interest fiscal $XX profit year capital effective expenses approximately to million. of rate and of of sales of tax adjusted $X.XXX of approximately margin For $XXX net $XX to approximately full adjusted SG&A also are

the our and priorities. As of allocation into second focused the remain we year, our we growth move on capital half strategy

shareholders. we're customers by demand supply encouraged seeing the builds to are which momentum and enhance value chain our improving steady an environment, We for from

turn that, concluding With I'll Laurel call for remarks. back the to

Laurel Hurd

you, Thank Bruce.

half a As capabilities progress and we ongoing expertise and value sharing as our with our we execute cash next drive Thank second growth our market we our for our position Interface gains on to generation. strategy forward be expect to strong and continued I impressed to with We share ahead, look look team's strong shareholders. you. call. continue for

Operator

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

Your open. line is

Brian Biros

it is this for everyone. Good quarter Brian questions. year, raised Thank on believe the quarter. outlook like you for was the I it and for taking full gross Biros last Hey. profit looks To start my on This lowered morning, then was Catherine. actually

So Kind it raise to what back of the there? it just touch you can brought again? of what's on up pieces remind initially you. changed then us down? moving further kind And Thank

Bruce Hausmann

we're more time for year-over-year. entered that quarters, but stable down stabilize you is remember Brian. Good to materials This stabilization where started we I'm and sorry, the quarter supply we're QX. raw environment to in year-over-year, raw many, around see environment. now a it to were and where improving XXXX just year, -- Bruce supply some continued chain they just QX, delighted in raw tell our seeing uncertainty inflation we entered an into there more, morning. a chain X% material in or many I'm Well, of materials up And go seeing first the as finally were you where going lot more materials we into then was as deflation still Hey, entered last Hausmann. to might When supply then -- that QX, we and in raw was X% and

sort So our to move and is basically, updating we of our continue the through as visibility just as things year. guide this improve

Brian Biros

main like driver. the most right? sounds of it is Is it's the raw materials so Yeah, that movement

Bruce Hausmann

is a piece initiatives. also to Raw of our initiate see and it. big materials of productivity continuing effects We're

Now by is by to -- absorption. be fixed some cost fair, that offset less

the So there takes puts in some are and number.

Brian Biros

can you increased business seeing pricing here. if also or are in you kind this Got on across just pressure of of lower growth competition just environment it. touch And the maybe any kind

trends better end it's competitive more out hand, have going a price you the lot one to products increasingly but that also becoming might products be the premium than there, see seeing lower probably that be pressure. On

interested just So you hear seeing guys there? out to what are

Laurel Hurd

an pleased the that in Yeah, It's pretty at When the market, we is share as take gained up example, believe in Brian, US we pricing would we're I'll Laurel. we that. I look the quarter. our holding that say market.

up continue good So across as and that seeing approachable And well. you there jobs only premium well said, to now. year-to-date. pretty price but spectrum. continue for losing new capture premium the progress jobs, products and the hold as more we're We're we're price with at to but the point products, we're seeing that we But about not the so pleased sure. we're It's more feel also as well, we right sell competitive at our out end, not more launching

Brian Biros

along. pass I’ll Thanks.

Operator

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

Your line is open.

David MacGregor

quarter, everyone. well. guys Good Laurel, morning, results the where quarter, you turned actually. And, Yes. I given this actually nice thought out be mean, relatively you'd

be lagging big think much maybe than maybe hand, the there. Can other as visible more this progress points you can update this? the more you would behind, Thank should in congratulations making a on you're as are or detail little So half, would? second little that Interface? One One but, Where major the where we on Where, you. of maybe inflection a do Are you help? there you're you thought in you anticipate Interface results program on on Just a us terms of that occur you in bit XXXX? does

Laurel Hurd

great. good to planned. Yes, lot David. pleased we place, I Look, really we're Officer to say Supply help that Chain going our gross who's continue progress. our us the a making enhance for announced now as margins. think in Thanks have Chief I'm to tracking I'd question, we're that's as we

about good his joined addition the Bill spent in. down there really a great feel on He He team to Monday. with digging day team. LaGrange I in is that. So really and first the us

meaningful think team see works having initiatives. I really will So as we start drive the to he our productivity that a to with impact

that. So I'm about excited

meaningful more the across in market new I on also, more with we're focused faster the globe. impact We products say, would

we're the to our impact new speed products. are the of So things and tracking market

in good So perspective, marketing started been see has team that the week team progress say then building. marketing the continue to to global really both about was capabilities just we're from working really in think our there, I we're early going this and front. you're town that. actually a I'd finalized, I And getting through where but leadership feel

capabilities, digital have really We more we and being at talked with the about efficiency our around pushing while world, our from marketing which so time, initiatives. strengthening that the same impact we're efficient, more

markets, investing end. efficiencies we'll and we to most invest really US, So continuing on drive on the improvement continue as selling while the I to being growth profitable number side, our sequential there we strongest, we're see in for think for back one balance the really

David MacGregor

visibility, this and And visibility balance I of you the this? question cadence I be how see thinking with the the year we on profile, we when respect should but the realize the mean inflection? thinking really about to provide results around for a slightly about here, of longer-term maybe that do guidance of the just

