Interface(TILE) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter net sales totaled $344.3 million, an increase of 11% compared to the third quarter of 2023 [18] - Adjusted gross profit margin was 37.5%, an increase of 158 basis points year-over-year [19] - Adjusted operating income was$ 43.5 million, up 34% from $32.4 million in the same quarter last year [20] - Adjusted EPS was$ 0.48, compared to $0.28 in the third quarter last year [20] - Adjusted EBITDA was$ 53.7 million, up from $43.7 million in the previous year [21] Business Line Data and Key Metrics Changes - Currency-neutral net sales in the Americas were up 18% year-over-year, driven by strength in the Education market segment [9][18] - Global Education billings were up 18% year-over-year, supported by the expanded product portfolio [10] - Global corporate office billings increased by 2% year-over-year, gaining market share despite overall industry trends [11] - Healthcare billings were soft in the third quarter, but strong double-digit year-over-year order growth was noted [11] - Retail billings were up compared to a weak prior year period, contributing to overall growth [12] Market Data and Key Metrics Changes - Currency-neutral orders in the Americas were up 17%, with growth across all product categories [13] - In EAAA, currency-neutral orders were flat year-over-year, with growth in Asia offset by declines in Australia [13] - The backlog was strong, up 29% year-to-date, indicating positive momentum heading into the fourth quarter [13] Company Strategy and Development Direction - The "One Interface" strategy is focused on building strong global functions to support local selling teams and enhancing productivity [6] - The company is investing in automation and robotics to reduce complexity in manufacturing [14] - Sustainability initiatives include providing carbon impact metrics and expanding carpet recycling capabilities [15][16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the corporate environment and increasing activity as more employees return to work [28] - The company anticipates strong retail billings in the fourth quarter, with a healthy backlog supporting future growth [23] - Management raised the full-year outlook for net sales to between$ 1.315 billion and $1.325 billion [24] Other Important Information - The effective tax rate benefited from the release of a$ 2.7 million valuation allowance, which is not expected to recur [20] - Capital expenditures were $6.5 million in the third quarter, compared to$ 5.9 million in the previous year [22] Q&A Session Summary Question: State of non-residential repair and remodel leading into 2025 - Management noted strong order growth and optimism about the corporate environment, indicating better momentum compared to the previous year [28][29] Question: Details on order growth across verticals - Healthcare orders were up double digits, with expectations for future growth as projects are installed over time [32][37] Question: Insights on retail and corporate office performance - Retail business rebounded due to project delays from the previous year, contributing significantly to growth [35] - Corporate office business performed well, with mid-single-digit growth in the Americas [36] Question: Gross margin targets and timeline - The company aims to reach gross profit margins of 38% to 38.5%, with no specific timeline provided [41][56] Question: SG&A expenses and revenue growth support - Management emphasized efficiency in SG&A and intentional investments to support growth, with a focus on customer-facing initiatives [58]