Interface, Inc. (TILE) Q3 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to Interface Inc's Third quarter 2019 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question-and-answer session. Good morning. [Operator Instructions] Thank You. I'd now like to turn the conference over to your speaker for today Christine Needles, Corporate Communications. Please go ahead.

Thank you, Jack. Good morning, and welcome to Interface's conference call regarding third quarter 2019 results, hosted by Jay Gould, President 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 the Securities Act of 1933 as amended and the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995. 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 risk and uncertainties that could cause actual results to differ materially from any such statements, including risks and uncertainties associated with the economic conditions in the commercial interiors industry and our expectations regarding our acquisition of Nora Systems, as well as the risks and uncertainties discussed under the heading Risk Factors in Item 1A of the company's Annual Report on Form 10-K for the fiscal year ended December 30, 2018 and as updated by the additional risk factor included in part two item 1A of the quarterly report on Form 10-Q for the quarter ended March 31, 2019, which has been filed with the Securities and Exchange Commission. We direct all listeners to those documents. The company assumes no responsibility to update or revise forward-looking statements made during this call and cautions listeners not to place undue reliance on any such forward-looking statements. Management's remarks during this call also refer to certain non-GAAP measures. The directly comparable GAAP measures, as well as a reconciliation of the non-GAAP measures to the most comparable GAAP measures is contained in the company's earnings release and Form 8-K filed with the SEC yesterday, which explains why Interface believes presentations of these non-GAAP measures provides useful information to investors, as well as any additional material purposes for which Interface uses these non-GAAP measures each of which can be accessed in the Investor Relations section of the company's website, www.Interface.com. Lastly, this call is being recorded and broadcasted for Interface. It contains copyrighted material and may not be rerecorded or rebroadcasted without Interface's expressed permission. Your participation on the call confirms your consent to the company's taping and broadcasting of it. Now, I'd like to turn the call over to Jay Gould, CEO.

Good morning and thank you for joining us on this call. I'm pleased to share our third quarter results and our outlook for the remainder of the fiscal year. We delivered another solid quarter with net sales up 9% versus the third quarter last year and organic sales up 2%. GAAP EPS was up 221% while adjusted EPS was up 15% year-over-year. Thank you to the entire Interface team around the globe for your commitment to our strategic goals and for delivering another solid quarter. Despite continued macro-economic uncertainty, we remain on track to deliver our full year commitments. Since 2017, we have been transforming the company from a carpet tile company to a commercial flooring company. And today 25% of our business is resilient flooring. This shift has expanded our addressable market and allows us to better serve customers beyond the corporate office segment within healthcare, multifamily and education. Our strategies to drive growth with customer focused innovation and stronger route to market capabilities are working to create value. With now marked one year since our acquisition of Nora Systems in August of 2018 and we are delivering on the solid earnings per share that we communicated in our deal announcement. Rubber flooring growth is exceeding our expectations and our integration activities remain on track. LVT continues to drive organic growth for the company. Our asset light model allows us the flexibility to develop new products in the category with no capital investment. We're also excited about the introduction of our new 3 millimeter LVT product that we launched in the Americas in the third quarter. This lower price point and higher margin LVT offering is designed specifically to meet customer needs in healthcare, education, multifamily and tenant improvement. And it also provides new cross selling opportunities with LVT and rubber. Carpet tile growth was challenged in the quarter by a difficult comparable from the shipment of a large customer order in Q3 of last year, but we do continue to take market share and maintain a very strong new product vitality index. Carpet tile remains a solid foundation for the company and a healthy cash flow driver that enables us to continue enhancing our diverse product portfolio. Our productivity initiatives are also generating results. GAAP gross margin was up 760 basis points in Q3, including the purchase accounting amortization from Nora. While adjusted gross margin was up 160 basis points versus the prior year. In addition, we are making strategic investments to capitalize on opportunities in the marketplace. Our Carbon Neutral Floors program continues to gain momentum with our customers and we are accelerating approximately $10 million of capital expenditures this year as we expand on this opportunity and scale our capabilities to manufacture carbon negative products which we're targeting to launch next year. With that, I will turn the call over to Bruce for more detail. Bruce?

