Good morning, and welcome to Interface's conference call regarding second quarter 2023 results hosted by Laurel Hurd, CEO, and Bruce Hausmann, 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 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 re-recorded or rebroadcasted without Interface's expressed 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. Once again, I want to thank the Interface team for delivering a solid quarter. It was in line with our guidance and expectations on strong execution around the globe. Currency-neutral net sales were down 5% year-over-year as we anticipated compared to a strong prior year comp that was up 23%. Overall, given ongoing macro challenges, we're pleased with Q2's net sales results and the steady customer demand that we saw throughout the quarter. We are executing well on our segment diversification strategy to help insulate and strengthen us even further from unpredictable market dynamics in the corporate office segment. Education has grown to 18% of our global billings over the last 12 months, and we anticipate this trend to continue as US schools tap into remaining funds in the $122 billion American Rescue Plan legislation and tackle critical refurbishment and new construction projects across our primary geographies. Education is seasonally stronger in Q2, so we'll provide a bit more detail on the segment, and it was a bright spot for us this quarter. We saw increased activity in sales in the quarter across several of our larger markets, including the US, UK and Germany. The school administration invested in refurbishment and maintenance projects during summer break, driving global sales in this segment up 7% year-over-year on top of 20% growth last year. We're differentiated in education because of our reputation for high-quality flooring, overall product performance, and the breadth of our services, support and product warranties. And especially in higher education, many customers have their own sustainability goals and seek out our low carbon footprint flooring to help achieve them. In both K through 12 and Higher Ed, our products stand up to the wear and tear of high-traffic areas and provide design aesthetic for positive learning environment for students and teachers. We effectively leverage our full product portfolio in this segment with broad use of both carpet tile and LVT as well as nora rubber in key geographies such as Germany. Q2 is also when our biggest interior design event of the year occurs, NeoCon, where we had our second largest attendance of showroom visitors in our history as attendance continues to rebuild to pre-COVID levels. We've invested in enhanced digital capabilities to improve the customer experience and showcase new interface design studio software that allows us to design the entire floor plate and share the carbon impact of different flooring decisions with our customers. This is a true differentiator as more and more customers need to specify lower carbon products in their projects. And of course, we are focused on driving growth with new products. At NeoCon, we launched impactful new designs, including Lost Palms and Woven Gradience carpet tile collection and Silk Complex LVT. We also previewed a new global collection launching later this year, that features a modern take on designs of the past as we celebrate our 50th anniversary this year. We are making meaningful progress in accelerating our new product development, a key component to our strategy, and believe these new products will help us drive market share gains in the back half. Turning to orders. We continue to see steady order demand and enter Q3 with a strong backlog. Consolidated currency-neutral orders in the second quarter were down 2% year-over-year on a strong prior year comp that was up 10%. Orders were down 3% in the Americas and flat in EAAA. In EMEA, orders were steady, while strong growth in Australia helped offset continued soft post-COVID recovery in Asia. We enter the back half of the year with a solid backlog that is up 13% since the beginning of the year. We feel good about the steady demand we're seeing as customers continue to choose interface for their flooring solutions while remaining cautious about the dynamic market conditions around the world. Before I turn the call over to Bruce to discuss our financial results and outlook, I wanted to provide a brief update on our One Interface strategy, which is progressing as planned. As a reminder, this is a multiyear effort focused on resetting our operating model to leverage the power of our entire company to accelerate growth and improve profits. We are building strong global functions to support our world-class local selling teams, expanding margins through global supply chain management and improved productivity and accelerating new products and designs to drive incremental growth. Earlier this year, we announced changes to our executive leadership team roles and responsibilities, and I shared that we have created a new role, Chief Supply Chain Officer to lead efforts on supply chain optimization and help us unlock expanded gross margin. I'm pleased to share that Bill Blackorby joined us this week, filling this important role in my leadership team. Bill brings more than 25 years of experience leading and managing highly successful teams across complex international supply chain, manufacturing and distribution operations. Bill will leverage his extensive global experience to accelerate our productivity initiatives and increase agility across our global supply chain organization. With our executive leadership now in place, I'm confident in our team's ability to better leverage the strength of our entire organization to drive improved margins and profitable growth across the business. I'm excited for the future of Interface and the opportunities that lie ahead. With that, I'll turn it over to Bruce to go through the financials.

