TILE - Earnings call 4 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Jeannie, and I will be your conference operator today. I would like to welcome you to the Q4 and Full Year 2023 Interface, Inc. Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Christine Needles.

conference your begin may call. You

Christine Needles

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

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

forward-looking guarantees Forward-looking statements management intent, such as future as well the are team involve on statements current which not or include belief statements statements based. and performance Any the of regarding our expectations are assumptions of number that XX-K a Form any could actual results most and of including uncertainties our on statements, report filed from materially with cause recent risks and annual in described the uncertainties to SEC. such risks differ

to this release company's remarks responsibility for and non-GAAP the SEC statements. company their to today. non-GAAP certain to measures are assumes call the X-K refer Reconciliations most contained update during earnings of measures. the explanations and with use the Form measures no Management's furnished forward-looking GAAP also comparable The in

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

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

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

Laurel Hurd

ahead to Thank you, in Christine, expectations. with our year the finish quarter delivered morning, fourth and everyone. strong and coming of good a sales margins Interface

price great increased material quarter. input XXXX, execution. a did fourth and product areas market we Our through we We confidence XXXX in our cost also entered challenging activate in deliver our in momentum favorable performance raw that our Overall, outperforming job environment, strategy as commercial XXXX in with our specifically deflation, the from while through mix, is the and working. in driving benefited to team a many strategy macro continue margins strong diversification our solid reinforces business holding

is is a our strength share delivered have reflecting tile categorial our footprint growth of This industry execution, Digging category. billings low results. single-digit global gains in low into stronger-than-expected ahead commercial We this testament in with collections This important and carpet trends, quarter our product carbon new well quarter. of of importance that in the products. to strong the a momentum the for

On solid rubber the in category XXXX. nora delivered side, we another year in this

XXXX, digits by market to continue growth benchmarks up share our another Americas, solutions. the for largest the softness we outperforming XXXX. record digits. double billings Asia. in Global We're to our well, compared these We're single with compared LVT low performance increasingly this experience customers had billings encouraged as show growth LVT. flooring preference market Although in as in XXXX, year industry-wide category that We up in surpassed LVT $XXX for XX.X% million design and gains to of in showed in

people in right well provide driving we organization where and leadership. as premium QX back flat quarter. a to to premium system and our advantage. areas our win Today, companies us refresh in spaces excel office and their to as this to buildings. selling continues More and pleased due expectations the Americas. And We're A are execution office, our the on These to competitive way the Class at with move We to our with progress one design in to commercial to is and our office, and with capitalize our It's products our shift. selling tuned X% have segments. continued globally the fourth diversify market in are looking with I corporate Turning want corporate the strength year exceeded XXXX more ended start which the up to to business. coming

increasingly business care the a our standout diversification important by remains projects care an Americas of Education Australia, were interior as segment softness Europe. serve including in well market a us. and sustainability up purchasers and Americas and of Health billings attributes and the strength customers this our the key X% in Global remains Asia prioritize products, winning health for in In timing flooring. year, Interface driven of in part for grew in market. positioned ad higher remains by to XXXX, offset continue strategy. the

in retail quarter overall the headwind, for and sector locations the As the driving closing uncertainty expected, deferring ongoing full remodel both some Macroeconomic cases, projects store due in constrained and, budget. softness resulted sales a some decline customers year. in remained to

it we have expect small of our back overall XXXX. to first the of half in impact sales percentage outsized our in the did the continue headwinds While a an retail and revenue, remains half through

we were retail, the for navigated we the year, through. headwinds the and growth pleased given particularly quarter saw with Excluding macro we the

end Turning $XXX.X of at solid to up were the we offset moved was was Americas orders. quarter flat as into orders Fourth year-over-year the at X.X%, fourth down million quarter XXXX. backlog EAAA orders currency-neutral the in X.X%. The were as by that

We are and geographic mix, commercial our done favorable both and from geographically The organization the job team product to selling and market. on a fastest-growing standpoint. aligning a driving intently has great focused productivity sales holding price

of in improvement this, fourth and adjusted margin. raw gross basis of All with materials coupled helped year-over-year drive profit deflation certain XXX quarter's points

over bringing double-digit a U.S. into many partner, opening tremendous seen sellers that floor. coordinated quota benefits, flooring our independently, test of year outpacing markets, integrated as In results. already our Interface more in part delivered markets together win together selling, the Interface prior the nora period, of the single growth an a strategy, XXXX One and launched we've we with pilot we've us previously to seen operated for total, in the incentivizes opportunities team calling the order and non-combined our of the new teams aligned customers in cost the Americas. started Since select As

is product have installed only in customers, may the type with even long-time true This one past. they of

installed other of LVT floor. the rubber has For for nora a hospital years we carpet and offer have had proactively that example, areas for we now that tile system

