Interface, Inc.

to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Christine Needles. You may begin your conference.

Good morning and welcome to Interface's conference call regarding fourth quarter and full year 2023 results, hosted by Laurel Hurd, CEO, and Bruce Hausman, 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 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 will turn the call over to Laurel Hurd, CEO. Thank you, Christine, and good morning, everyone.

Interface delivered a strong finish to the year with fourth quarter sales and margins coming in ahead of our expectations. Our performance in 2023 through its challenging macro environment reinforces our confidence that our strategy is working. We entered 2024 with solid momentum in our business in many areas outperforming the market as we continue to activate our diversification strategy and deliver strong commercial execution. Overall, in 2023, our team did a great job holding price and driving increased margins to a favorable product mix, but we also benefited from raw material input cost deflation, specifically in the fourth quarter. Digging into our product category results, we delivered a stronger-than-expected quarter in carpet tile, with low single-digit growth and global billings for the quarter. This is well ahead of industry trends, reflecting shared gains in this important category. This is a testament to the strength of our commercial execution, new collections that have strong momentum, and the importance of our low-carbon footprint products. On the NOAA rubber side, we delivered another solid year in this category in 2023, although we continue to experience softness in Asia. We had another record year for LVT. Global billings surpassed 165 million in 2023, up 10.5% compared to 2022. We're outperforming market growth in this category as well, with LVT billings in 2023 up double digits in the Americas, our largest market, compared to industry-wide benchmarks that show LVT growth in low single digits. We're encouraged by these share gains as customers increasingly show preference for the design and performance of our flooring solutions. Turning to our market segments, we're pleased with our continued progress to diversify our business. Today, I want to start with looking at corporate office, which exceeded our expectations in 2023 and the fourth quarter. We ended the year flat in corporate office and up 4% globally in Q4 due to strength in the Americas. More and more people are coming back to the office, driving companies to refresh their spaces, as well as the move to Class A premium buildings. These are areas where we excel and have a right to win with our premium products and design leadership. And our commercial execution and selling organization is keen to capitalize on this shift. It's one way our selling system continues to provide us with a competitive advantage. Healthcare remains an important segment and a key part of our diversification strategy. In 2023, our healthcare business grew in the Americas and Australia, offset by softness in Asia and timing of projects in Europe. Education remains a standout market for us. Global billings were up 5% for the year, driven by strength in the Americas. As higher ed purchasers increasingly prioritize the sustainability attributes of interior products, including flooring, Interface remains well positioned to serve customers and continue winning in this market. As expected, ongoing retail sector softness remained the headwind, driving the overall decline in sales for both the quarter and the full year. Macroeconomic uncertainty resulted in some customers deferring store remodel projects, and in some cases, closing locations due to constrained budgets. While retail remains a small percentage of our overall revenue, it did have an outsized impact in our sales in the back half, and we expect the headwinds to continue through the first half of 2024. Excluding retail, we were pleased with the growth we saw for the quarter and the year, particularly given the macro headwinds we navigated through. Turning to orders, fourth quarter orders were flat year over year, as currency neutral orders in the Americas were up 3.1%, offset by EAAA that was down 4.1%. Backlog at the end of the fourth quarter was solid at 176.3 million as we moved into 2024. We're intently focused on commercial productivity and aligning our sales team to the fastest growing geographic market. The selling organization has done a great job holding price and driving favorable mix, both geographically and from a product standpoint. All of this, coupled with deflation and certain raw materials, helped drive 507 basis points of improvement year over year in fourth quarter's adjusted gross profit margin. As part of our one interface strategy, we launched a pilot in 2023 in select U.S. markets, bringing together the NORA and interface sellers into coordinated teams with an aligned quota that incentivizes cross-selling. We've seen tremendous results. In total, our test markets delivered double-digit order growth over the prior year period, outpacing many of the non-combined teams in the Americas. Teams that previously operated independently started calling their customers together as a single integrated flooring partner, and we've already seen the benefits, opening new opportunities for us to win more of the floor. This is true even with long-time customers who may have only installed one type of product in the past. For example, we have a hospital system that has had Nora rubber installed for years that we now proactively offer carpet tile and LVT for other areas of the floor. Some of these new opportunities are quick turns. Some are longer sales cycles, particularly on the Nora side. Ultimately, we're serving our customers better and helping them get the right mix of product across more of the floor plates. Building off the success in January 2024, we launched combined selling teams across the entire America's business. And importantly, we are investing in additional feet on the street, specifically with more rubber flooring sales expertise that will help strengthen our approach as the teams become even more successful. We're funding this investment through realized efficiencies from our global operating model under the one interface strategy. We're also focused on productivity improvements in our manufacturing. As you'll see reflected in our 2024 CapEx guide, we are planning to make operational investments in our plants. including new automation and robotic solutions. We will be rolling out these investments over the next 18 to 24 months, following an initial pilot that's been going well with the goal of driving gross profit margin expansion. We anticipate we'll see these benefits amplify as we get into fiscal year 2025. I'm incredibly excited about the work our design teams are doing, as well as the product innovation and development in our pipeline, as we've aligned as one interface, leveraging our global expertise. In Q4, we launched our Pass Forward carpet tile collection. This was the first time in our history that we launched a global collection at the same time everywhere around the world, drawing in decades of renowned design. We have another exciting global carpet tile and LVT collection launch coming up in Q2 that will unveil at Quirkenwell and then Neocon, our biggest design events of the year. In addition, we'll continue to expand our open-air collection with more carpet tile designs available at accessible price points while continuing to bring market-leading design to the premium category. Lastly, we continue to be recognized for our sustainability progress and leadership. Notably, in January, our circular approach to carpet tile production was recognized as one of three circularity lighthouses in the built environment by the World Economic Forum and McKinsey & Company. This spearheading circular solution exemplifies our ongoing commitment to achieving our sustainability objectives as well as our focus on innovation, impact, and value. As we report our financial results for 2023, I'm proud of our global team for truly embracing our One Interface strategy. We have positive momentum going into 2024, and I'm excited for what is to come. We remain focused on leveraging the power of our global company to drive profitable growth and value to our shareholders. With that, I will turn it over to Bruce to go over the financials.