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Interface Reports Third Quarter 2024 Results

Strong strategy execution drives significant profitability expansion and double-digit order growth

Interface, Inc. (Nasdaq: TILE), a worldwide commercial flooring company and global leader in sustainability, today announced results for the third quarter ended September 29, 2024.

Third quarter highlights:

  • Net sales were $344.3 million, up 10.7% year-over-year.
  • Gross profit margin increased to 37.1%, up 162 basis points year-over-year.
  • GAAP earnings per share of $0.48; Adjusted earnings per share of $0.48.
  • Currency-neutral orders up 10% year-over-year.

“We delivered another quarter of strong performance, as our One Interface strategy continues to yield tangible results, including double-digit sales growth and significant profitability expansion. Education billings were up 18% year-over-year in the third quarter. In the Corporate Office segment, our global billings were up 2% year-over-year, outpacing overall industry trends and demonstrating that we are gaining market share. As expected, Retail billings increased in the third quarter compared to soft activity in the prior year,” commented Laurel Hurd, CEO of Interface.

“Effective commercial execution drove double-digit growth in currency-neutral orders in the third quarter. Currency-neutral orders in the Americas were up 17% with growth across all product categories, highlighting the effectiveness of our combined nora and Interface selling teams in the U.S. Currency-neutral orders in EAAA were flat, with increased activity in Asia offset by softness in Australia. Our ability to adapt globally in a dynamic market has enabled us to consistently deliver strong results, gain market share, and grow our business,” concluded Hurd.

“We generated $76.2 million of cash from operations in the third quarter and repaid $51.3 million of debt in the third quarter and $80.9 million year to date. We remain focused on strengthening the balance sheet through debt repayment and utilizing cash to reinvest in growth opportunities across the business,” added Bruce Hausmann, CFO of Interface.

Third Quarter 2024 Financial Summary

Sales: Third quarter net sales were $344.3 million, up 10.7% versus $311.0 million in the prior year period.

Gross profit margin was 37.1% in the third quarter, an increase of 162 basis points from the prior year period. Adjusted gross profit margin was 37.5%, an increase of 158 basis points from the prior year period primarily due to lower costs driven by raw material cost deflation and lower fixed costs per unit due to higher volume.

Third quarter SG&A expenses were $85.5 million, or 24.8% of net sales, compared to $79.3 million, or 25.5% of net sales in the third quarter last year. Adjusted SG&A expenses were $85.5 million, or 24.8% of net sales, in the third quarter of 2024, compared to $79.2 million, or 25.5% of net sales, in the third quarter last year.

Operating Income: Third quarter operating income was $42.2 million, compared to operating income of $31.0 million in the prior year period. Third quarter 2024 adjusted operating income (“AOI”) was $43.5 million versus AOI of $32.4 million in the third quarter of 2023.

Net Income and EPS: On a GAAP basis, the Company recorded net income of $28.4 million in the third quarter of 2024, or $0.48 per diluted share, compared to third quarter 2023 GAAP net income of $9.9 million, or $0.17 per diluted share. Third quarter 2024 adjusted net income was $28.3 million, or $0.48 per diluted share, versus third quarter 2023 adjusted net income of $16.4 million, or $0.28 per diluted share.

Adjusted EBITDA: In the third quarter of 2024, adjusted EBITDA was $53.7 million. This compares with adjusted EBITDA of $43.7 million in the third quarter of 2023.

First Nine Months of 2024 Summary

Sales: Net sales for the first nine months of 2024 were $980.6 million, up 4.7% versus $936.4 million in the prior year period.

Gross profit margin was 36.8% for the first nine months of 2024, an increase of 282 basis points from the prior year period. Adjusted gross profit margin was 37.2%, an increase of 281 basis points versus the prior year period due primarily to raw material cost deflation and higher average sales prices.

SG&A expenses for the first nine months of 2024 were $255.9 million, or 26.1% of net sales, compared to $251.0 million, or 26.8% of net sales, in the same period last year. Adjusted SG&A expenses were $255.9 million, or 26.1% of net sales, for the first nine months of 2024 compared to $246.3 million, or 26.3% of net sales, in the same period last year.

Operating Income: Operating income for the first nine months of 2024 was $104.8 million, compared to operating income of $69.4 million in the prior year period. AOI was $108.6 million for the first nine months of 2024 versus AOI of $75.4 million in the same period last year.

Net Income and EPS: On a GAAP basis, the Company recorded net income of $65.2 million in the first nine months of 2024, or $1.11 per diluted share, compared to first nine months of 2023 net income of $25.0 million, or $0.43 per diluted share. Nine-month 2024 adjusted net income was $66.1 million, or $1.13 per diluted share, versus first nine months of 2023 adjusted net income of $34.8 million, or $0.60 per diluted share.

