TILE - Earnings call 3 2023

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Operator

Thank you for standing by, and welcome to the Q3 2023 Interface, Inc. Earnings Conference Call.

I would now like to welcome Christine Needles, Corporate Communications, to begin the call. Christine, over to you.

Christine Needles

Good morning, and welcome to Interface's conference call regarding third quarter 2023 results, hosted by Laurel Hurd, CEO; and Bruce Hausmann, CFO.

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

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

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

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

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

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

Laurel Hurd

and in dynamic environment. a Christine, want to team work hard start everyone. you, good Thank I Interface morning, their by thanking for the

and diversification our lower generation. Our execution the volumes results global expanded delivered quarter, of a strategy the we and operating strong effective in relatively the reflect market. in quarter in our margin sluggish cash Despite resiliency

continue but third growth revenue quarter. our we impacted the that factors primary fourth X also to expect the were quarter, in There in

good retail sector, for an year-over-year as third sales. quarter the it's retail don't X% about our often a on outsized segment year-to-date the our annual impact of had We decline. our about of sales talk which portion First,

the out and macroeconomic been being and their seen of facing. are remodel uncertainty have that. cases, to They're has budget, some significant closing you these know, cautious pressured, store projects sector pushing projects in this impact deferrals locations unplanned the due retailers However, as in of and feeling we we're capital

Second, in well. and a several have resilience order spots held including bright our while fairly rates seen we dynamic up have broad-based market,

have industry-wide develop market. sluggishness We see to the started commercial to across begin

Turning detail. to up in our the in quarter up more and in health saw We with segments XX% strength Americas. notable in XX% care the globally billings

designers X the this making I As win care and renovate facilities facilities. major are the well visited to as to evolve, segment. health continues build their Midwest existing care our growing and health systems. industry as in new time spent in to right investments They're architects recognizing recently impressive

which typically environment, operating Health as care in of spaces thought is primarily are clean incredibly important, the theaters. especially sterile,

environments well-being on that increasingly creating are serenity. Our focused and patient also caregiver and customers now prioritize

interface is flooring As expand more performance, representation in these other globe, the Rubber spaces we and, and matters care more segment are a Design of health truly cases, and country and the addition integrated nora become brands that their systems brands. across of this resonating. our around to in in system designed offer the and some

with used their carbon have head X our Interface company. also case accountable I year-to-date hold care X% in the on customers higher industry, Often, as We lowest a up met and ed basis, On of Midwest. also of education we'll while only are the of in facilities study curriculum strong higher and students or up important design, them university head education, embodied Often to in most and head advancements to sustainability. our to because is education. customers. Interface sustainability. carbon Many across in of the not the their total to universities made and both commitments but in for our from continue deliver for a meet matters K-XX see the of is markets have Sustainability their activity also we these major their with and drawn commitments.

they It centers our also products floors. to our labs appreciate. is student struck ed our these and in of and solution. classrooms, Rubber unions, LVT they are system customers dynamic So nora is and truly of across me Again, flooring integrated needs course, our solutions that where their expect storms use higher how the their customers health carpet where

Americas continued are up people X.X% softness remains office. last year office and with relatively year-to-date. and renovations in fairly with where more to levels office they steady, more modifying see back X.X% we billings Europe close Asia. up Corporate as continued bring companies corporate the spaces is their Australia to

orders. solid, the neutral quarter than remained softness offset stable the Americas to slightly beginning EAAA our quarter, in the driven currency third Asia, was year-over-year. year. in the up Strong Orders since were more order with by backlog Moving EMEA roughly orders third and flat sector, while Currency-neutral in were retail X.X%, softness in growth up X% net consolidated declining the of but down the in X.X%. in orders

in quarter, increased gross adjusted Despite profit the XXX margins year-over-year. volumes basis lower points

the in remain an of price investing relief areas and cost SG&A innovation Our of challenging fixed design focused team in to activity, cycle, lower business. more drive price our of all this growth did customer-facing We on mix, absorption. control, driving favorable and other enabling maintaining raw coming efficiencies job out us while capture despite long-term driving benefit excellent to material

of managed also and debt expectations. flow working cash We strong our effectively use capital ahead our reduce to our

