TILE - Earnings call transcript Q1 2024

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Operator

Good day, and welcome to the First Quarter 2024 Interface, Inc. Earnings Conference Call. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. I'd now like to welcome Christine Needles, Corporate Communications, to begin the conference. Christine, over to you.

Christine Needles

Good morning, and welcome to Interface's conference call regarding first quarter 2024 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

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

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

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

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

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

Laurel Hurd

our Thank going results. Thanks progress. quarter. to mind, update few to is you, working start to to and To team fact the you Christine, a I'm the we With a and quarter, tangible the first fueled partners, strategy performance our very strong that strong minutes on comprehensive One Americas. results These in their yielding of in take Interface good our our I'd thank backdrop support that Interface call, the customers across strength morning, achieved like by everyone. and and for reinforce the robust entire efforts

and successful complexity, our our pilot core see selling team. on improvement, functions strategy a As we driving focused have After world-class the and territories continue the transitioned selling our between reducing reminder, throughout a support combined team, to our to two. U.S. continuous Interface Nora in synergies is XXXX, and globalizing tremendous to

During environment. a and selling aligns coverage drove collaborative outpacing team consolidated One macro incentives in together. challenging our growth, to quarter, first expectations This and the approach strong business the win Interface maximizes order

Reducing complexity is tenet strategy. our a core of

We are and how customers. in and in around we everything enterprise functional across do, every to continuing the best the in simplify how services the our provide to the globe we area, products and industry in work importantly, we

robotic in new on including also improvements with drive in are track automation investments will manufacturing, improved operational We and solutions, margins. which

tile workforce months. our to U.S., of phases These We're implementation, solutions which manual process in parts and which the our XX the the carpet adding reduce next efficiencies in labor roll preliminary raw material drive will robotics over will and labor-intensive is more waste. We're some robotic these manufacturing of better out hard-to-fill of in the roles. for stages

visited the our We Germany, investments. continue Netherlands we will are recently opportunities. being and desired to invest see results, efficiency facilities as automation and with processes, prudent cutting witnessed throughput. And our assess press I rubber in we and increase in we the enhance in our safety manufacturing we production investments By our automating rubber Germany, In Australia. nora firsthand and that employee facility. the work

in and how seeing done time our It playing was leading There's health lot interacted and great showroom and field, in progress the to products customers the strategy we a showcased at an with several are out. we being to of great where Australia, across over office, XX event care, innovation spend visited and horizon. met our also work corporate encouraging customers. In education, hospitality with new

our all showcases design, flooring We belief the meaning all a Interface for beautiful with customers and quality, which to purpose sustainability. sustainability and encompasses products our Made of our for with out month, of More, or for get that don't innovation time. fresh sacrifice ask brand quality is and compromise, design rolled without our attitude, this new the performance, performance that made Interface our Earlier customers best

in We preferred marketplace. because forward in the May differentiates sustainability-focused and all and design Clerkenwell customers, same introduced it's partner Design around launches. time, design, for categories to we We've our products Week provide showcase One in action. globe several example strategy are high the exciting and NeoCon June, which across at for look our significantly another of flooring of our and product brands we More new Made us the will projects Interface in to We where the

high to sales by the end net driven of came results, the Turning our our expectations, first Americas. at in quarter

see continue digits. strength billings with We to education notable up in double

connect driving Our ultimately expanded of strong, allows offering tile and our LVT with needs, Air customers' K-XX business by sales. was driven particularly carpet demand at for increased increased to Expanding collection. our more while accessible our points Open price carpet us designs

Corporate first that the office in outcome segment. down single was digits the volatility which a viewed we in positive given as low quarter,

people Our and the grew continues, market remains in we to as renovation strong share business the quarter. U.S. tile in the returning trend for carpet office

due headwinds retail sector. to expected, sales soft the As in were ongoing in quarter first the

our and beginning reflected in increased beginning in demand, expect stronger are sales to guidance. we QX, retail updated which However, is we see

first adjusted down year-over-year. were sales profit year-over-year, points gross basis margin increased by X% While quarter XXX

in also driving Our selling from price Gross and material organization margin mix. holding deflation to benefited raw profit quarter. continues favorable execute the successfully

in and and orders softer EMEA Turning Total company year-over-year. in in partially comps. X% up Americas in orders Strength EAAA. was had X% tough offset up which Australia, were by Asia to orders. the in strong up X% were quarter, Orders the

QX, up year-to-date. was and teams markets XX% productivity geographic we and focused remain our backlog fastest-growing finished strong commercial the Our to as on We sales aligning segments.

