Interface Reports Second Quarter 2024 Results
One Interface strategy drives growth and profitability expansion; Company raises full year guidance
Interface, Inc. (Nasdaq: TILE), a worldwide commercial flooring company and global leader in sustainability, today announced results for the second quarter ended June 30, 2024.
Second quarter highlights:
- Net sales were $346.6 million, up 5.2% year-over-year, and 5.8% on a currency neutral basis.
- Gross profit margin increased to 35.4%, up 145 basis points year-over-year.
- GAAP earnings per share of $0.38; Adjusted earnings per share of $0.40.
- Currency neutral orders up 8% year-over-year.
“Our growth and profitability expansion in the second quarter demonstrates the successful execution of our One Interface strategy. Growth in the quarter was primarily driven by continued strength from our Americas business as net sales increased 7% and orders were up 15% on a currency neutral basis. We are proactively driving growth in Education which remains a prominent market segment with global billings up 13% year-over-year. Based on industry trends, we gained market share in Corporate Office, with global billings up 4% year-over-year,” commented Laurel Hurd, CEO of Interface.
“Strong commercial execution led to an 8% increase in consolidated currency neutral orders in the second quarter, and our backlog increased by 33% since the beginning of 2024, positioning us for strong year-over-year growth in the second half of the year. As a global organization, we are focused on strategically leveraging our strengths to accelerate growth and create value for our shareholders,” concluded Hurd.
“We continue to drive margin expansion through increased volume and higher selling prices while benefiting from overall input cost deflation, which expanded gross profit margin in the second quarter. We also continue to pay down debt and strengthen the balance sheet while investing in the business,” added Bruce Hausmann, CFO of Interface.
Second Quarter 2024 Financial Summary
Sales: Second quarter net sales were $346.6 million, up 5.2% versus $329.6 million in the prior year period.
Gross profit margin was 35.4% in the second quarter, an increase of 145 basis points from the prior year period. Adjusted gross profit margin was 35.7%, an increase of 183 basis points from the prior year period due primarily to higher volume and selling prices as well as input cost deflation.
Second quarter SG&A expenses were $84.5 million, or 24.4% of net sales, compared to $85.5 million, or 25.9% of net sales in the second quarter last year. Adjusted SG&A expenses were $84.3 million, or 24.3% of net sales, in the second quarter of 2024, compared to $83.9 million, or 25.5% of net sales, in the second quarter last year.
Operating Income: Second quarter operating income was $38.2 million, compared to operating income of $28.9 million in the prior year period. Second quarter 2024 adjusted operating income (“AOI”) was $39.6 million versus AOI of $27.9 million in the second quarter of 2023.
Net Income and EPS: On a GAAP basis, the Company recorded net income of $22.6 million in the second quarter of 2024, or $0.38 per diluted share, compared to second quarter 2023 GAAP net income of $15.8 million, or $0.27 per diluted share. Second quarter 2024 adjusted net income was $23.6 million, or $0.40 per diluted share, versus second quarter 2023 adjusted net income of $14.5 million, or $0.25 per diluted share.
Adjusted EBITDA: In the second quarter of 2024, adjusted EBITDA was $50.5 million. This compares with adjusted EBITDA of $39.8 million in the second quarter of 2023.
First Six Months of 2024 Summary
Sales: Net sales for the first six months of 2024 were $636.4 million, up 1.8% versus $625.4 million in the prior year period.
Gross profit margin was 36.6% for the first six months of 2024, an increase of 341 basis points from the prior year period. Adjusted gross profit margin was 37.0%, an increase of 341 basis points the prior year period due primarily to higher volume and selling prices as well as input cost deflation.
SG&A expenses for the first six months of 2024 were $170.4 million, or 26.8% of net sales, compared to $171.8 million, or 27.5% of net sales, in the same period last year. Adjusted SG&A expenses were $170.5 million, or 26.8% of net sales, for the first half of 2024 compared to $167.1 million, or 26.7% of net sales, in the same period last year.
Operating Income: Operating income for the first six months of 2024 was $62.6 million, compared to operating income of $38.4 million in the prior year period. AOI was $65.1 million for the first six months of 2024 versus AOI of $43.1 million in the same period last year.
Net Income and EPS: On a GAAP basis, the Company recorded net income of $36.7 million in the first half of 2024, or $0.63 per diluted share, compared to first half 2023 net income of $15.1 million, or $0.26 per diluted share. Six-month 2024 adjusted net income was $37.8 million, or $0.64 per diluted share, versus first half 2023 adjusted net income of $18.4 million, or $0.32 per diluted share.
