• Net Sales: $297.4 million, an increase of 2.6% year over year.
• FX Neutral Net Sales Growth: 4.1% compared to the prior year's first quarter.
• Americas Net Sales Growth: 6.3% year over year.
• EAAA Net Sales Growth: 1% year over year.
• Adjusted Gross Profit Margin: 37.7%, a decrease of 82 basis points from the prior year.
• Adjusted SG&A Expenses: $86.8 million, compared to $86.2 million in the prior year.
• Adjusted Operating Income: $25.5 million, flat compared to the prior year.
• Adjusted EPS: $0.25, up from $0.24 in the prior year.
• Adjusted EBITDA: $37 million, compared to $38.8 million in the prior year.
• Cash from Operating Activities: $11.7 million generated in the first quarter.
• Liquidity: $397.2 million at the end of the quarter.
• Net Debt: $205.1 million at the end of the quarter.
• Net Leverage Ratio: 1.1 times.
• Capital Expenditures: $7.5 million in the first quarter.
• Second Quarter Net Sales Forecast: $355 million to $365 million.
• Second Quarter Adjusted Gross Profit Margin Forecast: Approximately 37.2% of net sales.
• Full Year Net Sales Forecast: $1.340 billion to $1.365 billion.
• Full Year Adjusted Gross Profit Margin Forecast: Approximately 37.2% to 37.4% of net sales.

• Warning! GuruFocus has detected 3 Warning Sign with TILE.

Release Date: May 02, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Interface Inc (NASDAQ:TILE) reported a 4% year-over-year currency-neutral growth in net sales, indicating strong performance despite a challenging macro environment.
• The company's 'One Interface' strategy is showing positive results, particularly in the Americas, where net sales grew by 6% and currency-neutral orders increased by 10%.
• Interface Inc (NASDAQ:TILE) launched two new carpet tile collections, Material Impressions and Open Road, expanding their product portfolio and catering to the needs of education and corporate office spaces.
• The company is making significant strides in sustainability, with strategic investments to incorporate captured carbon into manufacturing processes, aiming for carbon negativity by 2040.
• Interface Inc (NASDAQ:TILE) has a strong balance sheet with liquidity totaling $397.2 million and a net leverage ratio of 1.1 times, providing financial flexibility in a dynamic macro environment.

Negative Points

• The EAAA region experienced a softer macro environment, with currency-neutral orders down 6% year-over-year, impacting overall growth.
• Corporate office buildings saw a 7% year-over-year decline in the quarter, attributed to timing issues, although growth is expected for the full year.
• The adjusted gross profit margin decreased by 82 basis points from the prior year's first quarter due to higher manufacturing and freight costs.
• Exposure to tariffs on US imports of rubber from Germany and LVT from South Korea could impact approximately 15% of global product costs, though plans are in place to mitigate this.
• Despite strong performance in some areas, the overall adjusted EBITDA decreased to $37 million from $38.8 million in the first quarter of 2024.

Q & A Highlights

Q: Can you expand on how the one interface strategy contributed to the better-than-expected Q1 results, particularly in gross margin and SG&A? A: Laurel Hurd, CEO, explained that the one interface strategy has been effective, especially in the Americas, where combined selling teams have driven growth. All product categories, including Carpet tiles, LVT, and rubber, saw global growth in volume and price. The strategy's success is evident in healthcare and education sectors, which grew double digits globally. The momentum is expected to continue into the second quarter, with strong order growth and backlog.

Q: What led to the adjustment in revenue guidance, raising the lower end of the range? A: Laurel Hurd, CEO, stated that the adjustment was due to the strong Q1 performance and positive outlook for Q2. With global order growth up 3% in Q1 and a strong backlog, the company felt confident in raising the lower end of the revenue guidance.

Q: Can you provide more details on geographic growth, particularly in EMEA and APAC, and the performance in China? A: Bruce Hausmann, CFO, noted that Asia, particularly China, experienced strong double-digit growth on a currency-neutral basis. Europe and Australia were softer, but overall, Asia Pacific showed robust performance.

Q: How is the company addressing the impact of tariffs, and what is the expected financial impact? A: Bruce Hausmann, CFO, mentioned that the tariff impact is limited to less than 15% of global product costs, primarily affecting rubber from Germany and LVT from South Korea. The company plans to offset these costs through pricing and productivity, and these plans are reflected in the guidance.

Q: What are the expected benefits of the new global product category management role, and when will they materialize? A: Laurel Hurd, CEO, explained that the new role is crucial for accelerating and optimizing the innovation pipeline to drive growth across categories. While innovation takes time, this role is expected to contribute to long-term growth by better serving customer needs globally.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.