of better get them these the of some new serving the are of floor quick opportunities right side. turn, mix sales helping more nora our we're cycles, and the are Ultimately, product particularly site. across longer Some on customers

approach the XXXX, entire across sales teams become investment Interface off expertise in additional under January success, on this street, the strengthen that our efficiencies Building with model investing from global more selling combined operating will help business. even teams as our feet are specifically successful. One the Americas funding strategy. flooring importantly, the the we We're in through more realized we And rubber launched

manufacturing. also We're improvements on focused our in productivity

our robotic solutions. in automation CapEx including and new you'll XXXX plants, reflected we to are in guide, planning operational investments As see our make

gross margin investments be months year XXXX. to expansion. been will going anticipate these the we'll the XX benefits amplify of over profit that's initial out these We pilot next goal with into XX rolling following driving see We as an we fiscal well get

decades around our collections. about global This as the QX, drawing design Forward first global as leveraging in Past doing, carpet well renowned everywhere teams collection as we design. a that same launched time was time as tile product pipeline history incredibly One our work the excited our expertise. of Interface, world, and are innovation I'm in we at the in development the our In launched our the they've aligned

Neocon, collection and and of coming carpet the global the up design year. that exciting unveil events at QX in launch biggest will LVT tile another have then We Clerkenwell

our designs expand at bring premium more design to continue we'll while price continuing open accessible available to category. air market-leading points addition, collection the carpet with to In

one recognized Company. This recognized value. our Lastly, Environment we objectives as exemplifies by the ongoing carpet & as approach spearheading McKinsey focus circular World and to and circular production impact and Built our progress innovation, was in be continue tile our to sustainability as on achieving Notably, Economic commitment Lighthouses leadership. the Forum well Circularity solution for of sustainability to our in our January, three

Interface for As I'm we our results report strategy. our embracing team global financial for of our truly proud One XXXX,

to the I'm We growth is over With momentum for what XXXX, value Bruce to focused go on Bruce? our of and turn to have it will power going positive drive our and to company We remain over profitable financials. that, into leveraging come. global the shareholders. to I excited

Bruce Hausman

were you, year-over-year. FX-neutral sales FX-neutral softness morning, of XXX X% down Laurel, office sales product execution Fourth X.X%, partially deferrals. FX-neutral adjusted we XX.X%, driven from net points offset by a quarter X.X% material price, down particular Fourth quarter decrease by $XXX.X due quarter, project the absorption. and to driven hold sector, year's of everyone. net thank X.X% by from were sales offset gross strong deflation, our in in Well, net year-over-year, increase cost primarily net versus environment. strength an and sales in retail million, mix quarter. unfavorable input selling fourth saw fourth margin Americas raw prior and softer corporate organization favorable declined profit fixed and quarter to basis cost macroeconomic was a by Fourth the good totaled XXXX's education mostly

that items gross few which XXXX. adjusted a of full had quarter benefited XX the for year in basis basis and in contributed points We points QX XXX fourth profit our the margin

expect credit the do an going our which quarter our and government subsidy energy reflected recur Germany which of from not is For fourth benefits an R&D we received are to sales. forward, that example, cost guide. we in reduced the These in

$XX Fourth controls margins $XX.X were XXXX. the by million fourth $XX.X XXXX, million was EBITDA to compared of in described $XX.X higher quarter to and operating of earlier. quarter, and we focused due which adjusted XXXX. quarter $X.XX increase adjusted in quarter income compared the income quarter the expenses XXXX as million adjusted SG&A Fourth profit The quarter in offset fourth million $XX was in of cost to quarter Adjusted in strong is the gross of EPS in I fourth inflation. fourth million fourth $X.XX $XX.X versus versus operating quarter on million of the fourth adjusted was efficiencies

to XX of inflation. to full back year down net And million Adjusted compared prior year X.X% declined gross organization in XXXX, $XXX.X XXXX an net expenses billion, primarily year sales points of basis the margin raw the results. profit and to X.X% FX-neutral versus XXXX the in decrease year-over-year. period, sales due adjusted primarily cost and $XXX.X in in were EAAA increase from down million was $X.XX in of the XXXX X% fiscal half were net material the turning SG&A year-over-year Americas execution selling increase X.X%. from year. Now sales strong due deflation was FX-neutral a sales to totaled net FX-neutral Full were year and XX.X%, XXXX. the