Thanks Jay, and good morning to everyone. Third quarter net sales were 309% over the prior year period [indiscernible] 1% compared to the third quarter of last year, but sales were up approximately 5% excluding the shipment of the previously mentioned large customer order in Q3 of last year. Legacy Interface sales in EMEA grew 6% in local currency, but grew 1% in US Dollars to do the currency headwinds driven by the Euro to USD and pound sterling to USD exchange rates versus the prior year. Legacy Interface sales in Asia, Asia Pacific were flat in local currency compared to the third quarter of last year, but were down 4% in US Dollars, largely due to the Australian dollar to USD exchange rate versus last year. In our Global Market segments, third quarter growth was driven by office, education and healthcare. Third quarter gross profit margin was 39%, up 760 basis points versus third quarter gross profit margin in the prior year period. Now adjusted gross profit margin was 39.4%, a 160 basis point improvement over adjusted gross profit margin last year. Productivity efficiencies and solid results in the Americas more than offset margin pressure from the lower than anticipated production volumes and the transactional currency impacts in EMEA and Asia Pac due to stronger currencies due to the weak dollar that we experienced in Q3 and that we've experienced throughout the year. Probably due to the strong dollar relative to the euro and due to other currencies out there, pardon me. SG&A expenses were 91 million in Q3, or 26.2% of sales. SG&A was well managed in the quarter despite unusually high legal expenses of approximately 1.7 million related to the SEC matter. Separately, we recorded restructuring charges of $672,000 associated with lease agent costs related to the decommissioning of our facility in Shelf England as we restructured our Shelf operations as part of the December 2018 restructuring plans that we previously announced at the end of last year. Looking at the operating income line, third quarter operating income was 44 million compared with 16 million in the prior year period. Adjusted operating income was 46 million in Q3 of 2019, compared to 37 million last year. In Q3, we recorded net income of 26 million or $0.45 per diluted share, up 221%, compared to net income of 8 million or $0.14 per diluted share last year. And adjusted net income was 28 million or $0.47 per diluted share in Q3 of 2019, compared to 24 million or $0.41 per diluted share last year, representing 15% growth. Trailing 12 months net income was $69 million and adjusted EBITDA was 57 million in third quarter 2019, compared to 51 million in the same period last year representing 13% growth. Moving over to the balance sheet and cash flows, our balance sheet and liquidity remain strong, with 253 million of borrowing availability under our revolving credit facility at the end of the quarter. Working capital efficiency generated 30 million of cash in the quarter as we continue to improve our working capital metrics. In addition, we repatriated 18 million of cash from foreign operations, allowing us to pay down 43 million of debt in Q3. We ended the quarter with 85 million of cash on hand and 626 million of gross debt. Net debt, which is simply gross debt minus cash on hand, was 541 million at the end of the quarter. Trailing 12 months adjusted EBITDA was 200 million at the end of Q3 2019, which resulted in a leverage ratio at the end of the quarter of 2.7, calculated as net debt divided by adjusted EBITDA. We were very pleased with the de-leveraging progress that we've made in the quarter and we remain committed to a disciplined process of de-leveraging the balance sheet. Please note these are non-GAAP measures. So as a reminder, please refer to the reconciliation tables in our press release to reconcile GAAP to non-GAAP measures. Interest expense was 7 million in the second quarter, compared to 5 million in Q3 of last year. An increase in interest expense was due to financing the Nora acquisition, which occurred in August of 2018. Depreciation and amortization was 11 million in Q3, compared to 10 million last year. Capital expenditures were 19 million in the third quarter compared to 12 million last year as we continue to execute on our strategic objectives, including expanding manufacturing capabilities and productivity initiatives. Now I'd like to hand it back to Jay to provide an update on our 2019 full year outlook.

Thank you, Bruce. Despite continued macro-economic uncertainty, we expect a very solid finish to the year. Our full year guidance this quarter is largely unchanged from the full year guidance we provided on our second quarter call, as we target to achieve the following this year; total net sales growth of 14% to 15%, organic sales growth of 2% to 3%, adjusted gross profit margin of approximately 39.5%, an increase of 80 basis points versus prior year, adjusted SG&A expenses of approximately 28.5% as a percent of net sales. Full year interest and other expenses are projected to be approximately $30 million and the effective tax rate is anticipated to be approximately 24%. Our diluted share count is anticipated to be approximately 59 million shares. With Q3 earnings coming in stronger than anticipated, we expect fourth quarter EPS to be lower than the third quarter. Capital expenditures for the full year are forecast to be $75 million to $85 million. As I mentioned earlier, we are accelerating investments in our carpet tile operations to fund growth and value creation initiatives that we expect will expand our manufacturing capabilities and also yield gross margin expansion. Total capital spend for the year is comprised of approximately $40 million of maintenance capital plus investment capital as we finished counting optimization project this year and positioned to launch carbon negative products, which again, we're targeting to launch next year. We look forward to updating you on our outlook for 2020 when we release our fourth quarter results. I again want to thank the global Interface team for another solid quarter and for keeping us on track to accomplish another year of growth. And also thank you to our customers and our shareholders who continue to support Interface and our Climate Take Back mission. With that, I'll open it up for questions. So Jack, could you open up the lines, please?

