Interface Reports Third Quarter 2022 Results

November 4th, 2022 / Atlanta, GA

Interface, Inc. (Nasdaq: TILE), the global flooring solutions company where everything is certified carbon neutral, today announced results for the third quarter ended October 2, 2022.

Quarterly Highlights:

• Net sales totaled $327.8 million, up 4.8% year-over-year. Currency neutral net sales were up 10.9% year-over-year.
• GAAP SG&A expenses at 24.7% of net sales, down from 24.9% in Q3 2021; adjusted SG&A expenses at 24.2% of net sales, down from 24.8% in Q3 2021.
• GAAP operating income up 13.2% year-over-year; adjusted operating income up 3.5% year-over-year.
• GAAP earnings per share of $0.24, up 26.3% year-over-year; adjusted earnings per share of $0.30, up 3.4% year-over-year.
• Orders were down 9.7% from Q3 2021 and down 4.3% on a currency neutral basis.

“Interface had another solid quarter with currency neutral net sales growth of 10.9% and adjusted EPS of 30 cents. Demand for our best-in-class lower carbon offerings continues across the business, with notable strength in Q3 in the office and retail sectors,” commented Laurel Hurd, CEO of Interface. “In the back half, we are lapping tougher comps as we saw pent up COVID demand that was released in Q3 and Q4 of 2021. Even with currency neutral orders down 4% in Q3 this year, we enter Q4 encouraged about order rates and with a strong backlog that is up 7% since the beginning of the year. I’m proud of the entire global team for consistently controlling costs and managing our SG&A to deliver strong results.”

“At Interface, everything we do, every aspect of our business, is carbon neutral. We are the first and only global flooring company to be third-party certified as a Carbon Neutral Enterprise across our entire business, products, and value chain. As we radically decarbonize every aspect of our business, our customers know they can support their own sustainability goals by specifying our products, giving us an incredible competitive advantage,” Hurd concluded.

“Our balance sheet remains strong, and we continue to navigate well in a persistent inflationary environment, mostly offsetting these challenges with pricing and productivity. Through our strong brand, differentiated product offering, and best-in-class sustainability story, we are well positioned to take share,” added Bruce Hausmann, CFO of Interface.

Third Quarter 2022 Financial Summary

Sales: Third quarter net sales were $327.8 million, up 4.8% versus $312.7 million in the prior year period on broad-based growth.

Gross profit margin was 33.2% in the third quarter, a decrease of 81 basis points from the prior year period. Adjusted gross profit margin was 33.7%, a decrease of 75 basis points from adjusted gross margin for the prior year period due primarily to higher freight and raw material costs, partially offset by higher selling prices.

Third quarter SG&A expenses were $80.8 million, or 24.7% of net sales, compared to $77.7 million, or 24.9% of net sales in the third quarter last year. Adjusted SG&A expenses were $79.2 million, or 24.2% of net sales in the third quarter of 2022, compared to $77.5 million, or 24.8% of net sales, in the third quarter last year.

Operating Income: Third quarter operating income was $28.0 million, compared to operating income of $24.8 million in the prior year period. Third quarter 2022 adjusted operating income (“AOI”) was $31.2 million versus AOI of $30.2 million in third quarter of 2021.

Net Income and EPS: On a GAAP basis, the Company recorded net income of $14.1 million in the third quarter of 2022, or $0.24 per diluted share, compared to third quarter 2021 GAAP net income of $11.0 million, or $0.19 per diluted share. Third quarter 2022 adjusted net income was $17.4 million, or $0.30 per diluted share, versus third quarter 2021 adjusted net income of $16.9 million, or $0.29 per diluted share.

Adjusted EBITDA: In the third quarter of 2022, adjusted EBITDA was $42.9 million. This compares with adjusted EBITDA of $42.0 million in the third quarter of 2021.

First Nine Months of 2022 Summary

Sales: Net sales for the first nine months of 2022 were $962.4 million, up 11.8% versus $860.8 million in the prior year period.

Gross profit margin was 34.5% for the first nine months of 2022, a decrease of 164 basis points from the prior year period. Adjusted gross profit margin was 35.2%, a decrease of 148 basis points from adjusted gross margin for the prior year period due to higher labor and raw material costs, partially offset by higher selling prices.

SG&A expenses for the first nine months of 2022 were $240.7 million, or 25.0% of net sales, compared to $236.9 million, or 27.5% of net sales in the same period last year. Adjusted SG&A expenses were $238.2 million, or 24.8% of sales, for the first nine months of 2022 compared to $234.5 million, or 27.2% of net sales, in the same period last year.

Operating Income: Operating income for the first nine months of 2022 was $90.0 million, compared to operating income of $70.9 million in the prior year period. AOI was $100.4 million for the first nine months of 2022 versus AOI of $81.2 million in the same period last year.