Adjusted EBITDA: In the first nine months of 2024, adjusted EBITDA was $142.9 million. This compares with adjusted EBITDA of $109.8 million in the prior year period.

Cash and Debt: The Company had cash on hand of $115.6 million and total debt of $337.9 million at the end of the third quarter 2024, compared to $110.5 million of cash and $417.2 million of total debt at the end of fiscal year 2023.

Third Quarter Segment Results

AMS Results:

  • Q3 2024 net sales of $210.2 million, up 17.9% versus $178.2 million in the prior year period.
  • Q3 2024 orders up 17.1% compared to the prior year period on a currency-neutral basis.
  • Q3 2024 operating income was $31.9 million compared to $23.5 million in the prior year period.
  • Q3 2024 AOI was $32.2 million versus AOI of $23.3 million in the prior year period.

EAAA Results:

  • Q3 2024 net sales of $134.1 million, up 1.0% versus $132.8 million in the prior year period.
  • Currency fluctuations had a positive impact on EAAA net sales of approximately $1.6 million (1.2%) compared to the same period last year due to the strengthening of the Euro, Australian dollar, and the British Pound sterling against the U.S. dollar.
  • Q3 2024 orders were up 0.4% compared to the prior year period on a currency-neutral basis. Asia was up 8.0%, partially offset by Australia which was down 1.8% and EMEA which was down 0.3%.
  • Q3 2024 operating income of $10.3 million compared to $7.5 million in the prior year period.
  • Q3 2024 AOI was $11.3 million versus AOI of $9.0 million in the prior year period.

First Nine Months Segment Results

AMS Results:

  • Net sales for the first nine months of 2024 were $595.1 million, up 8.4% versus $548.7 million in the prior year period.
  • Operating income for the first nine months of 2024 was $76.9 million compared to $57.0 million in the prior year period.
  • AOI for the first nine months of 2024 was $77.2 million versus AOI of $58.6 million in the prior year period.

EAAA Results:

  • Net sales for the first nine months of 2024 were $385.6 million, down 0.5% versus $387.7 million in the prior year period.
  • Currency fluctuations had no material impact on EAAA net sales for the first nine months of 2024 compared to the prior year period.
  • Operating income for the first nine months of 2024 was $27.9 million compared to $12.4 million in the prior year period.
  • AOI for the first nine months of 2024 was $31.4 million versus AOI of $16.8 million in the prior year period.

Outlook

Interface delivered impressive results in the third quarter of 2024 and enters the fourth quarter of 2024 with strong orders and a healthy backlog. As a reminder, the Company’s fourth quarter of 2023 adjusted gross profit margin benefited 160 basis points from non-recurring items that reduced the Company’s cost of sales in that quarter. Separately, Interface continues to anticipate strong Retail billings in the fourth quarter of 2024, which have slightly lower gross profit margins. With that backdrop in mind, the Company is raising its full year outlook and is now anticipating the following:

For the full fiscal year 2024:

  • Net sales of $1.315 billion to $1.325 billion.
  • Adjusted gross profit margin of approximately 36.6%.
  • Adjusted SG&A expenses of approximately $345 million.
  • Adjusted Interest & Other expenses of approximately $27 million.
  • An adjusted effective tax rate for the full year of approximately 25.0%.
  • Fully diluted weighted average share count of approximately 58.8 million shares.
  • Capital expenditures of approximately $37 million.

The full text of Interface’s 3Q24 earnings release, including all tables, and an archived replay of the company’s Nov. 1 conference call discussing the results may be accessed at https://investors.interface.com.

About Interface

Interface, Inc. (NASDAQ: TILE) is a global flooring solutions company and sustainability leader, offering an integrated portfolio of carpet tile and resilient flooring products that includes Interface® carpet tile and LVT, nora® rubber flooring, and FLOR® premium area rugs for commercial and residential spaces. Made with purpose and without compromise, Interface flooring brings more sophisticated design, more performance, more innovation, and more climate progress to interior spaces. A decades-long pioneer in sustainability, Interface remains “all in” on becoming a restorative business. Today, the company is focusing on carbon reductions, not offsets, as it works toward achieving its verified science-based targets by 2030 and its goal to become a carbon negative enterprise by 2040.

Learn more about Interface at interface.com and blog.interface.com, nora by Interface at nora.com, FLOR at FLOR.com, and the company’s sustainability journey at interface.com/sustainability.

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