Good morning. And welcome to Interface's Conference Call regarding Fourth Quarter and Fiscal Year 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. Each of those can be found on our 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. 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.

Thank you, Christine. Good morning, and thank you for joining us today. 2021 was a success story for the Interface team. As we advance our growth and diversification strategy, we continue to make history with the world's first and only carbon-negative carpet products. We navigated through supply chain and inflationary headwinds, made significant reductions to SG&A and reduced net leverage to 2.5 times adjusted EBITDA, our lowest level since acquiring nora. I continue to be impressed with the Interface team for their hard work and dedication to our customers and our company. Demand for our carbon-neutral and carbon-negative products continues to grow. Fourth quarter orders increased 19% year-over-year, which is our third consecutive quarter of double-digit growth. In Americas, fourth quarter orders were up 31% year-over-year. In EAAA, they were up 12%, both currency neutral. Year-end 2021 backlog increased 28%, up $46 million compared to year-end 2020, and we feel confident with the momentum we are going into 2022. Fourth quarter net sales increased 23% year-over-year to approximately $340 million, on par with the fourth quarter of 2019. This is a positive sign that the market is continuing to grow. During 2021, we made great strides to advance our diversification and segmentation strategy, executing on growth drivers. Significant wins through the year drove progress on our Climate Take Back journey, underpinning our position as the industry leader in carbon tech. Major companies across the globe, including multiple Fortune 100 customers, are turning to interface for our carbon-neutral and proprietary carbon-negative product offerings. We alight with our customer's values and priorities to reduce their own carbon emissions and meet their own sustainability goals. Globally, we continue to launch multiple new products in 2021 with a focus on design and innovation. We expanded our Open Air product line after a very successful…

Thank you, Dan. And good morning, everyone. Our fourth quarter net sales increased 22.6% year-over-year to $339.6 million, driven by strong demand across our geographies and all product lines. Organic sales growth, which excludes the impact of currency translation was 23.9%. Fourth quarter net sales in the Americas were up 35.1% year-over-year based on strong demand across segments and categories. In EAAA, fourth quarter net sales were up 9.7% year-over-year, with solid growth across the region, particularly in Australia, the UK, Southern Europe and Central Europe. Currency translation decreased the total company's fourth quarter year-on-year net sales growth rate by 122 basis points, and EAAA's fourth quarter year-on-year growth rate by 275 basis points. Fourth quarter adjusted gross profit margin was 36.1%, an increase of 67 basis points from the prior year period. We view this as a very successful outcome as our pricing actions are being realized on the P&L to offset the headwinds we experienced from labor shortages, significantly higher freight costs and inflationary increases in our raw material inputs. All in, we are very proud of the fantastic job that our manufacturing, supply chain and selling teams did to offset these inflationary headwinds with pricing and productivity gains. We also continue to build earnings power through structural changes in our SG&A, which has been a focus area for Interface over the past 2 years. Adjusted SG&A expense for the fourth quarter was 24% of net sales compared to 26.2% of net sales in the prior year. This 221 basis points of improvement exemplifies our continued commitment and demonstrated progress in tightening the company's cost structure and being more efficient with our SG&A dollars. Fourth quarter adjusted operating income was $41.1 million this year versus $25.6 million in the fourth quarter last year. Fourth quarter adjusted EPS was…

Thank you, Bruce. I want to again acknowledge and thank the Interface team for their strong execution and contributions to our achievements in 2021. We entered 2022 with great momentum, including increasing demand and strong financial position. We're set up to win and to capitalize on future growth opportunities as they arise. With that, I will open it up for questions. Operator?

[Operator Instructions] And your first question comes from the line of Joseph Nolan from Longbow Research. Your line is open.

Hi. This is Joe Nolan on for David MacGregor. Thanks, for having me and congrats on a good quarter.

Thanks.

I was just wondering if you - yeah, I was just wondering if you could break down the 2022 growth guide by carpet tile versus LVT versus rubber flooring if possible?

Hey, Joe. This is Bruce Hausmann. Thank you for dialing in. And we really don't break it down by product line. It's the guide that we gave is more of a blended number. But as you can see, we continue to have a lot of strong momentum going into 2022 and we're really optimistic. Obviously, with the strong results in 2021, we're really optimistic as we enter into 2022.

Yeah. We're just concerned about competitive data, Joe, on that.

Yeah.

Got you. Makes sense. Okay. And then just within LVT and the rubber product, just wondering how availability has been trending given and port logistics congestions and just to what extent that has been a headwind on growth in the fourth quarter, and how are you thinking of that into 2022?

Yeah. I would say that we had a world class and have a world class supply chain on LVT coming out of Asia, and we didn't have a lot of issues with that. We had some, of course, some delays but not a lot of issues. And then coming out of benign [ph] from a rubber standpoint, same thing, really world class supply chain and we had some issues, but not a lot.

Got it, all right. Thanks. I'll pass it along.

Thank you, Joe.