circular climate will initiatives innovation from that point offset both Beginning the call I recent solutions. investments a accelerate to our carbon journey. and purchases sustainability turn footprint including XXXX, to marks want reduce about into in a we our will update I Bruce, which carbon talk growth, Before over our to and in strategy, pivotal our redirect low-carbon

decades over that We carbon XX% carbon we we growing our proven our journey when our X while business, the significantly to reduce footprint reduction with an from showing footprint in the started have figures back our global most XXXX. recent can XXXX past in

solutions differentiated enable remain tangible confident achieve results is working I'm helping more this with sustainability our will results. their We and to our than accelerating of committed to change will strategy our thoughtfully pleased to customers love. yielding summary, and development invest innovation, first goals, In that sustainable continue customers quarter and more I'm that us strong our in ever

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

Bruce Hausman

Laurel, Well, thank good everyone. and you, morning,

quarter First totaled of of quarter a versus the XXXX. X% decrease sales net first $XXX.X million,

net FX-neutral by sector, down quarter the FX-neutral year-over-year. project sales Americas deferrals. the softer driven First in X.X%, in by education, up environment. in EAAA were saw net X.X% softness were mostly We driven offset retail in sales strength by macro a

margin due first inflation. were adjusted product quarter cost an quarter quarter compared quarter, basis mix material first primarily strong XXX year's to gross favorable $XX.X First SG&A of the $XX.X organization prior our increase hold first points XX.X%, increase price, primarily the in was profit to expenses selling in million of to deflation. Adjusted and from XXXX. The input was million to raw execution from due

operating quarter million adjusted $XX.X in operating income higher quarter. million first XXXX. compared to the $XX.X due income margins The adjusted quarter of increase gross in of to First profit the was was

quarter First the $X.XX first $X.XX versus XXXX. adjusted EPS was in quarter of

allocation and We of versus was activities $XX of $XX.X revolver our of XXXX. generated net quarter $XX.X of first totaled million million in in the liquidity debt quarter resulting which Adjusted line total first $XXX less million million on million first repaid $XX.X million, hand debt the $XX.X we $XXX cash of at capacity. from In end quarter or consisted operating debt cash the the and the capital $XXX quarter. of with EBITDA million of million of cash strategy, in in

expenditures net positions remain debt, capitalize us growth paying was LTM strengthen We they by focused as future to to our EBITDA. continues leverage on balance Capital debt adjusted Our calculated ratio as and sheet arise. on divided down which opportunities X.Xx, as encouraged of in first XXXX macroeconomic continue were XXXX, the we while first in the compared to trends. $X And dynamic, by to quarter of improving be to look the quarter remains million XXXX. we environment $X.X million

we We net and sales are this continue gross increasing expect profit year. estimate, margin expansion to full our year

gross change generally in in full adjusted million; SG&A diluted As that average which approximately mix of quarter adjusted other of Laurel margin mentioned XX.X more sequential of and the XX.X%; updated reflected $XXX segment earlier, product profit we guide. we have we million now interest our sales expect have fiscal with premium profit approximately million; lower is higher of to million; gross fully XXXX, are compared year second in count expenses $XXX net This margin $X And approximately approximately guidance, share anticipating offerings. backdrop mind, million our to shares. expenses profit adjusted XXXX adjusted our following: $XX of margins and weighted retail sales, of gross For

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

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

Laurel Hurd

you, for sustainable remain our questions. open and to executing Thank driving we shareholders. business. Bruce. positive delivered increase to strong Operator? our our trends start With market, continue see XXXX. Despite value focused on up that, in global I'll dynamic a Interface to it the to growth strategy We

Operator

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

Kathryn Thompson

things. today. for A you of different Thank commentary couple your

carpet balance great First other can there one on volumes great. that backdrop, in give against very quarter. growth in by color the be be is you of category. And solid categories give discuss then volumes to and and just price price you the mix would tile Any color in that of product would also the can Any major backlogs. versus terms of

Laurel Hurd

If I'll and categories. order about at This we growth where really our sit. Maybe take feel in good all growth, is quarter order second Kathryn. growth, your showing in Laurel. Really look one, we strong we we're

excited little but showing rubber, in tile across bit growth, carpet tile, LVT and stronger growth a really carpet So which we're about. also

Bruce Hausman

about bit in you volume just the little quarter, a mix then And say versus the I'd price Kathryn. of asked

see negative was So price that's across X% And P&L. was where around categories globally. the product X%. And Volume all on X%. that's around down up you the

Kathryn Thompson

have and puts down materials. Great. including Okay. margins I the gave of end margins, expect the solid that about really to a raw mix just know upper quarter backdrop, good because given But look did tailwinds, you takes the slightly bit XXXX? ex going against as gross forward. performance little you Maybe some then And commentary some better for terms various into mix we margins in what about talk more in of this

Bruce Hausman

high And we to sure. guide. compared actually gross Yes, clarify, to up the end margins our of brought our just prior

So I just that was make noted. to wanted sure

Kathryn Thompson

basis XXX points, the Yes, yes.

