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II

INTERFACE INC (TILE)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $335.0M (+3.0% YoY) with GAAP diluted EPS of $0.37 and adjusted diluted EPS of $0.34; adjusted EBITDA was $46.0M. Results were within management’s implied range, but margins were lower YoY due to non-recurring benefits in Q4 2023 and higher commissions/incentives in Q4 2024 .
  • Americas (AMS) strength continued (Q4 AMS net sales +9.3% YoY), while EAAA was softer (Q4 EAAA net sales -5.6% YoY); consolidated currency-neutral orders rose ~5% and year-end backlog was up ~15% YoY, positioning 2025 well .
  • FY 2025 outlook: net sales $1.315B–$1.365B, adjusted gross margin 37.2%–37.4%, adjusted SG&A 26% of sales, adjusted interest & other $24M, tax rate 28%, capex ~$45M; Q1 2025 net sales $290M–$300M and adjusted GM ~37.5% .
  • Near-term catalysts: growing backlog, sustained AMS momentum, Nora mix tailwinds, and ongoing automation/robotics investments driving productivity and margin expansion; watch FX translation headwinds (~2% drag in Q1 2025 and ~1–2% for FY 2025) and EAAA macro softness .

What Went Well and What Went Wrong

  • What Went Well

    • One Interface selling strategy drove AMS growth and double-digit orders during 2024; management expects continued share gains and outperformance vs industry in 2025 (“early days”) .
    • Year-end backlog up ~15% YoY; consolidated currency-neutral orders +5% in Q4, supporting 2025 topline visibility .
    • Balance sheet strengthened: FY 2024 cash from operations $148.4M; total debt reduced to $302.8M; net debt $203.5M; net leverage 1.1x LTM adjusted EBITDA .

  • What Went Wrong

    • Q4 adjusted gross margin fell 139 bps YoY because Q4 2023 benefited by ~160 bps from non-recurring items; adjusted operating income and adjusted EPS declined YoY .
    • FX: ~$6M adverse translation in Q4 not anticipated; ongoing FX headwind guided at ~2% for Q1 2025 and ~1–2% for FY 2025 .
    • EAAA softness (Q4 EAAA net sales -5.6% YoY; orders -1.1% YoY currency-neutral) pressured mix/profitability despite stronger Asia and AMS .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Millions)$346.6 $344.3 $335.0
Gross Profit Margin % (GAAP)35.4% 37.1% 36.5%
Adjusted Gross Profit Margin %35.7% 37.5% 36.9%
Operating Income ($USD Millions, GAAP)$38.2 $42.2 $29.6
Adjusted Operating Income ($USD Millions)$39.6 $43.5 $32.8
Diluted EPS (GAAP)$0.38 $0.48 $0.37
Adjusted Diluted EPS$0.40 $0.48 $0.34
Adjusted EBITDA ($USD Millions)$50.5 $53.7 $46.0

Segment Net Sales

Segment Net Sales ($USD Millions)Q2 2024Q3 2024Q4 2024
AMS$215.0 $210.2 $205.7
EAAA$131.6 $134.1 $129.3
Consolidated$346.6 $344.3 $335.0

KPIs and Balance Sheet

KPIQ2 2024Q3 2024Q4 2024
Currency-Neutral Orders YoY+8% +10% +5%
Backlog YoY (end of period)——+15%
Cash from Operations ($USD Millions)$34.2 (1H) $76.2 (Q3) $148.4 (FY) ; $38 (Q4)
Total Debt ($USD Millions)$387.6 $337.9 $302.8
Net Debt ($USD Millions)$293.4 $222.3 $203.5
Net Debt / Adjusted EBITDA (x)1.6x 1.1x 1.1x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY 2024$1.30–$1.32 $1.315–$1.325 Raised
Adjusted Gross Profit MarginFY 2024~36.0% ~36.6% Raised
Adjusted SG&A ($USD Millions)FY 2024~$342 ~$345 Raised
Adjusted Interest & Other ($USD Millions)FY 2024~$27 ~$27 Maintained
Adjusted Effective Tax RateFY 2024~27.5% ~25.0% Lowered
Fully Diluted Shares (Millions)FY 2024~58.7 ~58.8 Slightly higher
Capital Expenditures ($USD Millions)FY 2024~$42 ~$37 Lowered
Net Sales ($USD Millions)Q1 2025—$290–$300 New
Adjusted Gross Profit MarginQ1 2025—~37.5% New
Adjusted SG&A ($USD Millions)Q1 2025—~$88 New
Adjusted Interest & Other ($USD Millions)Q1 2025—~$6 New
Adjusted Effective Tax RateQ1 2025—~28% New
Fully Diluted Shares (Millions)Q1 2025—~59.2 New
Net Sales ($USD Billions)FY 2025—$1.315–$1.365 New
Adjusted Gross Profit MarginFY 2025—37.2%–37.4% New
Adjusted SG&A (% of Sales)FY 2025—~26% New
Adjusted Interest & Other ($USD Millions)FY 2025—~$24 New
Adjusted Effective Tax RateFY 2025—~28% New
Capital Expenditures ($USD Millions)FY 2025—~$45 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
One Interface strategy / combined sellingAMS net sales +7%; CN orders +15% in AMS; market share gains in Corporate Office CN orders +17% AMS; share gains; double-digit sales growth Continues to drive AMS growth; expected to outpace industry in 2025 Improving
Automation/robotics & supply chain productivityMargin expansion via input cost deflation; productivity focus Confirmed margins up; continued productivity Automation in U.S. carpet tile and Germany Nora plants; throughput improving Improving
FX and macroFX headwind noted in EAAA (-1.4% impact H1) FX mixed; slight positive in EAAA Q3 ~$6M Q4 FX headwind; guide ~2% drag Q1’25, ~1–2% FY’25 Deteriorating
Segment performance (AMS vs EAAA)AMS growth; EAAA slight decline AMS +17.9% sales; EAAA +1.0% AMS +9.3% YoY; EAAA -5.6% YoY Mixed
Corporate Office / RTOShare gains; billings up 4% Office billings +2% YoY Office down 1% for year but momentum building with RTO mandates/Class A TI Improving
Nora (rubber) mix and pricing powern/an/aNora expansion in U.S. supports mix margins; carbon-negative prototype unveiled Improving
Retail timingDeferred projects Increased Q3 billings Up in back half of 2024 as deferred projects activated Improving
Tariffs/regulatoryn/an/aLimited exposure; can pivot supply chain; LVT sourced in South Korea, Nora made in Germany Stable