Adjusted EBITDA: In the first six months of 2024, adjusted EBITDA was $89.2 million. This compares with adjusted EBITDA of $66.1 million in the prior year period.
Cash and Debt: The Company had cash on hand of $94.2 million and total debt of $387.6 million at the end of the second quarter 2024, compared to $110.5 million of cash and $417.2 million of total debt at the end of fiscal year 2023.
Second Quarter Segment Results
AMS Results:
- Q2 2024 net sales of $215.0 million, up 6.8% versus $201.3 million in the prior year period.
- Q2 2024 orders up 15.3% compared to the prior year period on a currency neutral basis.
- Q2 2024 operating income was $26.8 million compared to $24.8 million in the prior year period.
- Q2 2024 AOI was $26.9 million versus AOI of $24.0 million in the prior year period.
EAAA Results:
- Q2 2024 net sales of $131.6 million, up 2.6% versus $128.3 million in the prior year period.
- Currency fluctuations had a negative impact on EAAA sales of approximately $1.8 million (1.4%) compared to the same period last year due to the weakening of the Euro, Chinese Renminbi and Australian dollar against the U.S. dollar.
- Q2 2024 orders were down 1.3% compared to the prior year period on a currency neutral basis. EMEA was down 2.6%, Australia was down 0.4%, partially offset by Asia which was up 6.2%.
- Q2 2024 operating income of $11.3 million compared to $4.2 million in the prior year period.
- Q2 2023 AOI was $12.7 million versus AOI of $3.8 million in the prior year period.
First Six Months Segment Results
AMS Results:
- Net sales for the first six months of 2024 were $384.9 million, up 3.9% versus $370.5 million in the prior year period.
- Operating income for the first six months of 2024 was $45.0 million compared to $33.5 million in the prior year period.
- AOI for the first six months of 2024 was $45.0 million versus AOI of $35.3 million in the prior year period.
EAAA Results:
- Net sales for the first six months of 2024 were $251.5 million, down 1.3% versus $254.9 million in the prior year period.
- Currency fluctuations had an approximately $1.9 million negative impact on net sales in the first six months of 2024 compared to the prior year period, primarily due to the weakening of the Australian dollar and Chinese Renminbi against the U.S. dollar. Excluding negative foreign currency impacts, for the first six months of 2024, EAAA’s net sales were down 0.6% year-over-year.
- Operating income for the first six months of 2024 was $17.6 million compared to $4.9 million in the prior year period.
- AOI for the first six months of 2024 was $20.1 million versus AOI of $7.8 million in the prior year period.
Outlook
With strong orders and a strong backlog, Interface is increasing its full fiscal year net sales estimate, continues to expect a year-over-year increase in adjusted gross profit margins this fiscal year, and is anticipating the following:
For the third quarter of 2024:
- Net sales of $330 million to $340 million.
- Adjusted gross profit margin of approximately 36.0%.
- Adjusted SG&A expenses of approximately $86 million.
- Adjusted Interest & Other expenses of approximately $7 million.
- Fully diluted weighted average share count of approximately 58.7 million shares.
For the full fiscal year 2024:
- Net sales of $1.30 billion to $1.32 billion.
- Adjusted gross profit margin of approximately 36.0%.
- Adjusted SG&A expenses of approximately $342 million.
- Adjusted Interest & Other expenses of approximately $27 million.
- An adjusted effective tax rate for the full year of approximately 27.5%.
- Fully diluted weighted average share count of approximately 58.7 million shares.
- Capital expenditures of approximately $42 million.
The full text of Interface’s 2Q24 earnings release, including all tables, and a replay of the company’s Aug. 2 conference call may be accessed at https://investors.interface.com .
About Interface
Interface, Inc. (NASDAQ: TILE) is a global flooring solutions enterprise with an integrated portfolio of carpet tile and resilient flooring products. A leader in sustainability, Interface is working toward achieving its verified Science Based Targets by 2030 and its goal to become a carbon negative enterprise by 2040. With our design approach to flooring systems, we help our customers create high-performance interior spaces that have a positive impact on people’s lives and the planet. Our range includes Interface® carpet tile and LVT, nora® by Interface rubber flooring, and FLOR® premium area rugs for commercial and residential spaces.
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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