Interface Reports First Quarter 2024 Results

Interface, Inc., a worldwide commercial flooring company and global leader in sustainability, announced results for the first quarter ended March 31, 2024.

First quarter highlights:

• Net sales totaled $289.7 million, down 2% year-over-year.
• Gross profit margin increased to 38.1%, up 569 basis points year-over-year.
• GAAP earnings per share of $0.24; Adjusted earnings per share of $0.24.
• Currency neutral orders up 5.1% year-over-year.

“We delivered a strong start to the year. First quarter net sales came in at the high end of our guidance with notable strength in the Americas business. Our One Interface strategy is yielding tangible results including reduced complexity, continuous improvement of pricing and mix management, and synergies from the globalization of our core functions. These improvements contributed to significant profitability expansion in the first quarter,” said Laurel Hurd, CEO of Interface.

“We recently rolled out a fresh and exciting new brand attitude, Made for More™, which showcases the best of Interface and encompasses our belief that our flooring products are made with purpose and without compromise. We are excited about One Interface’s collaborative focus, and we remain committed to positioning Interface for long-term success and increasing value for our shareholders,” said Hurd.

“Our selling teams did a great job driving favorable mix and price, and we further benefited from input cost deflation, which drove significant gross profit margin expansion in the first quarter. Effective commercial execution also led to 5.1% order growth year-over-year resulting in strong momentum as we move into the second quarter,” said Bruce Hausmann, CFO of Interface.

First Quarter 2024 Financial Summary

Sales: First quarter net sales were $289.7 million, down 2.0% versus $295.8 million in the prior year period.

Gross profit margin was 38.1% in the first quarter of 2024, an increase of 569 basis points from the prior year period. Adjusted gross profit margin was 38.6%, an increase of 528 basis points from adjusted gross profit margin for the prior year period due primarily to input cost deflation, higher selling prices and favorable product mix.

First quarter SG&A expenses were $86.0 million, or 29.7% of net sales, compared to $86.3 million, or 29.2% of net sales in the first quarter of 2023. Adjusted SG&A expenses were $86.2 million, or 29.7% of net sales, in the first quarter of 2024, compared to $83.2 million, or 28.1% of net sales, in the first quarter of 2023.

Operating Income: First quarter 2024 operating income was $24.4 million, compared to operating income of $9.5 million in the prior year period. First quarter 2024 adjusted operating income (“AOI”) was $25.5 million versus AOI of $15.2 million in the first quarter of 2023.

Net Income and EPS: On a GAAP basis, the Company recorded net income of $14.2 million in the first quarter of 2024, or $0.24 per diluted share, compared to first quarter 2023 GAAP net loss of $0.7 million, or $0.01 per diluted share. First quarter 2024 adjusted net income was $14.2 million, or $0.24 per diluted share, versus first quarter 2023 adjusted net income of $4.0 million, or $0.07 per diluted share.

Adjusted EBITDA: In the first quarter of 2024, adjusted EBITDA was $38.8 million. This compares with adjusted EBITDA of $26.3 million in the first quarter of 2023.

Cash and Debt: The Company had cash on hand of $89.8 million and total debt of $391.8 million at the end of the first quarter 2024, compared to $110.5 million of cash and $417.2 million of total debt at the end of fiscal year 2023.

First Quarter Segment Results

AMS Results:

• Q1 2024 net sales of $169.9 million, up 0.4% versus $169.2 million in the prior year period.
• Q1 2024 orders were up 6.8% compared to the prior year period.
• Q1 2024 operating income was $18.2 million compared to $8.7 million in the prior year period.
• Q1 2024 AOI was $18.1 million versus AOI of $11.3 million in the prior year period.

EAAA Results:

• Q1 2024 net sales of $119.8 million, down 5.3% versus $126.6 million in the prior year period.
• Currency fluctuations had no material impact to EAAA Q1 2024 net sales versus the prior year period.
• Q1 2024 orders were up 2.8% compared to the prior year period on a currency neutral basis. EMEA was up 2.4%, Asia was up 14.9%, partially offset by Australia which was down 2.6%.
• Q1 2024 operating income of $6.3 million compared to $0.8 million in the prior year period.
• Q1 2024 AOI was $7.4 million versus AOI of $3.9 million in the prior year period.

As Interface looks at 2024, while the macro environment remains dynamic, the company continues to be encouraged by improving trends. Interface is increasing its full fiscal year net sales estimate and continues to expect a year-over-year increase in gross profit margins this fiscal year. A portion of the anticipated increase in net sales is expected to come from the retail segment, which generally has lower gross profit margins compared to Interface’s more premium product offerings. This sequential change in the company’s anticipated overall product mix is reflected in the updated guidance below.

With that backdrop in mind, Interface has updated its full fiscal year 2024 guidance and is anticipating the following:

For the second quarter of 2024:

• Net sales of $335 million to $345 million.
• Adjusted gross profit margin of approximately 34.5%.
• Adjusted SG&A expenses of approximately $86 million.
• Adjusted Interest & Other expenses of approximately $8 million.
• Fully diluted weighted average share count of approximately 58.8 million shares.

For the full fiscal year 2024:

• Net sales of $1.29 billion to $1.31 billion.
• Adjusted gross profit margin of 35.5% to 36.0%.
• Adjusted SG&A expenses that are approximately 26.0% of net sales.
• Adjusted Interest & Other expenses of approximately $30 million.
• An adjusted effective tax rate for the full year of approximately 28%.
• Capital expenditures of approximately $42 million.

Non-GAAP Financial Measures

Interface provides adjusted earnings per share, adjusted net income, adjusted operating income (“AOI”), adjusted gross profit, adjusted gross profit margin, adjusted SG&A expenses, currency neutral sales and currency neutral sales growth, net debt, and adjusted EBITDA as additional information regarding its operating results in this press release. These non-GAAP measures are not in accordance with – or alternatives to – GAAP measures, and may be different from non-GAAP measures used by other companies. Adjusted EPS, adjusted net income, and AOI exclude nora purchase accounting amortization, the cyber event impact, and restructuring, asset impairment, severance, and other, net. Adjusted EPS and adjusted net income also exclude the property casualty loss impact and the loss on discontinuance of interest rate swaps. Adjusted gross profit and adjusted gross profit margin exclude nora purchase accounting amortization. Adjusted SG&A expenses exclude the cyber event impact and restructuring, asset impairment, severance, and other, net. Currency neutral sales and currency neutral sales growth exclude the impact of foreign currency fluctuations. Net debt is total debt less cash on hand. Adjusted EBITDA is GAAP net income excluding interest expense, income tax expense, depreciation and amortization, share-based compensation expense, cyber event impact, property casualty loss impact, restructuring, asset impairment, severance, and other, net, nora purchase accounting amortization, and the loss on foreign subsidiary liquidation. This news release should be read in conjunction with the Company’s Current Report on Form 8-K furnished today to the U.S. Securities & Exchange Commission, which explains why Interface believes presentation 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.