Certainly. [Operator Instructions] Michael Wood with Nomura/Instinet your line is open.

Hi, good morning.

Good morning, Mike.

Wanted to just start with a big picture question, you talked about the difficult macro backdrop and you do have one of the businesses probably most impacted by business confidence in this building products group and the CEO confidence just hit a decade low reading this quarter with trade issues and Brexit. So curious to your thoughts in terms of – with some de-escalation in the US China trade recently, do you think that commercial remodeling backdrop might start to improve? And are you seeing any leading indicators that could suggest that through their request for price or samples?

Honestly, Mike, I say it's a mixed environment out there. There are some positive signs, like you say, but some continued challenges. Brexit continues to be a big question mark, what's going to happen there? CEO confidence level that dropped last month was a real concern. Right now, I'd say we're looking at a slow growth environment continuing.

Okay, and gross profits. They've trended lower versus your expectations throughout the year. Can you just give us some detail on what specifically contributed to that and do you think it's something temporary or more of a secular shift?

Yeah, Mike. This is Bruce. It's really two things. One is as you know the US Dollar is very strong relative to all of our foreign currencies that we operating in. And so that has cost – if you think about at the EPS level, that cost us about $0.03 on the EPS line due to just transactional currency headwinds. Translation is also cost us $0.03 as well. On the gross margin line, we've also been hit by roughly $0.06 of the EPS hit on the gross margin line, really due to production being down roughly 10% in Europe and also, it's down in Asia due to just slowing environment that we previously spoke about in Europe.

Okay, great. And just finally, you mentioned in the release discipline in SG&A which is good to hear. I did see that you maintain the SG&A outlook, any changes being made there going into fourth quarter or into 2020?

Not really, we always are continuing to be very disciplined about managing our SG&A and as we mentioned, we're really reiterating our back half forecast. We remain on track for the back half. Q3 came in a little stronger than we thought it would. And it's just the timing of the business coming in a little stronger in Q3. And so – but for the full back half we really remaining on track.

Okay, thanks, great job.

Thanks Mike.

Kathryn Thompson with Thompson Research Group, your line is open.

Great, thanks for taking my questions today. Just getting into looking at Nora versus LVT versus carpet tile growth for the quarter and also understanding that you had some tough comps for carpet tile in Q2 and Q3 and what are your expectations that normalize growth patterns for carpet tile into Q4? Thank you.

Katherine this is Bruce. It depends on what time horizon you're talking about. We always want to see 3% to 4% growth on the carpet tile. As you mentioned, this quarter, we had a very difficult comp. That was about 300 basis points pressure on the carpet tile business year-over-year. So the carpet tile if you exclude that one time transaction did grow in Q3, which is fantastic. And we are continuing to take share in carpet tile. We are extremely pleased with our new product vitality index and extremely pleased with the progress that we're making around our Carbon Neutral Flooring program and the traction that that's getting in the marketplace.

Katherine, on LVT we will exceed the forecast we had of $75 million this year. We're well on our way to deliver or to exceed our expectation of $100 million on LVT in 2020. The rubber category is generating really strong growth. Year-to-date we're around 8% growth on rubber on a standalone basis. So Katherine, if you compare Nora on a standalone basis, rubber year-to-date is growing 8%. So we're extremely pleased with the progress of that business, the growth rates that we're seeing on that and, frankly with how well that acquisition is going.

Okay and a clarification on guidance, in the prior quarter you said that Q4 was going to be 3% to 5% per share, stronger versus Q3, but in Q3 results, your results were about $0.05 better. But now you're saying that Q4 will be below Q3. Could you help us just pack it has anything changed with expectations and just help understand that delta? Thank you.

