Interface, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 and Fiscal Year 2020 Interface, Inc. Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the call over to Christine Needles, Corporate Communications. Please go ahead.

Good morning, and welcome to Interface's conference call regarding fourth quarter and full year 2020 results, hosted by Dan Hendrick, Chairman and CEO, and Bruce Hausman, Vice President and CFO. During today's conference call, any management comments regarding Interface's business, which are not historical information, are forward-looking statements within the meeting 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 associated with the ongoing COVID-19 pandemic and those described in our SEC filing. 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 8K furnished with the SEC today. Lastly, this call is being recorded and broadcasted for interface. It contains copyrighted material and may not be re-recorded 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'd like to turn the call over to Dan Hendrick, Chairman and CEO.

Thank you, Christine. Good morning, and thank you for joining us today. 2020 was a challenging year, and we all experienced the impacts of the global pandemic. I am very proud of the Interface team across the globe for your resilience. Thank you. Thank you. In response to the pandemic, we took swift action to put our people first. We quickly moved our office-based workforce to work from home and establish stringent health and safety protocols to support our manufacturing team. We took significant actions to align our cost structure with the weaker demand environment, which helped to protect both margins and cash flow during this time. Some of our cost reductions were temporary, like freezing salaries and eliminating bonuses, but we expect a significant portion will be permanent changes to the way we run our business. This gives us significant earnings power as our markets recover. While we acted swiftly to control costs, we stayed focused on product innovation and our selling system. These competitive advantages position Interface for long-term success. The fourth quarter came in as expected with sales of $277 million in line with the third quarter 2020 sales, but down 18% compared to the fourth quarter 2019. Full-year sales of $1.1 billion were down 18% compared to the sales for the full year of 2019. Interface continues to deliver solid cash flows despite the soft demand caused by COVID-19. Notably, we generated $119 million of cash from operations during the year. Globally, in some parts of APAC in Europe, we are seeing modestly improving trends. The Americas have been slower to recover, but the rollout of the vaccine, we're hopeful the market will recover. The new administration's return to the Paris Climate Accord and their focus on global warming should provide some tailwind for us. We're excited about the potential of our new cradle-to-gate carbon-negative offerings, and we're seeing interest from customers across all industries and regions. Turning to segments, education, retail, healthcare, and multifamily housing have been the first to show signs of recovery. Our retail segment was up 12% in the quarter, and we're encouraged by our consumer online business. And our Nora Rubber brand has also shown resilience through the downturn, with our focus on serving the healthcare and education segments. Selling activity has increased in recent weeks, including a growing number of sales engagements and RFPs. Sample activity in the United States is approaching pre-COVID levels, which is a good leading indicator of a rebounding activity. Lastly, as the macro environment begins to open, we're seeing a number of major projects kick off, including ones that had previously been put on hold, and a meaningful growth in our project pipeline. It is still unclear when we'll see a full rebound in the office market, but we're starting to see overall signs of improvement. We're anticipating demand may strengthen in the second half of 2021. Major companies are allowing their employees to return to the office as we have at Interface. They're also reconfiguring portions of their office footprints to create more open, collaborative space. This is a large opportunity for us. Based on market data and the research we're seeing, we believe that most companies are ultimately planning some level of return to a physical office. We're positioned well to take advantage of this potential recovery. We continue to be focused on product development with a robust launch pipeline plan for 2021. In fact, we're on track to launch more styles in 2021 than we did in 2019 pre-COVID. As we look to grow our carpet tile share, we plan to expand our embodied beauty collection to EAAA in the first quarter of 2021. We first launched this product line in the Americas in the fourth quarter of 2020. The industry's first cradle-to-gate carbon-negative carpet styles are generating a lot of interest, particularly with our global end-use customers, as they work to meet their own publicly declared time-bound commitments for carbon reduction. And I'm proud to share the key elements of our carbon-negative carpet style innovations are now patent-protected. This US Patent Award is the culmination of two decades of research and development that started in the early 2000s with our cool blue technology. This is an incredible achievement for Interface and further cements our leadership position and competitive advantage. We're not stopping there in select markets in Europe, In the first quarter, we expect to launch our first cradle-to-gate carbon-negative micro-tough carbon tile collection. The dealer channel is an important focus for us. In the Americas, our open-air product platform is ideally positioned for the dealer market. It allows us to design, manufacture, and quickly bring to market sets of products that are attractive, high-quality, and that meet today's budget needs. Open-air styles work particularly well in areas with large floor plate footprints, and we're expanding with new colors, patterns, and combinations in 2021. These styles also appeal to customers in the commercial office, tenant improvement, and education segment. It is encouraging that this product launch has seen the fastest take-up in the America's marketplace, in my memory. On the resilience side, we continue to have significant opportunities within rubber and LVT products. In EMEA, we just launched several new rubber costiles in our Normant family that play into the concrete look design trend. In Americas, we plan to launch a new vinyl sheet offering designed to meet stringent infection control needs on patient floors and other healthcare applications. This is an exciting expansion that complements our flowing opportunity in healthcare. We're also looking at additional resilient product category expansion opportunities and provide more updates on this later in the year. Overall, we continue to drive innovation as we look to capitalize on trends and create market opportunities, all the while helping customers lower their carbon footprint of their projects. We continue to advance our manufacturing in line with our sustainability priorities and to standardize on new backing systems globally. One great example of this is our Sequest bio backings. These backings offer the same performance qualities as our existing products, but are made with materials that have a net negative carbon footprint when measured cradle to gate. supporting our work to decarbonize the built environment. In our Europe manufacturing, we expect to transition our entire portfolio to our C-Quest bio-backing system in 2021. These moves in our Americas and EM manufacturers should allow us to continue to meet growing customer demand for non-petroleum-based packing options. Sustainability is top of mind for our customers. It is becoming table stakes. Several Interface customers, including multiple large global technology and Fortune 100 companies, have chosen our products due to our carbon negative and non-PVC offerings, and have made commitments for our Sequest Bio Backings product line. Because every flooring we sell is made carbon neutral through our Carbon Neutral Floors program, Interface helps end users achieve their carbon commitments. We provide lower carbon footprints across our entire portfolio. These offerings and technology provide us with a competitive advantage. Carbon matters to our customers. 90% of our top customers have publicly declared their own time-bound carbon reduction goals. We are confident we will have even more success in the future because of our sustainability value proposition and the differentiation that our products bring to the market. and carbon matters to us at Interface. We are dedicated to finding solutions to reduce the carbon footprint of our products, and our goal is to become a carbon-negative enterprise by 2040. These steps are good for Interface, good for our customers, and good for the planet. With that, I will turn it over to Bruce for Q4 and full-year 2020 financial recap. Bruce?