in is sheet balance great shape. Our

at over world. globe call anniversary. is we to of example to the XX, the making. launched October moment our Forward of One same about on our turn One Past progress our we are results, operationalizing and and a Forward talent we draws time we're consistently. collection great I a how around messaging launched decades iconic time On the of confident design. which the It's tile carpet power collection and the our and harness across Past talk a global take design It first financial to to Interface to demonstrates our I the market want the and through business. a vintage go Bruce to new amplify charm brand faster will to modern across brings we strategy the deal to Interface designs and new global I also bring retro thinking continue products our celebrate am XXth Before

good the to organization XX last as about with over continue challenges dynamic customers. We an and Overall, way long We've we continue the market. to way feel products a the this brand our come in navigate years. resonate

capitalize the return our growth sustainability and by power uniquely growth We will design, pushing global deliver to continue leveraging innovation market opportunities guiding on value organization. and principles improve, our believe limits honor and they on profitable arise As we look positioned ahead, which conditions help we while the as are as our to shareholders. will we to of

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

Bruce Hausman

Thank you, Laurel, everyone. and morning, good

in in deferrals totaled as year's last the by year. decrease macroeconomic Third sales quarter in third X.X% by FX-neutral in a year's FX-neutral offset retail EAAA as conditions. sales $XXX growth health softness the strength down sales last the compared well general quarter. period declined the care double-digit and sales net X.X% overall project in versus net net X.X% Americas double-digit were net year-over-year was year-over-year same quarter. were sector, last down X.X% FX-neutral of growth to third to million, in driven compared

as fixed as gross was raw well due primarily Third material an adjusted favorable from mix, of deflation to points absorption. increase profit quarter cost year's cost basis lower and partially product prior higher by margin XX.X%, XXX third offset quarter, pricing

move year-over-year deflation. of we raw QX into we anticipate XXXX, As continued material

Adjusted a had outcome through all to compared third strong offset in inflation controls. we've to the SG&A last expenses flat year million, were and cost given $XX.X successful quarter SG&A

the income Third quarter compared gross million income the is operating year. third quarter. to margins $XX.X increase higher operating The adjusted up due million, quarter to was last X.X% profit in of adjusted in $XX.X

million quarter $XX.X $XXX.X in cash of Third calculated $X.XX adjusted debt at million end million of totaling of in million of quarter $XX.X million of third The quarter, debt or which EBITDA debt $XX.X revolver activities $X.XX and the the We the net ratio year. as total net million XX net We consisted in generated million Liquidity the X.Xx from was cash third of of $XXX.X dropped of EBITDA. last was third debt million quarter. Adjusted resulting $XXX.X was third end the months $XX.X divided the quarter million adjusted at capacity. on versus hand EBITDA EPS the in to repaid $XXX.X of in quarter. last our $XXX.X strong year. leverage operating adjusted the versus by cash quarter, minus totaled last

continued and pleased very pay efforts balance our strengthening the focused debt with sheet. are of down to We

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

outlook. Moving to our

count shares of approximately winning We and approximately million. are average year tax of XX.X%, margin of fully million $XX adjusted weighted following: cost adjusted XX.X profit and $XXX billion management. and of net of adjusted focused anticipating effective XXXX, million, $X.XXX sales gross business, share the diluted are $XX approximately on SG&A approximately for disciplined debt expenses XX.X%, share, expenses $X.XXX down approximately expenditures interest adjusted of taking And to million, the paying of billion, capital an rate other approximately we full of

for the turn Laurel I'll Now call back remarks. to concluding

Laurel Hurd

Bruce. you, Thank

constant quarter, proud drive and execution we I'm results volatile focused solid as this well executed the on our our to our Thank year. team the remain market conditions so our close you. disciplined strategies of we uncertainties. of out are accomplishments exemplary far and and Our of

up for With questions. that, Operator? it open I'll

Operator

question of Our line first from Thompson [Operator TRG. Instructions] with comes the Kathryn

Brian Biros

down more little kind This backwards you maybe XXXX, based Biros orders here, Kathryn. inflecting little about a little can bit of talk into here but Maybe bit, going the Americas on a maybe up for is broadly Brian setup actually segment, on end XXXX just bit. EAAA a

volumes, mix, providing looks the internal that be initiatives like raw don't better, on some going So they're there. trending I benefits to seem know,

So XXXX just be the in any would outlook here helpful. setup on thoughts

Laurel Hurd

Brian. Thanks, Yes.

