Investor Presentation · 2019-06-05 · Investor Presentation JUNE 2019. page 2 Forward Looking Statements and Non-GAAP Measures This presentation contains forward-looking statements,

Investor PresentationJUNE 2019

page 2

Forward Looking Statements and Non-GAAP Measures

This presentation contains forward-looking statements, including, in particular, statements about

Interface’s plans, strategies and prospects. These are based on the Company’s current assumptions,

expectations and projections about future events.

Although Interface believes that the expectations reflected in these forward-looking statements are

reasonable, the Company can give no assurance that these expectations will prove to be correct or that

savings or other benefits anticipated in the forward-looking statements will be achieved. Important

factors, some of which may be beyond the Company’s control, that could cause actual results to differ

materially from management’s expectations include the matters discussed under the heading “Risk

Factors” included in the Company’s Quarterly Report on Form 10-Q for the period ended March 31,

2019 and its most recent Annual Report on Form 10-K, which discussions are hereby incorporated by

reference. Forward-looking statements in this presentation include, without limitation, the information set

forth on the slide titled “Growth and Value Creation Strategy”, the section of this presentation titled

“Growth and Value Creation” and the slide titled “Investment Thesis”. Other forward-looking statements

can be identified by words such as “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,”

“could,” “seek,” “project,” “estimate,” “target,” and similar expressions. Forward-looking statements

speak only as of the date made. The Company assumes no responsibility to update or revise forward-

looking statements and cautions listeners and meeting attendees not to place undue reliance on any

such statements.

This presentation includes certain financial measures not calculated in accordance with U.S. GAAP.

They may be different from similarly titled non-GAAP measures used by other companies, and should

not be used as a substitute for, or considered superior to, GAAP measures. Reconciliations to the most

directly comparable GAAP measures appear in the Appendix.

page 3

Interface at a Glance

Interface is a global leader of commercial flooring solutions

including carpet tile, luxury vinyl tile (LVT) and rubber flooring.

Headquartered in Atlanta, GA

7 manufacturing locations on 4 continents

4,100 global employees

Sales in over 110 countries

New Product Vitality Index** of 38%

All products are Carbon Neutral

55%30%

15%

Americas

EMEA

APAC

47%53%

Corporate

Office

Non-Office

** New Product Vitality represents products launched in the past three years and custom products

Note: Geographic breakdown and segment figures represent proforma FYE 2018 sales for Interface and nora combined

($ in millions, except EPS) 2017 2018

Net Sales $996 $1,180

Adj Operating Income* $119 $134

Adj EPS (Diluted)* $1.18 $1.49

Net Debt* $538

Proforma Adj EBITDA* $210

Proforma Adj EBITDA % of Net Sales* 16%

Net Debt / Proforma Adj EBITDA* 2.6x

ROIC* 15% * See Appendix for a reconciliation of Non-GAAP figures

page 4

42%Gross Profit

Margin

15%Operating

Income Margin

19%EBITDA

Margin

Investment Thesis

VALUE DRIVERS

• Strong brands that are participating in growth areas of the industry

• Positioned for growth in a $34 billion global category:

– Leading share in carpet tile with ~22% of the segment

– Leading share in rubber with ~30% of the segment

– Growing share in LVT with ~2% of the segment

• Attractive and expanding margin structure

• Global footprint with manufacturing on four continents

• Strong track record of value creation

• 16% Adjusted EBITDA CAGR

MID-TERM OBJECTIVES (4-6 years)

$116

$157 $142

$152

$186

$210

2014 2015 2016 2017 2018 Proforma

2018*

ADJUSTED EBITDA*($ in millions)

* See Appendix for a reconciliation of Non-GAAP figures

page 5

Investment Highlights: Who We Are

leading

global provider

of commercial

flooring solutions

most valuable

brand

in the flooring

category

strongest global

sales &

marketing

capabilities

global

manufacturing

footprint and

industry-leading

gross margins

engaged,

customer-centric

culture, focused

on performance

and galvanized

around our

sustainability

mission

page 6

Grow the Core

Carpet Tile

Business

Build

a Resilient

Flooring

Business

Execute

Supply Chain

Productivity

Optimize SG&A

Resources

Growth and Value Creation Strategy

Lead a World-Changing Sustainability MovementCentered Around Mission Zero and Climate Take Back.