Thank you, Laurel, and good morning, everyone. Second quarter net sales totaled $329.6 million, a decrease of 4.9% versus last year's strong second quarter, which was up 23%. FX-neutral net sales declined 4.7% year-over-year. Net sales in the Americas were down 3% year-over-year on a very strong prior year comp that was up 32%. In EAAA, net sales were down 8% on a prior year comp that was up 12%. On an FX-neutral basis, EMEA was down 5%, Asia was down 31% and Australia was up 4% year-over-year. Given the challenging year-over-year comps, we were pleased with Q2's net sales results and the steady customer demand that we saw throughout the quarter. Second quarter adjusted gross profit margin was 33.9%, which was stronger than our guide of 33%, but a decrease of 39 basis points from the prior year period due to lower fixed cost absorption, partially offset by higher pricing and favorable product mix. For the first time in many quarters, we saw deflation in our raw material purchases as the overall rates we pay for Q2's raw material purchases decreased 2% year-over-year. That compares to 9% year-over-year inflation that we incurred in Q1's raw material purchases. As we move into the second half of 2023, we expect further year-over-year raw material deflation. Adjusted SG&A expenses were $83.9 million or 25.5% of net sales in the second quarter compared to $80.4 million or 23.2% of net sales in the second quarter of last year. The increase was primarily due to inflation. Second quarter adjusted operating income was $27.9 million, down 28% versus adjusted operating income of $38.5 million in the second quarter last year. The decrease was mostly due to lower net sales volume. Second quarter adjusted EPS was $0.25 versus $0.36 in the second quarter last year. Adjusted EBITDA was $39.8 million this year versus $49 million in the second quarter last year. We generated $18.3 million of cash from operations in the second quarter, and liquidity was strong at quarter-end, totaling $384 million, which consisted of $93 million of cash and $291 million of revolver capacity. We repaid $25.9 million of debt in the quarter, resulting in net debt or total debt less cash on hand of $382.6 million at the end of the second quarter. The last 12 months of adjusted EBITDA totaled $150.3 million, and our net leverage ratio was 2.5 times, calculated as net debt divided by adjusted EBITDA. Our required principal and interest payments on all outstanding debt averaged approximately $10 million per quarter and with our strong balance sheet and our strong cash generation, we plan to continue paying down debt as a top capital allocation priority. Capital expenditures were $5.6 million in the second quarter of 2023 compared to $4.3 million in 2022. As we look at our outlook, we remain cautiously optimistic about the back half of the year. We have calibrated our net sales guidance to accommodate our first half actuals and the ongoing slow post-COVID recovery in Asia, while increasing our gross profit outlook based on the improving supply chain environment. And with that, we're now anticipating the following. For the third quarter of 2023, net sales of $320 million to $330 million. Adjusted gross profit margin of approximately 35.5%. Adjusted SG&A expenses of approximately $84 million. Adjusted interest and other expenses of approximately $10 million. An adjusted effective tax rate of approximately 31% and fully diluted weighted average share count of approximately 58.2 million shares. For the full fiscal year of 2023, we are also anticipating net sales of $1.285 billion to $1.310 billion, adjusted gross profit margin of 34% to 34.5%, adjusted SG&A expenses of approximately $336 million, adjusted interest and other expenses of approximately $37 million, and adjusted effective tax rate of approximately 29% and capital expenditures of approximately $32 million. As we move into the second half of the year, we remain focused on our growth strategy and our capital allocation priorities. We are encouraged by the steady demand we're seeing from customers and an improving supply chain environment, which builds momentum to enhance value for our shareholders.

Thank you, Bruce. As we look ahead, we expect a strong second half with continued market share gains and strong cash generation. I continue to be impressed with our team's expertise and capabilities to execute our strategy as we position Interface for growth and drive value for our shareholders. We look forward to sharing our ongoing progress on our next call. Thank you.