$XXX.X adjusted which minus XXXX million, million net to In of adjusted of allocation decrease for cash of Full $XXX.X or at million totaling in XXXX, million to line of our due of cash in was in $XXX.X with million $XXX.X lower $XXX $XXX was was The consisted at $XXX.X $XXX.X compared operating income to revolver liquidity of million the EBITDA sales cash and compared debt XXXX. operating strong repaid year total from XXXX. in Adjusted the of debt income in we XXXX, resulting capacity. versus operating million million in hand XXXX end net XXXX. million the generated $XXX.X $XXX.X on primarily of We was million of year. the year and debt capital end strategy, activities

ratio to our brought adjusted LTM by leverage also We divided EBITDA. calculated X.Xx, debt down as net

We strengthening continue growth balance us future the to focus they capitalize which arise. sheet as opportunities on positions on to

in Capital expenditures were XXXX. in million $XX.X XXXX to million $XX.X compared

tight in As we we we expansion the by and growth And XXXX are over remains forecasting while improving while encouraged macroeconomic trends. profit remains, while dynamic, gross uncertainty maintaining environment SG&A. margin look XXXX, controls at are

As continued a the stronger followed customary soft year by the first Laurel a plus QX for which from of the QX seasonality, half we more means sector lighter expect QX. sequentially typically retail and mentioned, headwinds

we of million, $XXX $XX approximately average mind, anticipating XXXX, shares. approximately first the of SG&A for approximately following: other $X adjusted share and million diluted million expenses fully are count adjusted in million, sales backdrop adjusted profit that with XX%, margin fiscal and interest expenses net to quarter gross the million $XXX XX.X of And of weighted of of approximately

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

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

Laurel Hurd

strong by Overall, I we Bruce. with to our high-growth work dynamic ahead, health delivering on gratitude want execution market. is We express and encouraged in we Interface momentum still strategy seeing our year. our commercial against growth this progress hard I you, my We're focused gaining making our share are care, some we their One for a efforts priorities. uncertainty Thank segments are like the there while as past teams while we remain amplifying to combined and with office. XXXX. education am operational discipline. corporate navigated enter positive against And

that, offer customers' system expanded We're competitive specified needs. we're to And also designs geographies. advantage opportunity build the mix calls. we a sharing on premium and progress products for our it open right delivering strength leveraging product to forward more up market our in innovative biggest Operator? and I'll Thank our differentiated continue as selling while low-carbon We the focused selection look our aligning to in in on updates meet you. With to on our questions. future

Operator

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

Kathryn Thompson

it great, generation. overall, that to Asia volume And pricing see clearly trends? And momentum QX, by you versus could able if mainly in But review out you're see wanted volumes great then follow-ups and ale. be just break the I initially? a and if would to carpet and Africa, Europe, Americas review on could I pricing for cash you to but have Australia,

Bruce Hausman

Bruce. Kathryn, is this

focus up was in So X% and around pricing if X%. QX, we around volumes were on just carpet down

saw the our And we we product quarter. up nice So going quarter. at of look actually all was around through company total pricing for a X% lines, around the momentum if

Kathryn Thompson

the you Xx bogey? cash where And cash does for your being you then the hit year? really in When below in of your now nice the year. put you've year, And terms Okay. bogey what paying debt down of done you the frame in and terms generated Great. for of this a job kind leverage, free of -- of you've quarter for just hit once generation

Bruce Hausman

Great question. Yes.

we're year, operating now. increase costs, margins. our guide focusing gross was also the We're the on capital while $XX lower our this right paying to in down we equipment million And is investing in believe plant, CapEx in, noticed have continue on that to So allocation in you help our also invest probably our which we business. going same strategy remains some and debt to profit going our our costs

act. So But top down it's balancing a bit of paying for a debt sure, still. priority a is

And as you for it you pointing thank mentioned, out.

cash, EBITDA disciplined year. noticed Our was was We down a free debt and lot adjusted debt. very paying we net cash this were X.Xx. generated generation probably our of flow great in I to

So which we're below is fantastic. Xx,

Kathryn Thompson

clarify Great. it just prepared Okay. margin said question. And and final adjusted your SG&A for what a you then then cleanup commentary? XXXX? puts gross expectations your just takes margin, in for profit the Could you and just And was also gross post the

Bruce Hausman

Sure. Thank Kat. you,

profit we if was gross adjusted a year, So margin for think XX%. about the it baseline

XX.X%. it sorry, Baseline basis our in in prepared we in points was year, As basis had we full pickups of QX XX nonrecurring QX, -- mentioned QX I'm remarks, nonrecurring pickups. of for was the for points XXX

note guide, on lap landed out, gross line. baseline, compared points year you have had the to we this But that really if XX guide, year have of next XXX margin on tough this our model just you QX. had that planning I'd we're as we QX that comp to you in our and compare in will basis we pickups fact note basis of -- that profit nonrecurring our please where So year-over-year of off improvement QX we'll given points midpoint a adjusted go the that year

just then continue. to we're And going

I SG&A. think you asked about

that spend. we're company. operate SG&A think company to scale. opportunities the continue opportunity one as as to optimizing us globe, gives running our our which And across globally, a continues program one I And and going Interface we're us really the leverage leverage to SG&A are One We demonstrating our give to our great