Interface’s vision is to become the world’s most valuable

interior products & services company

Interface PositioningInterfacePositioning

page 8

GLOBAL COMMERCIAL FLOORING SEGMENT (in Billions)

Source: Management estimates

Leading Global Provider of Flooring Solutions

• Interface participates in the $34 Billion Global Commercial Flooring segment

• We are the global share leader in the $4.6 Billion Carpet Tile segment which continues to take share from

broadloom

• We entered the high growth $3.0 Billion LVT segment in 2017

• We entered the $0.9 Billion Rubber flooring segment with our acquisition of nora, the category leader

• Our served market has expanded from ~$4.2 Billion a couple of years ago to an estimated $8.5 Billion today

$10.1 $3.0$0.9

$2.7

$4.7

$2.9

$5.4

$4.6

page 9

Ceramic Tile$10.1B

Carpet Tile$4.6B

LVT$3.0B

Laminate$2.7B

Other Resilient$2.9B

Broadloom$5.4B

Wood$4.7B

Rubber$0.9B

0%

1%

2%

3%

4%

5%

6%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Est

. C

AG

R t

hru

2020

Gross Margin

GLOBAL COMMERCIAL FLOORING: SEGMENT SIZE vs FORECASTED GROWTH and GROSS MARGIN

Participating in Attractive Commercial Flooring Segments

• Interface serves growing segments of hard and soft surface with the highest margins


page 10

9%17% 42%

0

10

20

30

40

50

60

70

80

90

100

Low End Mid-Range High End

volu

me

in m

illio

ns o

f sq

ua

re m

ete

rs

Interface

Total

GLOBAL CARPET TILE SEGMENT BY CHANNEL

Premium Player in the Specified Channel

• Interface competes on design, sustainability and innovation, commanding a premium price point and

industry leading margins

• Interface is the share leader in the specified and end user channels of commercial carpet tile which are

highly influenced by Architects & Designers

INTERFACE GLOBAL SHARE OF CARPET TILE

PRICE CATEGORIES


Oth

er

page 11

Carpet Tile

• Biomimicry-inspired random design (i2)

• High recycled content

• No glue installation (TacTiles®)

• Faster, more profitable installation for contractors

• Easily recycled (ReEntry® program)

• Carbon neutral (Carbon Neutral Floors™)

Luxury Vinyl Tile (LVT)• Creative design freedom

• Complements and enhances our carpet tile portfolio

− No transition strips needed

− Same sizes as our carpet tiles

• High acoustic value (Sound Choice™ backing)