So Katherine this is Bruce. Nothing's changed, you have to kind of step back and look at the full back half. We remain on track for the full back half. We may remain on track for the full year. We had some business that accelerated into Q3 that now we can't count on for Q4, we don't want to double count that business. And so we're very pleased with the progress of the business, with the pacing of the business and then that we continue to be on track for the year.

July and August waters were just really robust. Yeah, so all that blocking, so all that revenue kind of flowed into the third quarter.

Yeah.

And how are orders looking now?

So we landed at the end of the quarter with very strong orders up 6%. However, I will tell you that it's choppy. That was for the full quarter and it decelerated as we got into the quarter and it's very choppy as we enter into Q4. So as we think about Q4 growth, we think it'll be in the 2% to 3% range as we think about it. We map our pipeline. And we map our order rate. And as we look at all of our metrics and we think about how we think that's going to flow through the P&L? We're thinking about 2% to 3% organic growth in Q4.

Okay, final question. And thank you for answering my questions, so bogey for leverage ratio by year end and any thoughts on 2020?

Yeah, well, let me just start by saying we're super pleased with the de-leveraging that we're seeing on the balance sheet as sitting at 2.7. And that's right on track to where we said it would be when we announced the Nora acquisition. And we are very focused on that. It's our number one capital allocation strategies to can you continue delivering. If we're going to continue paying down debt and the disciplined way, we pay down our minimum is about $10 million a quarter. So think $10 million to $15 million a quarter. So that could get us down another 10 basis points by the end of this year, we're on pace and we're in our target we have our leverage ratio below two as we honor around two as we close out 2020 and below two as we go into 2021.

Great, thank you so much.

Matt McCall with Seaport Global Securities, your line is open.

Good morning, everybody. So I just want to clarify a couple things have been said. You said there was some business it was pulled forward, it sounded like maybe in the Q3 that won't show up again in Q4 or will repeat in Q4. Revenue was mostly in line with where ours and I think with the street was, with the street, just maybe a little bit ahead of what you all were expecting internally. I just want to make sure I understand what you're talking about in terms of revenue and/or earnings that hit Q3 that won't Q4.

Yeah, I mean – Matt this is Bruce. Again, I'm just sort of reiterate, we're on track for the full back half few steps back and we're on track for the full year. It's just timing inside of the back half of when the orders float in on to the income statement.

Okay, so – but from an operating income perspective, is that also kind of – is the back half also kind of trending where you were expecting initially?

Yeah, I mean, again, we're not changing our full year guidance. We're – it's really – we're kind of – our best estimate of where the year will land as we stand today is really remarkably close to where it was three months ago. So we're not changing our full year guidance. We see the full year kind of playing out in accordance with the guidance that we provided in our press release and again, all of this is just sort of timing and how stuff is flowing the back half.

Okay and then Jay you talked about – I think you said – you're talking about funding growth in carpet tiles, can you just go a little deeper into that. Is most of that going to hit in '19 from a spending perspective? And what's the expectation from a return on those investments as you move out into 2020?

Yeah, we'll give capital forecast for 2020 shortly Matt, but this initiative that we have to be able to manufacture carbon negative products also reduces our cost of goods. So we're anticipating a $15 million to $20 million cost reduction which we won't all capture in '20. Some of that will flow into the '21, but the capital will all be in place by roughly the year next year.

Okay, so this is the carbon negative initiative, this is not a new initiative.

Correct, it is tied to that. And it is the cost reduction or the decrease in our manufacturing costs that I talked about related to carbon negative products.

Okay, alright and last question, I think is this last quarter, I just wanted to confirm the number. You had the one large order last year and you also talked about legal expenses that were elevated this year. So two part question, but if you – what's going to be the full impact on growth from just that comp if we adjust out that large order last year, what would your growth projection have been? And then what's the elevated legal expansion expected to be for 2019?

Yeah, Matt this is Bruce. So as we mentioned, we spent about $1.7 million in the quarter on the legal matter on the SEC legal matter. It's a pending legal matter that we don't really comment on outside of our public filings. So we're just cooperating fully and providing the information as needed for that. And regarding the underlying growth rate, this year we're going to deliver 2% to 3% organic growth. Last year we delivered 7%, if you average that it's about 4.5% to 5% underlying growth. And I mean, that's a pretty solid growth rate for us, if you look at the two years combined.

Okay, thank you.

John Baugh with Stifel, your line is open.