Operator

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

Joseph Nolan

Nolan This for just is on David. to start. Joe wanted I

baked about into the talked And cost raw about guys some what maybe moving XXXX? You for fourth in in talk is about the just input talk you Can that? within some buckets quarter. your materials of guidance deflation

Bruce Hausman

Sure, Joe.

just of -- that had generated saw -- some in to be XXXX, by be benefit to we're is mentioned, and start of benefit planning as the deflation raw year we're So to productivity. and in coming material that be of that baseline on purchases, our profit going of continue planning deflation are by we XXXX. in some year-over-year the half generated we of off basis about we X/X QX adjusted some about And starting see back We'll see I margin, X/X other XX see gross XXXX. And X/X our last -- will of generated we -- will by and of pricing did of improvement. the other going points into

Joseph Nolan

Got it.

Okay. just helpful. One . an contribute expect update That's give Interface initiative the on us and results? to you please you then And what could XXXX that to

Laurel Hurd

I'd pleased think be Yes, see progress, Joe. launches new of to We're happy what some be collection with XXXX QX. with starting the points to. in progress. think I proof And we're of can both some you show our our -- and really will that in results I Thanks,

launching have as prepared You'll the mentioned continue contribute expect strengthen, to to see we global remarks, NeoCon we to growth. Clerkenwell that our that we'll really at more collections and in

Americas we then we combined this with team. have our that And launched pilot year the selling this in

to a been a and really sellers taking head carpet the in So hospital their really toe nora haven't with it users. crawling fully tile in is been in But the they end every room, on teams a what different go a the suited customer, around we one our love landed When of acquired of the XXXX, we a we the And patient suit, to I job campus, selling what's further versus because that step has as sale. design bunny or in what those the architects in really necessarily technical We've out integrate a waiting nora and brand, up reluctant sold sale. and facilities their every spend world. lot rooms to a doing great I'm really And in floor nora a in yet around operating you and on time example infusing we we're been and our know, Americas. nora we've room into rooms. business, LVT designers hospital Interface gave found the

quota, So a now structure selling selling combined some so which have teams, generation align variable when comp digits and you launching and with have you double we're seen those pilot order we've up markets. strong those in systems results one really

rolling excited that across We results Americas. about past really we're weeks January. there. that together had in and the teams We selling are in our the launched So few the

Operator

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

Keith Hughes

think Within be the for revenue flat, how about plan? just the end-user the under Could year, markets various guide you up. this you is it modestly talk will performing

Laurel Hurd

Yes, Keith.

being we're the good back we've year. they're one first see our half end news it's customer, there, going starting last And we we're the do of mentioned, to and remodel largely has continuing some delayed have mentioned, challenged that which point, just this that. that their year. but we of we about expect market been conservative haven't about And retail They've at we how remodels, in thinking lost As in business. as half the to store

that in half comp that So the middle in that's, the we'll be we've the past headwind the of got year. of biggest the and year, I first then think,

and share and we're We people really most to as work A activity, where Class are are strength believe space the is gaining seeing again, there. we're in seeing we returning corporate that

and cautiously expect then growth we're we're in and continuing that corporate the care to So optimistic steady. see there we're naive pull continue to dynamics, education, but continue. health that to will not really And to market

Keith Hughes

like activity? what Or office it based be remodel the to you made, comment corporate you said? is sounds In number what's a is Is it? on just just new that driving that positive us going from it construction? remodel and To it's

Laurel Hurd

some office either remodel strength the with encouraged but that's the It's movement for cases, to capitalizing their It's wanting and in a of really definitely We're we're remodel sure. on is of in moving return are side activity There's people it. they to primarily refresh to and to or space space, new . for lot back people it. moving bring smaller, that their good us, spaces. people seeing

Keith Hughes

guide. units of Or there scenario? going residual Okay. pricing pricing What's through some the in this final and to still the And be beginning revenue question on is that's flowing year? flattish the

Laurel Hurd

a with pretty little things times new do pricing bit price. when to collections off there's that out do to job it. other good We roll hold that and We we We'll in residual think of we're able hold. a

of little about So there's flattish, maybe bit units down little a and bit. price then a

Operator

to Hurd time. the further no are Laurel There questions remarks. closing at turn back will I this for now call over

Laurel Hurd

and the we Great. thanks, for everyone keep to to progress. the . to their for Interface posted Thanks Thank forward entire look team and listening today. everyone, our continued keeping call you, on efforts, -- everyone

Operator

call. concludes today's This

disconnect. You may now

Interface (TILE) 27 Feb 242023 Q4 Earnings call transcript