Hey. Good morning, everyone. This is actually Brian Biros on for Catherine. Thank you for taking my questions. To start on the gross profit outlook for the full year, I believe it was lowered last quarter and then looks like it was raised this quarter. So can you just touch further on kind of the moving pieces there? Kind of remind us what initially brought it down? And then what's changed to raise it back up again? Thank you.

Good morning, Brian. This is Bruce Hausmann. I'm pleased to share that we are finally experiencing a more stable and improving supply chain environment. At the beginning of the year, there was considerable uncertainty regarding inflation and the supply of raw materials as we entered 2023. However, as we moved into Q2, things began to stabilize further. You may recall that raw materials saw a 9% increase year-over-year in Q1, but in Q2, we observed continued stabilization, and for the first time in a long while, we're seeing a decrease in raw materials, with prices down 2% year-over-year. This update reflects our improving guidance and visibility as we progress through the year.

Yeah, so it sounds like it's most of the raw materials movement is the main driver. Is that right?

Raw materials play a significant role in this. We are also actively implementing and witnessing the impact of our productivity initiatives. However, it’s important to note that this is somewhat balanced out by lower fixed cost absorption. Therefore, there are various factors influencing the numbers.

Got it. And maybe just can you also touch on if are you seeing any pricing pressure or kind of just increased competition across the business in this kind of lower growth environment here. On the one hand, it's going to be becoming increasingly competitive out there, but you also have premium products that might be seeing better trends than the lower end products that probably see a lot more price pressure. So just interested to hear what you guys are seeing out there?

Yeah, Brian, I'll take that. It's Laurel. I would say that we're pretty pleased that our pricing is holding up in the market. When we look at the US market, as an example, we believe we gained share in the quarter. So we feel good about that as well as year-to-date. And as you said, our premium products continue to sell well, and we're launching more and more new products, not only at the premium end, but also at the more approachable price point so we continue to capture jobs across the spectrum. But we're seeing prices hold up pretty well. It's competitive out there for sure. We're not losing jobs, but we're pleased with the progress that we're seeing right now.

Yes. Good morning, everyone. And, Laurel, nice quarter, actually. I mean, given where you guys thought you'd be this quarter, the results actually turned out relatively well. So congratulations there. Can you update us on One Interface? Just where are you on this? Are there major inflection points in terms of the visible results of this program that we should anticipate in the second half, or does that maybe occur more in 2024? Where do you think you're making maybe a little more progress than you thought you would? Where, on the other hand, maybe you're lagging a little bit behind, but, as much detail as you can on One Interface would be a big help? Thank you.

Yes, that's great. Thanks for the question, David. Look, I think we're making really good progress. I'd say we're tracking as planned. I'm pleased as we announced that we now have our Chief Supply Chain Officer in place, who's going to help us a lot to continue to enhance our gross margins. So I feel really good about that. Bill is a great addition to the team. He joined us on Monday. He spent his first day down in LaGrange with the team there and really digging in. So I think that we will start to see having a meaningful impact as he really works with the team to drive our productivity initiatives. So I'm excited about that. We also, I would say, we're focused on more new products faster with more meaningful impact in the market across the globe. So the things we're tracking are speed to market and the impact of our new products. So I think you're going to continue to see that. I'd say we're just getting started there, but I feel really good about the early progress in that front. And then from a marketing perspective, our global marketing leadership team has been finalized, and the team was actually in town this week working through both capabilities where we're really building. We talked about our digital capabilities, which we're strengthening and pushing that around the world, while at the same time, being really efficient, so we have more impact with more efficiency from our marketing initiatives. So I think we'll see really sequential improvement as we continue to balance investing for growth in our strongest, most profitable markets, number one being the US, and we're continuing to invest there on the selling side, while we really drive for efficiencies on the back end.

And with respect to the question of the visibility around results and the cadence of that visibility, how should we be thinking about this? I mean I realize you provide guidance for the balance of the year here, but just thinking about this maybe on a slightly longer-term profile, when do we really see the inflection?

I believe you will observe a gradual improvement in both gross margin and SG&A leverage. We anticipate progress as we move forward, though I don't expect a sudden change. We are being cautious as we assess our investments and ramp up sales in the US, while also moderating the operational side. Therefore, you should think of it as steady progress and enhancement as we pursue growth, continuing to expand our top-line revenue while also improving margins with higher gross profit and lower SG&A expenses.