Rubber• norament® - sheet rubber

• noraplan® - modular rubber tiles

• Ideal for hygienic, safe flooring applications

• Extremely durable with strong chemical resistance


Attractive Product Portfolio

page 12

Benefits of Modular

• Creative design freedom

• No glue, no pad

• Lower cost to change

• Produces less waste

• Faster, more profitable installation

for contractors

• Easier to reconfigure and maintain

• Selective replacement

Modular Product Offering

page 13

Global Sales and Manufacturing Platform

• Sales in over 110 countries

• 1,100 sales & marketing professionals

• Global account management

• Seven manufacturing locations on four continents

• Global supply chain management

• Unique blend of efficiency and customization

Note: Figures represent proforma FYE 2018 for Interface and nora combined

Carpet Tile Manufacturing Facility

Showroom Location

AMERICAS

55%of Net Sales

EMEA

30%of Net Sales

ASIA-PACIFC

15% of Net Sales

Rubber Manufacturing/Distribution Facility

page 14page 14

Diversified Customer Verticals

CORPORATE OFFICE• Highest penetration of carpet tile vs broadloom

• Global Account management

• Emerging market penetration

47%53%

BILLINGS BY SEGMENT

Office Non-Office

EDUCATION• K-12 and higher education

• Second highest penetration of carpet tile vs

broadloom

• Second largest market for rubber

HOSPITALITY• Guest rooms, corridors and public spaces

• Named the brand standard or alternate at Hilton,

Marriott, IHG and Choice Hotels properties

RETAIL• Retail and bank branches

• Significant opportunity for broadloom conversion

• High penetration of LVTNote: Figures represent proforma FYE 2018

sales for Interface and nora combined

HEALTHCARE• Hospitals, MOB, Assisted Living and Senior Living

• Largest rubber market based on hygienic properties,

chemical resistance and durability

Growth andValue Creation

page 16

Grow the Core

Carpet Tile

Business

Build

a Resilient

Flooring

Business

Execute

Supply Chain

Productivity

Optimize SG&A

Resources

Growth and Value Creation Strategy

Lead a World-Changing Sustainability MovementCentered Around Mission Zero and Climate Take Back.

Interface’s vision is to become the world’s most valuable

interior products & services company

page 17page 17

Grow the Core Carpet Tile Business

• Enhance salesforce productivity – Execute

on selling system transformation including

reorganization, training and technology

tools

• Elevate and grow segments – Drive growth

in priority segments including Corporate

Office, Hospitality, Living and Education

• Optimize product portfolio – Expand our

portfolio to increase the addressable

market

• Lead the market in design and innovation –

Continue to introduce innovative new

products that energize and inspire

• Continue to develop brand love,

commanding the strongest Net Promoter

Score among A&D and End Users

page 18page 18

Build a Resilient Flooring Business

• Continue penetrating the high growth

LVT segment, building on successful

global LVT launch

• Integrate nora® rubber flooring into our

product portfolio

• Leverage innovation pipeline

• Expand global participation

• Strategically expand product portfolio

page 19

Resilient Flooring: nora Acquisition

nora is a leading global manufacturer of commercial rubber

floorcovering systems for healthcare, education, life sciences,

public buildings and other end markets

page 20

Interface and nora Together

59%25%

15%

Americas

EMEA

APAC

55%30%

15%

Americas

EMEA

APAC

+

63%

37%38%62%

45%55%

47%53%

60%

40%

57%43%

Office

85%

15%

75%

25%

Americas EMEA APAC Americas EMEA APAC

Non-office

Office

Non-office

Note: Figures represent proforma FYE 2018 sales for Interface and nora combined

Geogra

phic

Reach

Se

gm

en

tatio

n

excluding nora

page 21page 21

Execute Supply Chain Productivity

• Execute Troup County Optimization plan

which we expect to yield annualized

savings of $30M

• Implement a dynamic yarn strategy

• Continue to deliver on productivity

pipeline initiatives

page 22

Purpose-DrivenCultureGalvanizedAround aCommonSustainability Mission GLOBESCAN SUSTAINABILITY SURVEY – 20+ YEAR HISTORY

1997 1998 1999 2000 2001 2002 2004 2005 2006 2007 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Unilever

Patagonia

Interface

IKEA

Tesla

Natura

M&S

Nestle

page 23

• We commit to running our business in a way that creates a climate fit for life – and we call on others to

do the same.

• We expect to demonstrate that industry can operate with carbon negative business models. As a first

step, we are the first global flooring manufacturer to offer carbon neutral carpet tile and LVT across our

entire product range.

Purpose-Driven Companies Outperform their Peer Sets

ENERGY USE 43%

RENEWABLE ENERGY 88%

GHG EMISSIONS 96%

WASTE TO LANDFILL 91%

WATER INTAKE 88%

RECYCLED & BIOBASED MATERIALS 58%

PRODUCT CARBON FOOTPRINT 66%

Reduction versus 1996 Baseline

CLIMATE TAKE BACK

page 24

7 k g

2 k g

Moving Toward a Carbon Negative Business Model

It is possible to make a product with the potential to

reverse global warming.