Laurel Hurd

margin would you'll down. in sequential see progress think I up I call both leverage it SG&A improvement gross -- and

same some we US, we to the time, back improvement of inflection. being push see the on see the end I in bang to and the we side business. thoughtful moderate at we'll So as big forward. a continue don't selling Again, expect move we're while the as our really up investments monitor really

be think we're sequential -- as improvement while it driving you'd think about will growth. So progress it I and

drive top-line while gross profit growth both to up down. and the improve continuing on SG&A So we the margins,

David MacGregor

Great. Thanks and things Okay. with luck that there. good for

growth maybe Just in within what seeing now, carbon, order are the within some of orders? expect patterns movements term And product right seeing can talk If the talk you I there? you're the can what backlog elsewhere book, you in you just shifting order in would about just the seeing near US about terms just mix? the low versus you're negative

Laurel Hurd

and a I'll Maybe bit, little really our I little because bit there's can and we in there orders. step quarter news shift to unpack some that back a year-to-date the can in then talk about good Yes. and billings

a I Asia. corporate actually the of which Europe, if at flat we're Australia. right, year-to-date we our in So is and at look business, office, look obviously down in big up we're market, We're up in piece Americas. our We're and in that

-- heard, continue being on China softness economic in being as commented which, we challenged, So Asia continues. the to you've

it thing. office environment. up about is feel So in we cautious close we're macro pretty good back half. and naive to pretty We're We're the corporate But not year-to-date, the staying at holding I'd that's one encouraging. that say to well.

me, low we were our excuse year-to-date, but globally, mid-single at look tiles, -- our then our in And quarter, billings down Americas, Americas carpet in carpet the single dollars. carpet flat the billings in if the digits tiles in digits are roughly tile in

user at forward, So corporate us. And in of well again, Americas office pretty as segments going we're in in then orders some well as our look pleased the in up were largest holding end orders XX%. last year categories carpet our tiles. when area for we our are Those up in corporate

orders. So we comp in had tough a

So expected steady about it's and demand it we to we've got in where Americas, be. the

struggle down [Technical If about orders I but down one our Asia, color the that's Difficulty] they're year-over-year. on this quarter, XX% a were orders little quarter, about continued look X.X%. to market we've at year shared And we with, a first

tough, seeing but us orders was just the better those as continuing So rate in previously. we're order It's still certainly see billings than we're to market. the to longer for convert project to the delays taking trend

the we're area we an that's cautious back half some in to see delays, there. and that So continue being

David MacGregor

question be quarter quarter. X% up down about thinking in raw should first you Good cadence materials XQ how or XQ? with me, second the and half, the into Bruce, modeling help about there second us the X% progress. way Is Last talked any the then in you with for the can we

Bruce Hausmann

asking David? specifically, material Is raw Around Yeah. you're what that about?

David MacGregor

Yes.

Bruce Hausmann

and year-over-year, similar zone we're lot it, QX. materials there's pieces. in mid-single a raw that think obviously, about that kind be way will thinking of QX in We The moving digits Yeah. down of

And into as that, So the that obviously, in we help XXXX. helps that us will us we back half. think move

David MacGregor

everyone. Thanks, Okay.

Laurel Hurd

David. Thanks,

Operator

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

open. is line Your

Keith Hughes

How the you. units much quarter? were down Thank second in

Bruce Hausmann

So got and P&L units to -- down X% of what in the roughly what pricing the a and X%, were course, second us was the year-over-year, roughly with Keith, XX% growth. in quarter that's up see you negative

Keith Hughes

Right.

single-digit So in revenue kind half. your What growth, -- second low implies for half do in for number? of growth the expect the units that guidance revenue what unit you

Bruce Hausmann

We're flattish perspective up. and leave you down will sort it that back then half. the then our a And us, if leaves will in from digits at look of the us of anticipating volume back roughly be pricing mid-single Yeah. guide, being midpoint in the half,

Keith Hughes

and have been look is have Is in leaders who guess how the we number laggards by Right. the I specifically my I geography, been unit? question -- that and guess, in

Bruce Hausmann

price volume. been Around Americas actually has Yeah, stronger has -- around been units.

you For if versus our look at only, X% the was in down Americas, XX%. roughly of it the rest world, volume was down example,

So has Americas US line has more the where -- prominent outside been been has the volume stronger. seeing we're while more been

Keith Hughes

And going increases year. last Okay. to I assume lapping price start some you're from

way. do the your this to Let think you move When raw material me in it ask price response inflation? in last

Bruce Hausmann

of it the last is So kind year pricing answer, in because -- year. throughout we the it feathers did

we get opportunities in of we'll And all certain the in taking some we need half. getting we'll this of at sure back that of some first year, look And there we to and of do of markets, in wraparound -- continue the half we are as the taking the effect our to But back half. that continue for will so that price. in where Keith, markets be various price,

Keith Hughes

Thank great. Okay, much. very you

Laurel Hurd

Keith. Thanks,

Operator

to Hurd. further Laurel no at are the turn this time. will There call questions I

Laurel Hurd

and for the and you, this morning. engagement Great. thanks your questions Thank

efforts. Influential entire Before as Time’s of another the congratulate example and our for dedication call, neutral Most for the and for strength recognized I continued of market. I their leadership, carbon one tiles. team also our being the Companies to carbon-negative differentiation thank carpet It's in the team to we the end wanted driving XXX sustainability want of And Interface

just So thank exciting I great news. all that and was a And want have for you that, with to listening, day.

Operator

conference today's concludes you joining. for Thank call. This

lines. now disconnect You may your

Interface (TILE) 4 Aug 232023 Q2 Earnings call transcript