The care are. with we we're well continued and segment office, we'll a that markets pleased to are change do over as And holding you're our in minute up know, for headlines QX our well. X 'XX just well. with reading the about I'll and provide really you point core on would talk year-to-date, really I'm all retail corporate down us a report Health about education say guidance performance As we're holding just really corporately. everything that watching quarter, really this we're was earnings, when market. globally you and that. up I

X%, Our was down were in from quarter down X% we the retail. revenue

And we're we market. that so watch continue dynamic that's the as watching to something

Brian Biros

just I out on your been update then an give it. maybe there? of LVT, Got And sourcing historically. on South strategy Korea us you've you just Helpful. can know

setups. production in trends resi higher-end and as hear. focused, product low LVT are customers to Some But overall. a more end, first, competitors thinking know of have it's about the you adjustments are down Retailers strategy on seeing and interesting the making environment trade be how I here, you're current would LVT pricing but pressure to various your kind

Laurel Hurd

question. a digits really we great and our specking to we've continuing carpet. great Yes, effectively held LVT, our has In in see that growth. well up partner double in quarter a very and our LVT. We're it's with up our source for got the business LVT, do LVT, were We

got there, and we're not progress the LVT. pleased that So slowdown we've any we're with seeing in

Operator

question Research. the of line McGregor David with Longbow Our from next comes

David S. MacGregor

think are global you wanted we overall about the that about performance launch talk bit, just and if impacted how in just I'm should we launches by coming morning, modeling from the the to standpoint, XXXX, a lessons about that got we little as everyone. that guessing maybe approaching then head the margin Good be you've I'd that? should And and how you've I quarter Yes. because what like start to and global learned a could, operating expense from into how more just off that? you asking

Laurel Hurd

question. great Yes,

day market off in would the of say year. and it's beginning the you've really at some a impressed. initiatives. wasn't the plans Past around launch. in been marketing seen that the in it But was know the in don't So the do brand successful Forward, world, this, the to same I team really pulled if a that The And of I launch window. an X-month the that I'm unbelievable

things the team. the really we're taught to X as it we me agility great we speed what is can all that and together, work And aligned can when think life. bring I

around really see to that going brings that's about Interface I I'm think next world. seen. be see brand best the to more forward. of we're making our quarters you'll us And enable of that progress very the excited messages the of life it's sure -- work working on going honestly, to couple designs the strong brand in to that and we're you'll for some will One strengthen the new how over that I've

And excited. together as with that good we're progress margin we're around our driving really we're being world, I'm way the said, efficiencies and because spend. launching So some efficient really you seeing all

So so pleased far. I'm

David S. MacGregor

beneficial So operating expense leverage? to

Laurel Hurd

Yes.

David S. MacGregor

go And Okay. I to going -- was ahead. I'm also sorry.

Laurel Hurd

ahead. go No,

David S. MacGregor

No.

be little in forward would wanted of a turning in in markets up But a in terms to general. you're competitive that were most offer also what specifics I Okay. general some you elaborate more order further sluggish the if a probably in little -- commercial flow, in to your terms you of amongst just seeing little helpful. granularity think comment about And more Just maybe elaborate people. I of terms that's behavior? of sense further, visibility, terms could you ask could

Laurel Hurd

And seeing out of delays right a again, our up But The trend But are Yes, feel sluggish us like retail markets I office. big the it's, pushing say, of change and we're word. primarily lot dramatic is well. the not some a for in holding change. a I trend bit watching is things of order segment. sluggish again, the course. corporate and project really rates, -- watching We're would

to And Bruce, want on do at you all? elaborate that

Bruce Hausman

David, really pedal would on that Sure. the putting our I say I mean, just strategy. we're diversification down

putting I down pedal anticipated education on What in there well. So which is we're had health and frankly, than quite care, think while office us the is extremely doing of any but hurt hanging most be impact an retail to did was the mentioned, us it quarter, results. outsized is only the this revenue, have QX's Laurel on of as sector, which, fair, our stronger X%

Laurel Hurd

watching And indicators. the macro we're just

we're think naive QX As we're the into seeing to to some not conditions. cautious looking headlines, you sure the I market we're said, -- being make

David S. MacGregor

talking down mix. I of about of retail, retail, X% mean that revenue in the our X related to things total X% was is is and only it's your striking you're but X% of

than care forward the health retail less challenges gone and accelerate ] and into guess on with you [ as my air. and an offset be to have really would XXXX opportunity So to more any education question that respect office? to in I it's progress to visibility off the further what's the and

Laurel Hurd

Yes.

customer was on the retail, in say say, First, that will I'd I it substantially X U.S.