Bruce Hausman

that from QX sequentially, Exactly. Most to is The wanted sure to QX, go that margins we thing flag the will of noticed I'm down. that mix. also due gross you to is the

is good So news. that We're revenue which slightly lower will at in estimate just fantastic. It's best here's more our our premium margin profit the raising gross that, than probably that our come $XX is a products. million,

It's the than carpet rubber is slightly at margin we're with and also which happy a really volume. gross LVT us. for lower So volume,

take we're and our the margin pleased slightly in QX. note So to that be at saw volume, we we're revenue it a to is up. is the able in than It's gross lower happy what guide the just for

Laurel Hurd

seeing jump there as on the I'll carpet, by. just strength industry, encouraged compared into we're Bruce mentioned. Kathryn, we're And to really The

in industry. So billings the pretty to in QX compared were strong our carpet Americas the

So that. good we're about feeling

Operator

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

David S. MacGregor

of of results. of me focusing Strong the product but that up on lots market of let and tile of undertaken on rubber the guess a reflection to than stronger Interface, LVT initiatives are pick observation the attachment just Congratulations where on questions, demand? reflection that that quarter. the rubber the backlog Is sale LVT I you're is a a and the the the some more really One you've Or order. it of in carpet.

Laurel Hurd

And that. yet. it's Yes, days think early I it's

rubber momentum and early market said, on And now order and And And kicked team of it, this the week, we talking sales our we trying honestly, in across actually to Interface X. a off the leaders that It's days. bunch put LVT. we're is we're U.S. January One our had So seeing feel because we seeing the selling there. were we tough about out we're gaining attachment and a finger good as on it's more what share. you in

deliver market, of so think of encouraged. in what But it where we're hold. see other is holding product single I to each really the we're a expected momentum growth take family, encouraged accountable starting So soon. to don't to we regardless

So more to come.

David S. MacGregor

how mean market. sales in forward and to go to by much though mix It your innings this more to visibility product adding structural resources trying that? of you that of do is terms Do this respond you as new that if kind or I in seems is you And of just how take to product have probably new that on basket the market? organization a of early change

Laurel Hurd

Yes, a great question. it's

X, sellers takes if think to fuel customers. them is in getting design almost potentially new we'll some that. to that services we're now a more add We're internal while. our having looking a a build need business. of a while in amplifying really at do great And we is momentum. some added the takes is strong I how nora growth. addition on X, our our What do our is And their -- order at to indicator this it So to We've got finding as supporting It's design start we'll we sales actually and our learn for that momentum when momentum looking we that's it team, We functions specified resources go. right services of growth, pressured. it also definitely

that some to supporting we're make growth. looking to there the service sure functions at we're So

David S. MacGregor

in that of you've I wanted and some achieved of made about you in quarter. that as function? investments how reflection the the much to the a lower you ask the just of be your well procurement And improvements you've pricing costs would versus made market

Laurel Hurd

Yes.

probably it's both. think I

roll in and our -- through. So to investments out investments and talked impact. I I in automation, facility, days, Weinheim, about nice Bruce some looking think flow that's there that of starting Germany, the is through we're and made seeing some were at nora We we a have early seeing too. But

So investments up, just machines investments only a many get of quickly. Grange. we in laying we're those We're can but in, lot La making are so ramping the so

over So some months. of the that time next XX will take

So I one think that's early in innings, honestly. another that's

David S. MacGregor

sheet. Yes, your I that then And it sounds to wanted about way. ask you balance

just deleveraging. and evolved Do you just couple I that? further start about the comments his last sheet mentioned Interface X.Xx. has great a the whole you've little of looking creates more you seriously I that. opportunity. it to do with at Boy, you developing a I discussion done do drill down an -- You're acquisition around the guess, balance that guess, to on funnel really over of talk or now in Bruce what years job want

Laurel Hurd

Yes.

we'll to more forward. we've does #X #X to be the continue you I our of that to team we're lot up options think yes our after options gone those, think will as I'm us give which of debt. for -- and aggressively going assessing the see of give there. how internally, said, helps It us but do our and really investment business our finding And we down proud we're but a I growth, can us service things what's head it debt, more investment out pick pay

in invest here and lot I we've really think think going focused now. And automation and on with to we now got innovation to the a we're right respect forward.