Management Commentary

  • “We delivered impressive results in 2024… As a result, we significantly expanded gross profit margin and nearly doubled GAAP earnings per diluted share.” — Laurel Hurd, CEO .
  • “Strong cash generation and disciplined capital management enabled us to repay $115 million of debt, reducing net leverage to 1.1x FY 2024 adjusted EBITDA.” — Bruce Hausmann, CFO .
  • “We invested in automation and robotics… contributing to improved margins and greater operational efficiency.” — Laurel Hurd, CEO (prepared remarks) .
  • “We enter 2025 with a strong backlog… FX translation effects to negatively impact YoY net sales growth by ~2% in Q1 2025 and ~1%–2% for FY 2025.” — Bruce Hausmann, CFO .

Q&A Highlights

  • One Interface strategy: Management emphasized continued share gains and momentum; benefits incorporated into 2025 guidance .
  • Office demand: Growing RTO mandates, premium Class A demand, and higher TI dollars should support 2025 office refresh activity despite 2024 office billings -1% globally .
  • Capital allocation: Strong balance sheet enables targeted automation investments with <2-year returns; 2025 capex guided at ~$45M .
  • Gross margin drivers: Price/cost, Nora/LVT mix, and productivity initiatives underpin guide to 37.2%–37.4% FY 2025 adjusted GM; early days but committed to expansion .
  • Tariffs exposure: Limited; carpet largely manufactured locally; LVT from South Korea; Nora in Germany; management can pivot supply chain as needed .

Estimates Context

  • S&P Global consensus estimates could not be retrieved due to a rate limit; therefore, quarter vs. consensus comparisons are unavailable at this time. Management indicated Q4 results were in the range of expectations and noted ~$6M FX translation headwind impacting the quarter .
  • Investors should monitor subsequent estimate revisions given FY 2025 guidance for net sales of $1.315B–$1.365B and adjusted gross margin of 37.2%–37.4% .
  • Note: S&P Global consensus data was unavailable via API at time of analysis.

Key Takeaways for Investors

  • Backlog strength and AMS momentum provide visibility into 2025; expect seasonality with lighter Q1 then stronger Q2–Q3, and watch FX headwinds (guide: ~2% Q1, ~1–2% FY) .
  • Margin story intact: ongoing automation, Nora mix tailwinds, and disciplined SG&A underpin guided adjusted GM expansion to 37.2%–37.4% in FY 2025; near-term quarterly margins may be noisy vs Q4 2023’s non-recurring benefit .
  • Balance sheet optionality: net leverage at 1.1x, net debt down to $203.5M; continued debt repayment and targeted high-ROI capex ($45M) support value creation .
  • Regional mix: AMS growth offsets EAAA softness; any macro stabilization in EMEA/Australia would be incremental upside; Asia resilience noted .
  • Trading setup: Near-term stock narrative should center on execution vs FY 2025 guide, FX drag magnitude, and evidence of office/RTO momentum; beats/misses likely to hinge on quarterly order conversion and margin progress .
  • Product/brand differentiation: Nora pricing power and carbon-negative innovation strengthen competitive moat and mix quality; supports medium-term thesis around premium segments .
  • Watchlist risks: FX volatility, EAAA macro softness, tariff policy shifts; management indicates flexibility in supply chain and localized manufacturing footprint .