Net Income and EPS: On a GAAP basis, the Company recorded net income of $44.2 million in the first nine months of 2022, or $0.75 per diluted share, compared to the first nine months of 2021 net income of $33.4 million, or $0.57 per diluted share. Nine-month 2022 adjusted net income was $55.3 million, or $0.94 per diluted share, versus the first nine months of 2021 adjusted net income of $44.5 million, or $0.75 per diluted share.

Adjusted EBITDA: In the first nine months of 2022, adjusted EBITDA was $134.8 million. This compares with adjusted EBITDA of $116.6 million in the prior year period.

Cash and Debt: The Company had cash on hand of $79.4 million and total debt of $521.5 million at the end of the third quarter 2022, compared to $97.3 million of cash and $518.1 million of total debt at the end of fiscal year 2021.

Share Count: Fully diluted share count at the end of the third quarter of 2022 was 58.4 million shares.

Third Quarter Segment Results

AMS Results:

• Q3 2022 net sales of $194.4 million, up 10.0% versus $176.8 million in the prior year period primarily due to the strength in the corporate office and retail markets.
• Q3 2022 orders were down 5.7% compared to the prior year period.
• Q3 2022 operating income was $25.0 million compared to $21.7 million in the prior year period.
• Q3 2022 AOI was $25.0 million versus AOI of $21.6 million in the prior year period.

EAAA Results:

• Q3 2022 net sales of $133.3 million, down 1.9% versus $135.9 million in the prior year period.
• Currency fluctuations negatively impacted Q3 2022 net sales by approximately $18.5 million as compared to Q3 2021 net sales due to weakening of the Euro, Australian dollar and British pound sterling against the U.S. dollar. Excluding negative foreign currency impacts, EAAA’s Q3 2022 net sales were up 11.7% year-over-year.
• Q3 2022 orders were down 15.1% compared to the prior year period and down 3.0% on a currency neutral basis. Order growth was negatively impacted by the Russia/Ukraine war and COVID-19 lockdowns in China.
• Q3 2022 operating income of $3.1 million compared to $3.1 million in the prior year period.
• Q3 2022 AOI was $6.3 million versus AOI of $8.6 million in the prior year period.

First Nine Months Segment Results

AMS Results:

• Net sales for the first nine months of 2022 were $557.8 million, up 21.1% versus $460.4 million in the prior year period.
• Operating income for the first nine months of 2022 was $74.6 million compared to $54.4 million in the prior year period.
• AOI for the first nine months of 2022 was $74.5 million versus AOI of $54.6 million in the prior year period.

EAAA Results:

• Net sales for the first nine months of 2022 were $404.6 million, up 1.1% versus $400.4 million in the prior year period.
• Currency fluctuations had an approximately $41.4 million negative impact on net sales in the first nine months of 2022 compared to the prior year period, primarily due to the weakening of the Euro, British pound sterling and Australian dollar against the U.S. dollar. Excluding negative foreign currency impacts, for the first nine months of 2022, EAAA’s net sales were up 11.4% year-over-year.
• Operating income for the first nine months of 2022 was $15.4 million compared to $16.4 million in the prior year period.
• AOI for the first nine months of 2022 was $25.9 million versus AOI of $26.6 million in the prior year period.

Outlook

The Company continues to be challenged by high inflation and a dynamic geopolitical environment. As the Company monitors this situation, it is anticipating for the full fiscal year 2022:

• Net sales of $1.285 billion to $1.305 billion.
• Adjusted gross profit margin of approximately 34.5%
• Adjusted SG&A expenses of approximately $319 million.
• Adjusted Interest & Other expenses of approximately $31 million.
• An adjusted effective tax rate of approximately 28%.
• Capital expenditures of approximately $25 million.
• Fully diluted weighted average share count for the fourth quarter of approximately 58.4 million shares and for the full fiscal year 2022 of approximately 58.9 million shares.

The full text of Interface’s 3Q22 earnings release, including all tables, and an archived replay of the company’s Nov. 4 conference call webcast may be accessed at https://investors.interface.com.

About Interface

Interface, Inc., (NASDAQ: TILE) is a global flooring solutions enterprise with an integrated portfolio of carpet tile and resilient flooring products, where everything is third-party certified carbon neutral. With our design approach to flooring systems, we help our customers create high-performance interior spaces that have a positive impact on people’s lives and the planet. Our range includes Interface® carpet tile and LVT, nora® by Interface rubber flooring, and FLOR® premium area rugs for commercial and residential spaces.

Interface is third-party certified as a Carbon Neutral Enterprise. We neutralized our carbon impact across our entire business, including all operations and our full value chain, marking an important milestone toward our objective to become a restorative and carbon negative enterprise by 2040.

Learn more about Interface at interface.com and blog.interface.com, nora by Interface at nora.com, FLOR at FLOR.com, and our sustainability journey at interface.com/sustainability, and our Carbon Neutral Enterprise certification at https://www.interface.com/US/en-US/sustainability/carbon-neutral-enterprise.html.

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Tags: business | Interface