CO2

Proof Positive

Carpet Tile Prototype

FinancialPerformance

page 26

GAAP Financial Results

($ in millions, except EPS) First Quarter Fiscal Year End

2019 2018 Change 2018 2017 Change

Net Sales $297.7 $240.6 24% $1,179.6 $996.4 18%

Gross Profit 115.4 93.6 23% 424.4 386.0 10%

% of Net Sales 38.8% 38.9% 36.0% 38.7%

SG&A Expense 99.0 70.6 40% 327.5 267.2 23%

% of Net Sales 33.3% 29.3% 27.8% 26.8%

Operating Income 16.4 23.0 (29%) 76.4 111.6 (32%)

% of Net Sales 5.5% 9.6% 6.5% 11.2%

Net Income 7.1 15.1 (53%) 50.3 53.2 (6%)

% of Net Sales 2.4% 6.3% 4.3% 5.3%

EPS (Diluted) $0.12 $0.25 (52%) $0.84 $0.86 (2%)

RECENT QUARTER RECENT YEAR END

page 27

Adjusted Financial Results*

* See Appendix for a reconciliation on Non-GAAP figures

** No adjustments for first quarter 2019

($ in millions, except EPS) First Quarter Fiscal Year End

2019 2018 Change 2018 2017 Change

Net Sales $297.7 $240.6 24% $1,179.6 $996.4 18%

Adjusted Gross Profit 117.3 93.6 25% 456.5 386.0 18%

% of Net Sales 39.4% 38.9% 38.7% 38.7%

Adjusted SG&A Expense** 99.0 70.6 40% 322.2 267.2 21%

% of Net Sales 33.3% 29.3% 27.3% 26.8%

Adjusted Operating Income 18.3 23.0 (20%) 134.3 118.9 13%

% of Net Sales 6.1% 9.6% 11.4% 11.9%

Adjusted Net Income 8.4 15.1 (44%) 89.0 73.1 22%

% of Net Sales 2.8% 6.3% 7.5% 7.3%

Adjusted EPS (Diluted) $0.14 $0.25 (44%) $1.49 $1.18 26%

Adjusted EBITDA $31.4 $34.1 (8%) $186.1 $152.4 22%

RECENT QUARTER RECENT YEAR END

page 28

Organic Sales Growth

FYE ORGANIC SALES*($ in millions)

Q1 ORGANIC SALES*($ in millions)

• Organic sales were up 2% in Q1 2019

• nora sales were up 9% in Q1 2019


$241$246

$175

$200

$225

$250

$275

Q1 2018 Q1 2019

$992

$1,059

$600

$700

$800

$900

$1,000

$1,100

2017 2018

page 29

$152

$186

$0

$50

$100

$150

$200

2017 2018

Adjusted EBITDA Growth

FYE ADJUSTED EBITDA*($ in millions)

• Adjusted EBITDA grew 22% in FYE 2018


page 30

$0.62

$1.10$1.03

$1.18

$1.49

$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

2014 2015 2016 2017 2018

Adjusted Earnings Per Share

ADJUSTED EARNINGS PER SHARE (DILUTED)*

• Our value creation strategy is generating double digit Adjusted EPS growth

24% CAGR


page 31

TOTAL DEBT($ in millions)

NET DEBT($ in millions)

NET DEBT / ADJUSTED EBITDA*

Capitalization and Liquidity


0.9x 0.7x

0.9x

2.9x 2.8x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

2015 2016 2017 2018 Proforma

LTM Q1

2019*

$157 $142

$152

$186 $202

$0

$50

$100

$150

$200

$250

2015 2016 2017 2018 Proforma

LTM Q1

2019*

ADJUSTED EBITDA*($ in millions)

