Good day and thank you for standing by. Welcome to the Q1 2021 Interface, Inc. Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Ms. Christine Needles, Director of Global Communications. Please go ahead.

Good morning, and welcome to Interface's conference call regarding first quarter 2021 results, hosted by Dan Hendrix, Chairman and 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 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 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 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. After our prepared remarks, we will open up the call for questions. Now I'd like to turn the call over to Dan Hendrix, 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 de-lever 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…

Well, thank you, Dan, and good morning, everyone. Our first quarter results came in as expected with net sales of $253.3 million, down 12% compared to the prior year period. And as you may recall, first quarter 2021 consisted of 13 weeks versus 14 weeks in the first quarter of 2020. Organic growth, which excludes impacts of foreign currency translation, was down 16%. Declines in carpet tile were somewhat moderated by lesser declines in LVT and partially offset by increases in rubber. Sales in the Americas were down 20%, with declines across all product categories. And in EAAA, sales were down 3% in U.S. dollars, aided by favorable currency movements. Carpet tile was down for the quarter, offset by increases in rubber and First quarter adjusted gross profit margin was 38.5%, down 160 basis points from the prior year period, but up 300 basis points from Q4 2020. This was a strong result as we continue to navigate through the pandemic in Q1 of this year and lapped a strong quarter in Q1 of last year. We continue to build earnings power through the structural changes in our SG&A, which you will see in our income statement as we progress through the year. Adjusted SG&A expenses were $77.5 million in the first quarter or 30.6% of net sales. First quarter of 2021 adjusted operating income was $19.9 million versus adjusted operating income of $29.3 million in the first quarter last year. First quarter 2021 adjusted net income was $10 million or $0.17 per diluted share and adjusted EBITDA was $31.5 million for the quarter. Please refer to our press release for reconciliations of GAAP to non-GAAP numbers. Turning to our balance sheet. The company generated $24.9 million of cash from operations in the first quarter of 2021 and had $405…

Thank you, Bruce. I'm proud of the team's continued efforts in driving ESG initiatives across the company. In early April, Interface published our first Communication on Progress, or COP, since becoming a U.N. Global Compact signatory in 2020. As part of our sustainability approach, Interface is supportive of and committed to the United Nations' sustainable development goals as a road map to sustainable development that addresses shared global challenges. Following through on our commitment to prioritize diversity, equity and inclusion, we established a DEI task force responsible for developing our long-term DEI strategy with feedback from our people. Notably, we are also implementing a global human capital management system that will deliver invaluable data regarding the diversity of our global workforce. From an environmental standpoint, Interface committed to set a science-based target in line with a 1.5-degree ambition, which aligns with the Paris Agreement's goal to pursue efforts to limit global warming. We continue to focus on reducing the carbon footprint of all our products with an average year-on-year reduction of 10% from 2019. I'm proud of our team, and I'd like to thank all of our employees. We continue to drive innovation in our research and development as we look to capitalize on trends and create market opportunities all while helping customers lower their carbon footprint. We believe our culture, product and leadership will keep our business adaptable and successful for years to come. With that, I'll open it up for questions. Operator?

[Operator Instructions]. Your first question comes from Kathryn Thompson from Thomson Research Group.

This is Brian Biros on for Kathryn. I'll start with the Q2 guidance going forward. Can you give some more color on how that breaks out across the 2 regions and maybe specifically the products in those regions? I guess can we see positive growth for all products in both regions in Q2?

Brian, this is Bruce. Yes, we're anticipating growth in all of our product lines and we're anticipating growth across EAAA and Americas in Q2. So we are definitely anticipating broad-based growth. The U.S. is probably right now a little stronger than EAAA. As you are probably aware, in EAAA there are still some lockdowns that are happening due to COVID. And there's still a lot of travel restrictions going inside of countries, while the U.S. is further ahead from a vaccination standpoint and from a recovery standpoint.

Helpful. And then a follow-up. Can you just talk about some of the state of the supply chain, I guess, and specifically maybe the ports with demand coming back, are you able to source enough products to meet the demand levels?

Brian, this is Bruce. We're in really good shape from a supply chain standpoint. And I just continue to be so impressed with our supply chain and our plant operators. They've just navigated flawlessly through the COVID-19 pandemic and they continue to navigate even through all of the supply chain disruptions, whether it's the Suez Canal boat thing or it was the - all the stuff that happened down in Texas. Our team has done a great job. We are anticipating some inflation in - starting in Q2 and in the back half and that's baked into our guide as we are thinking about the GP guide that we gave for Q2.

So no major issues with any sourcing products and getting it through the ports?

No, we're in good shape on that. But we've been - and it's - again, it's due to good management and thinking ahead.

Your next question comes from Keith Hughes from Truist.

Got a lot going on in the numbers. The revenue in this quarter with the extra seem to be down; one fewer week and the currency. If you strip all that out, can you give us how carpet tile LVT and rubber did year-over-year in the quarter?

Keith, this is Bruce. As you mentioned, we had an extra week last year. So it was 13 weeks this year, 14 weeks last year. That differential is about 6% due to the extra week. So if you look at our P&L, we were down 12%. If you strip out that extra week, we were only down 6%. And then, of course, the currency lift is also baked in there. It was about $11 million of currency or roughly 4%.

Okay. So you say in the release that LVT, your carpet tile was down, lesser declines in LVT and gains in rubber. Does that take the week out? And does that include currency or take the currency out or what basis is that on?

Yes, I was kind of giving you the full company numbers around being down 12% in total and 6% due to the extra week. Haven't really broken out extra week and currency by product line.

Okay. So currency, does that help rubber more than the other 2 products or what's the other breakdown?

Yes, not really. Because we sell rubber all around the world. We sell rubber globally, so it's just wherever we sold rubber in a foreign currency, we got a lift from that this quarter as a result of the U.S. dollar being weaker than the euro or the Australian dollar versus prior year.

And I guess final question. We now have segment profit breakout. It shows declines in the Americas for obvious reasons. But there's an increase in the operating income in the EAAA segment. Can you talk about still relatively weak revenue, how you got the profits up?

Yes. So Keith, this is Bruce. That's a combination of strong SG&A control. And also, we have obviously decreased our cost structure around the company, including in EAAA, which gives us more leverage and more drop-through on the bottom line, aided slightly a little bit by some currency pickups that we saw on the top and a little bit on the bottom as well in our EAAA region.

There is no further question at this time. I would now like to turn the call over to Dan Hendrix for closing remarks.

Yes. Thank you for joining our conference call. I think we had a very solid quarter and look forward to talking to you next quarter. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.