Thank you. Good morning. And congrats on fairly solid results of the tough environment, jumping right in, could you maybe go a little more into detail on what you've seen specifically in the UK, Europe and Australia all kind of challenged macro areas? I think I heard you're curtailing production fairly meaningfully in some areas and then maybe contrast all that with what you're seeing and in North America.

John this is Bruce. It's taken more of the time in the UK, obviously, there's just a lot of uncertainty, so it is lower. Lot of uncertainty around Brexit and what that means and so that's definitely affecting our business and affects the customers' behavior, folks don't exactly know what's going to happen. Europe outside of what we call our doc region, our German speaking region is softer, but our German speaking region is doing quite well and so it's a mixed bag, but on balance. I would sort of say Europe is slower than it was last year, Australia is being hit mostly by currency headwinds. And our Australian Business buys their raw materials and US Dollars and in euro and so that affects their margins. So the week Australian dollar compared to the euro and especially compared to the US Dollar affects their business and so that's one – that's basically their largest challenge. In North America, while we have a very uncertain and macro environment, North America continues to have to be strong and continues to – North America is really having a great year. Now, what that means for next year is anyone's guess, we're definitely are reading the same newspaper headlines that you are and concerned about the macro environment going into 2020, but for this year it continues to be very solid.

Okay. And then maybe a quick comment. Thanks for that on the –if I looked at LVT and excluding Nora from this, obviously, you're not subject to the tariffs with your supplier. And now you're contemplating what you described as a higher margin albeit lower priced product, how overall is LVT impacting your gross margin percentage line and/or your EBIT performance?

So John this is Bruce. Our LVT is accretive on the gross margin line and accretive at the operating income line. That's the beauty. This product is not only is it helping with our growth in diversifying the company into new product lines and really needing customer demand, but it's accretive to the overall margin. So it's going extremely well and as Jay mentioned earlier that business remains on track. We had committed to wanting that business being $100 million business by 2020 and we're right on track on that number.

So just to be 100% clear, accretive to gross margin percentage, obviously as well as dollars.

That's right.

Okay. And then lastly, anything going on with your yarn suppliers in terms of composition, diversity price, kind of give me an update on what the raw material situation is here in the US? Thank you.

Well, our price has been fairly stable John. We are not subject to the same input cost inflation that virgin materials and now that roughly 65% of our carpet tile materials are recycled or bio based. We've got a pretty steady approach to how we're managing our input costs. So I mean, frankly, we haven't felt the input cost inflation that we expected for the year. So it's a very stable environment for us.

Great, so when I look at the gross margin, I don't know, implied weakness for fourth quarter may become an end for the year little lower with the primary things be the currency impact, as well as standings and production was that's basically where the pressure is.

Yes, exactly right.

Okay, thank you very much. Good luck.

David MacGregor with Longbow Research, your line is open.

Yeah. Good morning, everyone. I wonder if we could just dig in a little more on the observation you made in response to an earlier question that the order backlog is choppy. And which is not the way you've characterized it in the past, which would suggest that this is kind of an evolving condition. And I wonder if you could just talk about just in terms of your quoting activity, the size of projects, the number of bids, just thinking in terms of those metrics, just talk about what you're seeing at the margin in terms of changing the business conditions.

Well, I would say that the architectural billing index is still pretty solid. We see a lot of activity in the market, David. Now we have greater visibility with our new CRM system where we're able to track that. What we have seen is just lately, some push out on some orders. And it's created the outlook that it's going to be a sauce albeit it's still 2% to 3% organic growth, but softer than anticipated fourth quarter. So we're kind of going into this quarter in a pretty cautious manner.

And this choppy pattern is it the North American businesses, is it the European businesses, is it both, is one greater than the other?

It's both and you see it emerging in different parts of the world. So UK as an example, it's been pretty choppy, Southern Europe, France, Spain, Portugal, it's been pretty choppy. It's a little soft right now France in particular. Germany and the German speaking countries continue to be strong. We feel really good about that.

And I guess what gives you a sense of comfort that what's on the other side of the chop is good.

So David this is Bruce. We do have some visibility out. We often talk about the timing of our orders. It kind of depends on how far you step back. It's not new. The things are choppy if you look on a week-by-week basis. I'm going to sort of – I think it's naive of us to not be acknowledging that there's a macroeconomic environment that's slowing down, which is why we're trying to be cautious as we go into Q4 and we see orders bounce around. So that's why we remain on track to the back half. We had a great quarter like there were there were super pleased about, but we don't want to be delusional, going into the Q4. And as we go – and as we think about 2020 then you're reading the same headlines that we are, it is a slowing environment out there. And we just want to acknowledge that so that we can respond and that we can manage our cost structure in line with that.