Your next question comes from the line of Kathryn Thompson from Thompson Research Group. Your line is open.

Hi. Thank you for taking my questions today. Just a follow-up on Europe and really more the Domino [ph] or the unintended consequences that can come from an event happening between Russia and Ukraine. Based on your prior experience where you've seen spikes in energy cost in that region, how are you - are current price increases sufficient to overcome some of the headwinds that we're seeing right now? And in general, how do you manage just a similar - we have similar experience, but essentially managing that supply chain and cost disruption from this event? Thank you.

Thank you, Kathryn. Appreciate the questions. As you can see, in Q4, we did a great job at nora [ph] the inflationary environment that we were in around freight, raw materials and, of course, labor shortages. We're continuing - we think as we enter into Q1 and possibly even Q2 of 2022, we'll continue to have to navigate through the same. And then we are optimistic that we'll get a little more relief on the GP line in the back half of 2022. But we're doing everything we can around pricing activities, around productivity activities and also just good strong supply chain management to mitigate those things that we're seeing around what you mentioned energy, as well as raw material inflation, as well as freight inflation that we're seeing. And the team did a great job. We were up 67 bps in Q4 on our GP line year-over-year. And you'll see from our guide that we are planning on having a sort of a continued run rate around that in Q1 as we go into 2022.

Yeah. Kathryn, I'd say that generally, I'd say what Bruce says is the direction to where we are. But typically, there's a three month lag when you see spikes in energy prices that we have to get through to the marketplace, so.

Okay. Helpful. And as we, dare I say, come out of the global pandemic more like managing the ongoing reality, what changes have you seen from a product demand standpoint and also from a regional standpoint?

I would say that the LVT continues to have tremendous growth opportunities, double-digit growth. Our rubber business is a really good business geared for education and healthcare, and we continue to see that growth as well. And surprisingly, the carpet tile business is growing as the office market comes back. So we're seeing benefits from all three of those.

Okay. And just one follow-up to that, previously, for a couple of years leading into the pandemic, you said that your biggest competitor was actually polished concrete in an office space. Have you seen any change in trends for that?

I think polished concrete was a little bit of its polished [ph] to be honest with you. It's a very expensive product, very niche product, and I think LVT has taken over that category.

Okay. All right, great. Thanks so much.

Your next question comes from the line of Keith Hughes from Truist Securities. Your line is open.

Thank you. Question on the first quarter, the gross margin guide is particularly wide for a quarter. Can you talk about some of the things that could push you to the low end, high end of the first quarter?

Hey, Keith, this is Bruce. Thank you. There are a lot of moving parts in that number, as I'm sure you can appreciate. One of the biggest variables that we don't know how it's going to play out is around freight costs, they are continuing to be high. But at some point in time, we should see some relief on that. The other is what kind of what Kathryn mentioned, the energy costs and how that is affecting some of the raws that we purchase is another piece that goes into that. And then also, we have done - we are obviously passing on a lot of these costs to our customers and obviously we're seeing that on the P&L you saw that in Q4. But we just want to make sure that we can - that, that stays effective through the first half as we continue to navigate in the inflationary environment that we're in. Just lastly, I'll just close with, particularly in the US, we have - we continue to have some labor shortages around our manufacturing environment that also slows us down and obviously impacts that gross margin line.

But we're encouraged. I would say our US manufacturing is getting better.

Sure. And second question, you had some really strong orders, particularly in Americas, in addition to the revenue growth in Americas in the fourth quarter. Little surprised that the revenue guide, just from the fact that inflation is going to be flowing through for a good part of the year, just across revenue guide is not higher. As you think about this guide you've given, do you - is this anticipating a unit slowdown during the year? Or how do you think this is going to play out?

Yeah. Keith, as you know, it's very common sequentially for revenue to go down from Q4 to Q1, and that's exactly what we're guiding for it to happen.

I'm referring to the year. I'm referring to the year, The [indiscernible] specific. I was talking the 7% to 9% growth for the year?

All right. Yeah. We're entering 2022 in a really strong position with a strong backlog, and a lot of things going our way from a macro standpoint. It's still early days, right. And we sort of have to see how the year is going to play out. I will tell you that our education business, our healthcare business continues to be very robust, growing double digits. And even corporate office is growing double digits now, which is fantastic. All of those things play in our favor for a strong 2022.

Yeah. I would say it could be conservative, Keith, for sure. That's us.

Okay. A final question on the quarter, the organic growth, can you give us some sort of feel how much of that was price and how much of that was units and the growth year-over-year?

Yeah. Keith, about - so in Q4, on the P&L, we saw about 4% price and about 19% of the growth was driven by volume.

All right. Thank you.

Thank you.

Thank you, Keith.

And there are no further questions at this time. Mr. Dan Hendrix. I turn the call back over to you for some final remarks.

Yeah. Well, thank you for listening to our first quarter - not first quarter call, but our fourth quarter call and I can't wait to talk to you on the first quarter call. Thank you.

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