Okay. Great. Thanks for that and good luck with things there. Just within the order backlog right now, the order book, can you just talk about what you're seeing near term in terms of just shifting patterns within the US orders? And are you seeing growth in the low carbon, I would expect versus maybe some negative movements elsewhere in the product mix? If you can just talk about what you're seeing there?

Yes, let me provide an overview of our billings year-to-date and for the quarter because there are some positive highlights to discuss, after which we can move on to orders. Focusing on our corporate office segment, which is significant to our business, we see year-to-date growth in the Americas and Australia, stability in Europe, and a decline in Asia. We have acknowledged ongoing challenges in Asia, primarily due to the economic softness in China. Overall, the performance in the corporate office segment is encouraging, and while we remain aware of the macroeconomic landscape and are cautious about the second half of the year, we feel positive about our current standing. Regarding carpet tiles, our global billings were down in the mid-single digits for the quarter and low single digits in the Americas; however, year-to-date, our billings for carpet tiles in the Americas are roughly flat in dollar terms. We're pleased to see that some of our largest end-user segments in corporate offices and carpet tiles are performing relatively well. Looking at future orders, last year we experienced a 17% growth in the Americas, so we have a challenging comparison for orders. Nonetheless, demand in the Americas remains steady and aligns with our expectations. In Asia, we've faced continued struggles. Last year, our orders were down roughly 50% year-over-year in the first quarter, and this quarter they decreased by about 8.5%. Although the order rate is still challenging, it has improved compared to previous trends. Converting these orders to billings is taking longer due to ongoing project delays in the market. Therefore, we remain cautious in this area for the second half of the year.

Good progress. Last question for me, Bruce, you talked about raw materials up 9% in the first quarter and then down 2% in the second quarter. Is there any way you can help us with the modeling with the second half, how we should be thinking about the cadence into 3Q or 4Q?

Yeah. Around raw material specifically, David? Is that what you're asking about?

Yes.

Yeah. The way that we're thinking about it, obviously, there's a lot of moving pieces. We think that raw materials will be down mid-single digits in Q3 year-over-year, and similar kind of zone in Q4. So we think that that will help us in the back half. And obviously, that helps us as we move into 2024.

Thanks, David.

Thank you. How much were units down in the second quarter?

Units decreased by around 10% in the second quarter compared to last year, while pricing increased by about 5%, which led to the negative 5% growth you see in the profit and loss statement.

Your guidance for the second half indicates low single-digit revenue growth. What do you anticipate in terms of unit numbers for that growth?

Yeah. We're anticipating mid-single digits being down from a volume perspective in the back half, and then pricing will be up. And then that leaves us, if you look at sort of the midpoint of our guide, it will leave us roughly flattish in the back half.

My question is about how different regions are performing in terms of units. Who are the leaders and who are the laggards?

In terms of price volume, the Americas has actually performed better in unit sales. Specifically, our volume in the Americas decreased by only 7%, while other regions saw a decline of about 15%. This indicates that volume has been more significantly affected outside the US, whereas the Americas has shown stronger performance.

Okay. And I assume you're going to start lapping some price increases from last year. Let me ask it this way. When do you think your last move in price in response to the raw material inflation?

So the answer is that it gradually integrates, as we implemented pricing changes throughout last year. We are definitely seeing the impact of that in the first half of this year, and some of it will continue into the second half. As we evaluate our various markets, we will keep adjusting prices where necessary, and there will be chances to increase prices in certain markets during the second half.

Okay, great. Thank you very much.

Thanks, Keith.

There are no further questions at this time. I will turn the call to Laurel Hurd.

Great. Thank you, and thanks for the questions and your engagement this morning. Before we end the call, I wanted to thank the entire Interface team for their continued dedication and efforts. And I also want to congratulate the team for being recognized as one of Time’s 100 Most Influential Companies for our carbon neutral and carbon-negative carpet tiles. It's another example of the strength of our sustainability leadership, driving differentiation in the market. So that was exciting news. And with that, I just want to thank you all for listening, and have a great day.

This concludes today's conference call. Thank you for joining. You may now disconnect your lines.