One Interface strategy yielding strong results; Company increasing full fiscal year 2024 net sales guidance
Interface, Inc. (Nasdaq: TILE), a worldwide commercial flooring company and global leader in sustainability, today 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,” commented 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,” concluded 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,” added 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.
Outlook
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.
The full text of Interface’s 1Q24 earnings release, including all tables, and an archived version of the company’s May 3 conference call webcast, 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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