Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Interface Inc (TILE, Financial) reported a strong third quarter with an 11% increase in net sales compared to the same period last year.
- The company's 'One Interface' strategy is yielding positive results, particularly in the Americas, where currency-neutral net sales grew by 18%.
- Interface Inc (TILE) is experiencing significant growth in the education sector, with global education billings up 18% year over year.
- The company has made notable progress in sustainability, receiving recognition from Reuters and Newsweek for its efforts in carbon reduction and environmental sustainability.
- Interface Inc (TILE) has a strong financial position, with $415 million in liquidity and a net leverage ratio of 1.1 times, allowing for continued investment in growth and automation.
Negative Points
- Net sales in the Asia and Australia regions were down, with Australia experiencing a 9% decline year over year.
- Healthcare billings were soft in the third quarter, although there was strong order growth, indicating potential future revenue but current underperformance.
- The retail segment, while recovering, is still a small part of overall net sales and can be subject to unplanned deferrals.
- The company faces challenges in maintaining gross profit margins due to non-recurring benefits in the previous year's fourth quarter.
- Interface Inc (TILE) must continue to manage SG&A expenses efficiently to support revenue growth without significantly increasing costs.
Q & A Highlights
Q: How would you characterize the state of non-residential repair and remodel leading into 2025, especially in education and healthcare sectors?
A: Laurel Hurd, CEO: We are optimistic about the momentum building in non-residential repair and remodel. Our order book looks strong, and we are outpacing the market. The corporate environment is improving as more associates return to work, and our education business remains robust, with significant growth in our NORA products. We are confident in our ability to take market share.
Q: Can you provide details on the order growth in the Americas across different verticals or products?
A: Laurel Hurd, CEO: While we don't disclose detailed breakouts, we did see double-digit growth in healthcare orders, which will convert to billings in future quarters. Our combined selling teams are effectively supporting growth across all product categories.
Q: What is driving the strong performance in the retail sector, and how does it impact your overall growth?
A: Laurel Hurd, CEO: Our retail business rebounded as expected, with delayed store remodels from last year contributing to growth. In the Americas, retail accounted for eight points of the 18% growth, with the remaining 10 points from other markets. We anticipate this momentum to continue into the fourth quarter.
Q: How do you plan to manage capacity for NORA products given the growth beyond healthcare?
A: Laurel Hurd, CEO: We have invested in automation equipment to increase throughput and support growth. We are in good shape with current capacity and will continue to invest in automation and additional resources as needed.
Q: What are your long-term targets for gross margin, and how do you plan to achieve them?
A: Laurel Hurd, CEO: Our goal is to reach a gross margin of 38% to 38.5%. We are encouraged by our progress and plan to continue leveraging automation, procurement improvements, and our one interface strategy to drive margin expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