$214 $270

$230

$619 $642

$0

$175

$350

$525

$700

2015 2016 2017 2018 Q1 2019

$138 $105

$143

$538 $575

$0

$175

$350

$525

$700

2015 2016 2017 2018 Q1 2019

page 32

Capital Allocation for Value Creation

Reinvest in the

Business

Evaluate Leverage

Explore M&A

Opportunities

Return Excess Cash

to Shareowners

CAPITAL DEPLOYMENT PHILOSOPHY

Invest in strategic initiatives with high returns including organic growth opportunities,

innovation, manufacturing productivity and salesforce effectiveness

Utilize excess cash to opportunistically refinance or pay down debt

Optimize cost of capital and target Net Debt / Adjusted EBITDA below 3.0x

Opportunistically evaluate accretive M&A transactions

Returned $30M to shareowners in 2018 via dividends and stock repurchases

• Investing in the business to fuel our value creation strategy while upholding a disciplined approach to

capital allocation

• Maintaining strong liquidity with $254 million available under our revolving credit facility as of March 31, 2019

page 33

Investment Highlights: Who We Are

leading

global provider

of commercial

flooring solutions

most valuable

brand

in the flooring

category

strongest global

sales &

marketing

capabilities

global

manufacturing

footprint and

industry-leading

gross margins

engaged,

customer-centric

culture, focused

on performance

and galvanized

around our

sustainability

mission

AppendixAppendix

page 35

Appendix: Reconciliation of Non-GAAP Figures

($ in millions, except per share amounts)

Q1

2018

Q1

2019

FYE

2017

FYE

2018

Net Sales as Reported (GAAP) $240.6 $297.7 $996.4 $1,179.6

Impact of Changes in Currency - 8.0 - (8.4)

nora Net Sales - (60.1) - (112.6)

Specialty Retail Sales - - (4.7) -

Organic Sales $240.6 $245.6 $991.7 $1,058.6

Gross Profit as Reported (GAAP) $93.6 $115.4 $386.0 $424.4

Purchase Accounting Amortization - 1.9 - 32.1

Adjusted Gross Profit $93.6 $117.3 $386.0 $456.5

SG&A Expenses as Reported (GAAP) $70.6 $99.0 $267.2 $327.5

Transaction Related Expenses - - - (5.3)

Adjusted SG&A Expenses $70.6 $99.0 $267.2 $322.2

Operating Income as Reported (GAAP) $23.0 $16.4 $111.6 $76.4

Purchase Accounting Amortization - 1.9 - 32.1

Transaction Related Expenses - - - 5.3

Restructuring and Asset Impairment Charges - - 7.3 20.5

Adjusted Operating Income $23.0 $18.3 $118.9 $134.3

Net Income as Reported (GAAP) $15.1 $7.1 $53.2 $50.3

Purchase Accounting Amortization (after tax impact of $0.6m Q1 2019 and $9.3m in 2018) - 1.3 - 22.7

Transaction Related Expenses (after tax impact of $2.1m in 2018) - - - 7.4

Tax Act Expense (Benefit) - - 15.2 (6.7)

Restructuring and Asset Impairment Charges (after tax impact of $5.2m in 2018 and $2.6m in 2017) - - 4.7 15.3

Adjusted Net Income $15.1 $8.4 $73.1 $89.0

Diluted EPS as Reported (GAAP) $0.25 $0.12 $0.86 $0.84

Purchase Accounting Amortization (after tax impact of $0.6m Q1 2019 and $9.3m in 2018) - 0.02 - 0.38

Transaction Related Expenses (after tax impact of $2.1m in 2018) - - - 0.12

Tax Act Expense (Benefit) - - 0.25 (0.11)

Restructuring and Asset Impairment Charges (after tax impact of $2.6m in 2017 and $5.2m in 2018) - - 0.08 0.26

Adjusted Diluted EPS $0.25 $0.14 $1.18 $1.49

page 36


2014 2015 2016 2017 2018

LTM

Q1 2019

Q1

2018

Q1

2019

Diluted EPS as Reported (GAAP) $0.37 $1.10 $0.83 $0.86 $0.84 $0.71 $0.25 $0.12

Purchase Accounting (after tax impact of $0.6m Q1 2019 and $9.3m in 2018) - - - - 0.38 0.40 - 0.02

Transaction Related Expenses (after tax impact of $2.1m in 2018) - - - - 0.12 0.12 - -

