Interface, Inc. (NASDAQ:TILE) Q3 2023 Earnings Conference Call November 3, 2023 8:00 AM ET

Company Participants

Christine Needles - Corporate Communications

Laurel Hurd - President and Chief Executive Officer

Bruce Hausmann - Chief Financial Officer

Conference Call Participants

Brian Biros - TRG

David McGregor - Longbow Research

Keith Hughes - Truist

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.

During today's conference call, any management comments regarding Interface's business, which are not historical information, are forward-looking statements within the meaning of federal securities laws. Forward-looking statements include statements regarding the intent, belief or current expectations of our management team as well as the assumptions on which such statements are based. Any forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from any such statements, including risks and uncertainties described in our most recent annual report on Form 10-K filed with the SEC. The company assumes no responsibility to update forward-looking statements.

Management's remarks during this call also refer to certain non-GAAP measures. Reconciliations of the non-GAAP measures to the most comparable GAAP measures and explanations for their use are contained in the company's earnings release and Form 8-K furnished with the SEC today.

Lastly, this call is being recorded and broadcasted for Interface. It contains copyrighted material and may not be rerecorded or rebroadcasted without Interface's express permission. Your participation on the call confirms your consent to the company's taping and broadcasting of it. After our prepared remarks, we will open up the call for questions.

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

Laurel Hurd

Thank you, Christine, and good morning, everyone. I want to start by thanking the Interface team for their hard work in a dynamic environment. Our results in the quarter reflect the resiliency of our global diversification strategy and effective execution in a relatively sluggish market. Despite lower volumes in the quarter, we expanded our operating margin and delivered strong cash generation.

There were two primary factors that impacted our revenue growth in the third quarter, but we also expect to continue in the fourth quarter. First, the retail sector, which had an outsized impact on our third quarter sales for a good portion of our year-over-year decline. We don't often talk about the retail segment as it's about 4% of our year-to-date annual sales. However, this sector has been pressured, as you know, and we have seen significant unplanned deferrals of store remodel projects due to the macroeconomic uncertainty these retailers are facing. They're being cautious in their capital budget, pushing out projects and in some cases, closing locations and we're feeling the impact of that.