Europe a bit we've is retailers news So planned get seen the good some well. have we're widespread, will a as they've and -- in But do had remodeling as it's those efforts. and their get softness postponed more remodeled. worn challenges, The floors lot stores of

think will We It's will So hit. matter good that. won that the business. come that we a back. about that, do feel of when We've

I So wanted to just hit.

Bruce Hausman

making. That's a point Laurel good is really that

lost haven't business. We that

those that, It was We stores because will deferral that customer. haven't that really lost will year. to come back refurbished. be We a just think in need business

Laurel Hurd

again, as and strength we are selling we education. systems. And really continue the care the prepared in remarks, see examples then health to And in

and incredibly focus airports. street to And to business and are nora finding U.S. as and care in on more to as health the accelerate we our We're continue also is the push strategy. brand. product doing that data that which well diversification also centers labs, and growth on the Our continue segment doing more growing in the with adding we're well, nora feet well

health and focusing to to we're care beyond continue push diversification our just So education.

Bruce Hausman

coming ground has haven't just -- still education. so to And lot David, a the pent-up add, not There's been shovels I spend been yet. of that just federal the would money much there's still around

to with sustainability spend our with our sustainability to and get around we're lot that come, well is differentiation particularly and incredibly a story our that business, positioned So products. still of

Operator

question the comes Our line with Hughes final of from Keith Truist.

Keith Hughes

fourth What do -- the are what's this was quarter in going what the And units be to guidance, did quarter? units year-over-year? expectation what with

Bruce Hausman

Yes.

for QX, the Keith, So around were down in quarter XX%. units

XX%, price, P&L. gets you So and see on price to down what if units units think versus roughly growth, around around X%, about up you you the that

sure. think -- know I don't we for

we think for to similar a know in it mix fair, I sure. will be don't But QX. be

Keith Hughes

implied future goods? on price going in have able And pricing Is sure. I of year. to to last to Yes, the abate quarters? put are Or some that know -- things raised in still the you been you lot start there, pricing selling

Laurel Hurd

done good some I Yes. And say we feel products on aggressively. hold in new focused that that Keith, other continuing able price priced initiatives still is that more got We're to quarter. I'd we've were see thing QX. the are actually to that the we've in

premium taking margins more price aggressively our our priced rather but able on more hold than offer So to products. actually We're down products.

great got as well our with open tile we've that [indiscernible]. in we've in carpet that launched air a So collection, example and with of rubber

we can take hit down price So to premium project levels. are budgets in needed, not our most but that continue the

Keith Hughes

really occurring? I the I just fade increases, talking wouldn't of increases some just that like be to to mean Yes, Is away. fade going the down. the about math, of price sort in just anniversarying

Bruce Hausman

I'd that, half, to that back the of to what market say first remains see to an will sort half conditions in -- don't remains The seen. be Keith, We'll the we think are. issue. be have

holding good know, As been price at you have getting and price. really we

We and company this reasons market. back well our it gets differentiation and price we in as are who pleased certain people held so we've our around how a And buy to sustainability. products in with design are for

Keith Hughes

quarter? it to you tell up just said how Okay. some in And Can nora actually nora, was things. And is the year-to-date? you us switching -- positive what

Bruce Hausman

And and is in the quarter in up, year-to-date. a very projects us. and highly very, special product that has it's some care, airports. does in great incredibly very to nora resilient applications. health just markets it's strong for particularly how big incredible up And differentiated the is, nora is also the nora us nora transportation that's around well It's product Yes. -- is in Nora the it's -- and product education. and line doing and infrastructure brand in

Keith Hughes

great. is running That's X/X And nora around company's of [indiscernible]? sales Right. about the the

Bruce Hausman

is rough pretty rounding close. that's That's number

Operator

like I to Laurel would for closing now Hurd to the over call turn remarks.

Laurel Hurd

Great. entire the quarter to great to strategy. to listening continued to And the work and our I drive thanks, Thank the ongoing thank your you. want great for just efforts a team for really today. this Interface everyone, call minute take

Operator

you This speakers I us. all would thank joining concludes like thank and presentation, today's for for our to today's call. now

You disconnect. now may

Interface (TILE) 3 Nov 232023 Q3 Earnings call transcript