Interface, Inc.

Welcome to the Q1 2021 Interface, Inc. Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that this conference is being recorded. If you require further assistance, please press star 0. I would now like to hand the conference over to your speaker today. He's Kristen Needles, Director of Global Communication. Please go ahead.

Good morning, and welcome to Interface's conference call regarding first quarter 2021 results hosted by Dan Hendricks, 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 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 statement, including risks and uncertainties associated with the ongoing COVID-19 pandemic and those 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 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 re-broadcasted 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 Hendricks, Chairman and CEO.

Well, thank you, Christine. Good morning, and thank you for joining us today. We delivered solid results for the first quarter of 2021 as we continued to reduce our cost structure and benefited from a currency tailwind in the quarter. Tangible signs of recovery emerged in the first quarter and have continued into the second quarter, particularly in the United States and parts of Europe and APAC. Our first quarter results came in as expected with total sales of $253 million, down 12% from the prior year period. The 2021 first quarter was 13 weeks as compared to 14 weeks in the prior period. We generated strong cash flow from operations of $25 million during the quarter while continuing to delever the company. Overall sales pipeline activity is up, including RFPs and sample activity. First quarter 2021 orders were up 11% sequentially from the fourth quarter of 2020. Typically, our first quarter orders are lower than the fourth quarter due to seasonality. This is a positive sign that our markets are beginning to recover. The green shoots that we talked about last quarter are showing up tangibly in our numbers, and we believe this is sustainable demand. Looking around the world, we are seeing positive activity inside many of the countries where we do business, but the landscape continues to be mixed. There are strong signs of recovery in the Americas and some parts of Europe and APAC. However, recovery from much of Europe has been slowed by rising COVID cases, a slow rollout of the vaccination, and continued lockdowns. APAC, on the other hand, continues to be subject to heightened border restrictions. These lockdowns and border restrictions are slowing the recovery in many of our markets, particularly outside the United States. However, we continue to see increased RFPs due to reactivation of pipeline and new products. And building from last quarter's sample activity in the United States is approaching pre-COVID levels, which is a leading indicator of rebounding activity. Let's turn now to our geographies and market verticals. While we do not know the full impact of the return to the physical office, we are optimistic about the future. US CEOs have become more bullish on the return to the office, but it's still unclear when and what that return looks like. But they are going to return. In Europe, the conversation is not about if but when. The return will happen. This is all good news for our business. Remember that approximately 80% of our business is renovation and remodel work. Interface is well-positioned to benefit from the potential remodeling of space as companies bring their employees back and reconfigure their workplaces for a post-COVID world. We're also seeing good signs of market recovery in other market verticals, including education, healthcare, and government. Healthcare continues to be strong. Education is also coming back, particularly in higher education, due to increased renovations and new constructions. And government opportunities are picking up as well. We're starting to see progress in the dealer market too. I was pleased to see that our net promoter score with our dealers in the U.S. was the best we've seen for a long time. It has been trending upward since the third quarter of 2020 as we continue to focus on the discretionary dealer market. We continue to invest in innovation and new product development. On our last call, we talked about exciting developments in our product pipeline for 2021. Let me share a few important updates. In March, we officially launched our embodied beauty collection in EMEA and in APAC, including our first cradle-to-gate carbon-negative carpet tile styles. In addition, we also launched in EMEA the MicroTuff flash line that is also carbon-negative. Our customers are becoming more carbon-conscious and want to specify products that reduce the carbon footprint of their spaces. Also, in Americas, we expanded our popular open-air carpet tile product platform. with 17 new patterns. OpenAIR allows us to design, manufacture, and bring to market products that are attractive, high quality, and extremely affordable. OpenAIR styles work particularly well in areas with large footprints. We're seeing interest from many of our largest global customers and dealers, as well as commercial office tenant improvement in the education market segments. This is one of the fastest take-ups of any product that we've introduced at Interface. In Resilient and America's Market, we recently launched our first vinyl sheet offerings, which are designed to meet stringent needs in healthcare applications. These styles work well in patient room applications and complement our existing rubber opportunity in healthcare, and give us a much bigger part of the market to play in. Looking forward, April orders started off strong, and we're seeing double-digit order growth across all regions. There's continuing demand for our carbon neutral and carbon negative products. We are beginning to see more RFPs with requirements for low carbon products. We believe this is applicable across all regions and industries, and specifically with global companies that have made a series of carbon footprint reduction commitments over the past six to 12 months. While orders are trending in the right direction, we're seeing some positive signs of recovery. We recognize that we're in the early stages of that recovery. We're hopeful that successful vaccination rollouts continue, and we're optimistic about improved performance in the back half of 2021 as companies come back to the office. With that, I'll turn it over to Bruce for the first quarter 2021 financial recap. Bruce?