Tax Act Expense (Benefit) - - - 0.25 (0.11) (0.11) - -

Restructuring and Asset Impairment Charges* 0.13 - 0.20 0.08 0.26 0.26 - -

Debt Retirement Expenses (net of tax impact of $0.6m in 2013 and $4.2m in 2014) 0.12 - - - - - - -

Australia Fire Impact (net of tax impact of $0.2m in 2012 and $3.6m in 2013) - - - - - - - -

Tax Dispute Resolution - - - - - - - -

Adjusted Diluted EPS $0.62 $1.10 $1.03 $1.18 $1.49 $1.38 $0.25 $0.14

* Restructuring and Asset Impairment Charges are net of tax impact of $4.9m in 2012, $3.6m in 2014, $6.7m in 2016, and $2.6m in 2017 and $5.2m in 2018

($ in millions) 2014 2015 2016 2017 2018 Q1 2019

Total Debt $263 $214 $270 $230 $619 $642

Less: Cash (55) (76) (166) (87) (81) (67)

Net Debt $208 $138 $105 $143 $538 $575

($ in millions) 2014 2015 2016 2017 2018

LTM

Q1 2019

Q1

2018

Q1

2019

Net Income as Reported (GAAP) $25 $72 $54 $53 $50 $42 $15 $7

Taxes on Income 11 33 25 47 5 1 5 2

Transaction Related Other Expense - - - - 4 4 - -

Interest Expense 21 6 6 7 15 20 2 7

Depreciation & Amortization 31 31 31 30 39 42 9 11

Stock Compensation Amortization 4 14 6 7 15 14 3 3

Transaction Related Expenses - - - - 5 5 - -

Purchase Accounting Amortization - - - - 32 34 - 2

Restructuring and Asset Impairment Charges 12 - 20 7 21 21 - -

Debt Retirement Expenses 12 - - - - - - -

Adjusted EBITDA $116 $157 $142 $152 $186 $183 $34 $31

Total Debt / Net Income 10.6x 2.9x 5.0x 4.3x 12.3x

Net Debt / Adjusted EBITDA 1.8x 0.9x 0.7x 0.9x 2.9x

($ in millions)

For the

Period

1/1/2018 -

8/7/2018

For the

Period

4/1/2018 -

8/7/2018

Proforma nora Net Income prior to Interface Ownership $2 $4

Proforma nora taxes on income prior to Interface Ownership (0) (1)

Proforma nora interest expense prior to Interface Ownership 7 4

Proforma nora Depreciation and Amortization prior to Interface Ownership 8 6

Proforma nora other non-recurring charges prior to Interface Ownership 7 6

Proforma nora Adjusted Earnings before Taxes, Interest, Depreciation and Amortization $24 $19

Proforma Interface + nora (pre-acquisition) Adjusted Earnings before Taxes, Interest,

Depreciation and Amortization (AEBITDA)

$210 $202

Total Debt / Net Income 12.3x 15.2x

Net Debt / Proforma AEBITDA 2.6x 2.8x

page 37


($ in millions) 2018

Net Sales as Reported (GAAP) $1,180

Proforma nora Net Sales prior to Interface Ownership (1/1/2018 - 8/7/2018) 166

Proforma 2018 Interface + nora (pre-acquisition) Net Sales $1,345

($ in millions) 2018

Operating Income as Reported (GAAP) $76

Purchase Accounting 32

Transaction Related Expenses 5

Restructuring and Asset Impairment Charges 21

Adjusted Operating Income $134

Adjusted Tax Rate 24%

Net Operating Profit After Tax (NOPAT) $102

($ in millions) 2017 2018 Average

Shareholder's Equity 330 355 342

Total Debt 230 619 424

Cash (87) (81) (84)

Invested Capital $473 $892 $683

Return on Invested Capital (ROIC) = NOPAT / Average Invested Capital 15%

Documents

Investor Presentation · 2019-06-05 · Investor Presentation JUNE 2019. page 2 Forward Looking Statements and Non-GAAP Measures This presentation contains forward-looking statements,