Is the dollar distribution within the backlog extending of furthers the tail reaching further into the future now than it would have been a quarter or two ago?

I don't think so.

Projects being pushed out?

I don't think there's anything meaningfully to talk about in that area, no.

Okay, alright. Second question was just on – again, I don't want to beat the gross margin issue to death. Because I think you're growing your EBITDA at 13%, you're paying down debt, you're doing a lot of things right. But you also called out the fact that Nora was up 8%. So I'm just thinking about kind of the blended math within the gross margin where my recollection is Nora was probably a 500, 600 basis point gross margin premium to the legacy tile business with that kind of growth in Nora, the implication would be that the legacy business must have hit pretty hard at the gross margin line. I was just wondering if you could talk about kind of that weighted average math and how we should think about the downward guide on gross margin.

Yeah, let me try to unpack that for you, David. This is Bruce. We're super pleased with the gross margin expansion that we're seeing. It was up 160 basis points a year-over-year. And remember that's on carpet tile production that was down roughly 10% year-to-date if you think about it and it's mostly in Europe. So to be generating gross margin and expansion in an environment like that is fantastic operational discipline. And it speaks to the fact that our operational – that our productivity initiatives are working. Now, you go well, how does that reconcile with Nora and here's how the math works. If you look at Nora on a standalone basis, gross margins are down around 60 basis points. And that was due to the very large order that we had in China, which was fantastic. It came in last year we talked about that on the Q2 earnings call. We were delighted to get that business. It was a fantastically large order. However, it came in at a lower gross margin. So what we're doing here is we're balancing the business. If we see a little softness, and I guess the third component I talked about is and we talked about this earlier is FX that is hurting the gross margin, not just translational transactional. Yeah, what I'm referring to right now is transactional FX exactly. And the best example of that is in Australia, where they're buying raw material, and so it is definitely hurting our gross margin line. So among those three things, those are all headwinds on the gross margin line all being offset by the productivity initiatives that are working and we are seeing gross margin expansion in the core business, which is fantastic. And again, this is generating 160 basis points of year-over-year improvement.

Okay. Thanks very much, guys.

[Operator Instructions] Keith Hughes with SunTrust, your line is open.

Thank you. The talk of accelerated CapEx I believe is about carpet tile. Kind of given what carpet tile is and the growth of LVT. Are you expanding capacity or are you just adjusting your current capacity?

We're adjusting our current capacity to allow us to make a carbon negative product which also lowers our cost of goods Keith.

Okay, so you're – this total this is US, is that correct?

Yeah and some in Europe as well.

Europe, okay. So your total capacity is square meters, however, you want to do it is not going up as a result of this.

No, it's not.

Okay. I guess –

What we're doing is we're – our Carbon Neutral Flooring program is getting a lot of traction. And we're going to take that to the next level as part of our part of our mission and vision is to be a world changing sustainability leader in manufacturing. So we think we're super excited about this new capability from a strategic standpoint.

Kind of second question n SG&A, you talked a lot about SG&A for the year, as we move into next year, you had worldwide sales meeting in the first quarter of '19. Can you just remind us how much that was and I assume that's going to be going away as a cost in the first quarter of '20, is that correct?

That's correct, it is going away. It was about $8 million that we spent in Q1 of this year for the salesman.

Okay, so I assume that there'll be no offset to that? We should come down 8 million plus whatever the business is first quarter of '20, correct?

Yeah, that's fair. In the middle of the income statement, you'd see that. I mean, I would just caveat to that is we will give our full year guidance for next year, when we do the Q4 call and there's a lot of moving pieces inside the income statement and all the numbers and so we're sharpening our pencil on our annual operating plan. And we'll be able to provide a little more detail about 2020 and how we're viewing the world in 2020 while we release earnings in Q4.

Okay, thank you.

There are no further questions at this time. I would now like to turn the call back over to Jay Gould for closing remarks.

Okay. Well, thank you again for your participation in today's call. Thank you for your continued support. We look forward to updating you on the business next quarter. Thank you.

This concludes Interface Inc's third quarter 2019 earnings call. We thank you for your participation. You may now disconnect