David S. MacGregor

progress. the all on Congratulations Great. Okay.

Operator

your Paris [Operator Research. next line Instructions] of And the Alex from Barrington from question comes

Alexander Paris

congratulations quarter. strong Laurel on and Bruce, the

Laurel Hurd

Thank you.

Alexander Paris

clearly, it sort and the mix of favorable the of and cost of far. of understand just A more got margin benefit the to and to want bit good questions area little to input couple I've from story. continues being and focus, so gross dynamics price lot deflation. of a a I newer

starting input So in reverse order, cost deflation.

And Just long Or to have that? at point? it been has today, been me up how largely we catch from continue? anniversaried benefiting will it this

Bruce Hausman

come year-over-year seeing material we're raw ton year. raw will to very a fair, of steady of materials right from in quarter, puts about speed. that Great the a think margin pretty came from of X/X being now with about What of strongly and pretty question, to right back is of gross mix. benefited to have last the And quarters. be a pressure pricing material pickups you're takes, but raw expansion, price, from current material few deflation, best that this if And now new really X/X up our came you of X/X over that for close came exception Alex. of -- raw And to that bit the is and the on I half freight. the from story, we little think In the actually, deflation estimate on our

Alexander Paris

And Great. mix about talk That's price. other then the helpful. and let's X,

comes X/X from say Those You they're price increases durable. and price. are

they're You once back put don't into take place. them usually

Laurel Hurd

on Yes, of U.S. out where an the give I holding bit selling price. to putting nice Alex, price really can just in that, guys and we job do comment incentified a little a Those organization. have context, especially

So prices don't largest to the we we really incented won't in your U.S., point, to our take they're is market, which And -- often them. hold down.

So the they're tough fighting proud but of it. a every It's day market, progress. for

Alexander Paris

government, clear margins office, How of then than this market lastly, about rubber segment, mix, by questioning, higher gross and tile. And Great. the et it's that line have cetera, education, LVT health on retail? care, corporate

Bruce Hausman

come to very our a gross health be mix stronger Clearly, care than, But in of margins we retail at business. strong fair, across margins also It's say, segments. have and customers office all education does. those corporate

by by by it varies varies geography. segment, varies So mix, it customer, by it it varies

there of and different lot a puts are So takes.

in comes LVT by strongest has I were think gross of at everything headline to stack you I aware we that But Alex, followed margins carpet. margins you're like. is followed gross the by them, this, if rubber sell think that rank we the that

Laurel Hurd

And on to then our well, that stronger. in just U.S. are margins as add the

when you mix helps that we So in the U.S. up

Alexander Paris

down new then And have line at the guy's helpful. continuing this point. of stupid Super encouraging. of the license Order X.X%, Great. the because growth very of I do to kind questions, that

it prepared talked about in comments the already. were You little bit a about you questioned and it

fundamental question. quickly revenue orders a turn Interface? do at How into Here's

Bruce Hausman

average There of XX-ish is XX sort to The range. a is big weeks.

goes for and go stuff stuff same doesn't day, some out out then a quarters. few some However,

out, data, average weeks. So it's into there's you were XX-ish range, but the peel you it around a when if huge to

Laurel Hurd

orders comment April just this, trend. I'll the -- And but our said with same continue to think in already I Bruce our

So in the good about we're feeling order strength April.

Alexander Paris

Excellent. retail. And then

is in increase revenue retail to Is So heard. some on the contributor that half, than the a recovery some pressure second in I through segment, retail I though it's expected the had you continue to that realize sales and half? on revenue, first even net as put small pressure put a you expected? guidance, the faster in

Laurel Hurd

it. that, Yes, then I'll jump you on and take in can Bruce,

lose to what said, refresh in stores. will so But come pullbacks is the refreshed about say, our as So It's business through, decision back some We impacting lot. need our that significant revenue. And us I that were a and get retailers that to but see their total they which not start is going about And we're to our didn't when come X% impacted to stores you pleased, had business, don't back. half it's starting year, a eventually, in the of retail the we're a QX. We small. made not we huge some would segment. of last weren't it sure talk business, we

Bruce Hausman

business, was -- see business. to said, would we we starting back. question of deferrals going instead it which knew was get lost were just I And to project Laurel add I'll mean, timing. we're it I come The what reiterate that Yes,

Alexander Paris

I a quarters, pressure expected? it coming in it a back So the both back sooner and see sounds than is but coming from perspective, second a that little like on expected timing quarter. during second the first front to Again, the it's bit

Laurel Hurd

expected, in be there will then our current also It quarter the and sooner second than back bit that in view is. It's is coming a QX. it

you're right. So

Alexander Paris

aware $XXX,XXX occur? a Good of ignorance. that event. last expect Great. then for Is the There When that do in was Or from And you company that behind again, a regard? my charge did news. cyber Okay. more that. now? I question, expenses wasn't

Bruce Hausman

Yes.

actually claim was our had credit. So event. related We cyber Alex, insurance XXXX an that a to

So we costs. hard incurred some

insurance on got And so we actually that. recovery

so pickup. And and is GAAP seeing adjustment what a the on non-GAAP you're schedule actually

Alexander Paris

All I missed you. right. that. Got

the follow-up to I'll you talk color, our call. thank I appreciate additional you much. So very and on

Operator

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

David S. MacGregor

Yes.

a to from drivers our got I the a of Just observation I here. follow-up. referring talking functions. the to the believe, globalization that in you press we've margin, get just on the you're gross It comment core few synergies release about of seems like minutes and you're to wanted

more talked I of so things and you've is I'd sales you about yet you guess, feel haven't a have been of resources and numbers, play get worth in I we've that would to And become talked into maybe you've some noting. And that maybe come in on you comment second a just factors that bit terms visible really that little impact speculators, on to about but in thought more we done half. the the working anything expect beneficial then haven't but the

Laurel Hurd

Thanks the Yes. love stuff appreciate to It's about. it. follow-up. we talk for I

We're across the a the doing teams a Americas. combined we work, So honestly, about every of talked in ton selling lot function.

So of a couple examples.

to organization, world. have used level, around which one marketing driving even very country the and marketing be we team that's initiatives Our regional

So our great, for More we Made is which launched which exciting. campaign, hit, brand

and hits That brand website an market, that on one the That's for see the at social media. globe all You'll our one to it and speed voice time. example. goes

So really efficient.

against globalized opportunities. one it looking different view team we've team. from design a think in our that every and have doesn't of global be best really our They yet is But putting one because nuances. mean sit start global we're regional to certainly a And are product, biggest seen point but around world, there's of efforts at our it places design example the we'll is product see that at to NeoCon to Clerkenwell I signs at and function. Another is there

at So product launches showcase that some exciting we've got will new NeoCon.

example. another that's So

how And to Officer, then and globalizing Bruce well. say, the There's much at. the other a third, efficiently can sense is. efficiently, we're Supply from we we so Chief there's showcased those other. really it once, to learn opportunity best we're And other results, investments each as so regions, you do making But Chain that's and not. assessing the the on of are We Netherlands. practices as went function in see Australia, that where and happening it. coming the some do in sharing that much I'd we team or we're for and there's And same markets each know, hired through see whether facilities the great helping we've makes I Germany looked to is driving learning that that's the just good in We La that and as scale beauty and and we it everyone Grange

far. a work so to good perspective. from more there's that So It's come lot

David S. MacGregor

opportunity, you with building more opposed that find One capability maybe that global you smaller, as you're a larger little audience you're are Global this traction better with out scale more maybe fragmented accounts. getting to a or you're Team, Do finding Dream the One accounts as getting

Laurel Hurd

again, as you of it's with we're, solution. are flooring Yes, Australia, that of a that. it little coming the shown approaching with. we in a voice. it a that examples met global than solution. another major a is one a one with bit There differently of large In interesting. and And multi-floor and There's up really account, that. past, we at It's we're more There's looking we've say, we're beyond now couple some Yes. in retailer example met

as level we're teams, coordinated a customers. much and know also higher do as one you're up making with don't show more they're with with think our meet and have They more They needs work and And enjoying impact their I So well. right? we voice, it. right, we're getting audience, we to separate

David S. MacGregor

the on Great. progress. Congratulations

Laurel Hurd

Great. David. Thanks,

Operator

no are questions this time. There further at

I'd the call So to to like Hurd. back turn Laurel over

Laurel Hurd

today, the to all start that thank and we year, you and again listening next work I Great so Well, progress. want the everyone to thank forward you for and all the much. quarter. team I great they're updating look appreciate to the doing

Operator

for does That Thank for you today. conclude participating. our conference

disconnect. all now may You

Interface (TILE) 3 May 242024 Q1 Earnings call transcript