• Fourth Quarter Net Sales: $335 million, a 3% increase versus Q4 2023.
• FX Neutral Net Sales Growth: 3.4% increase compared to Q4 2023.
• Americas FX Neutral Net Sales: Up 9.6% year over year in Q4.
• EAAA FX Neutral Net Sales: Down 5.2% year over year in Q4.
• Fourth Quarter Adjusted Gross Profit Margin: 36.9%, a decrease of 139 basis points from Q4 2023.
• Fourth Quarter Adjusted SG&A Expenses: $90.8 million, up from $83.5 million in Q4 2023.
• Fourth Quarter Adjusted Operating Income: $32.8 million, down from $41 million in Q4 2023.
• Fourth Quarter Adjusted EPS: $0.34, compared to $0.41 in Q4 2023.
• Full Year 2024 Net Sales: $1.32 billion, a 4.3% increase versus 2023.
• Full Year FX Neutral Net Sales Growth: 4.4% year over year.
• Full Year Adjusted Gross Profit Margin: 37.1%, an increase of 173 basis points from 2023.
• Full Year Adjusted Operating Income: $141.4 million, up from $116.4 million in 2023.
• Full Year Adjusted EBITDA: $189 million, compared to $162 million in 2023.
• Cash from Operating Activities: $148.4 million in 2024.
• Liquidity at Year-End: $398.5 million.
• Debt Repayment in 2024: $115.2 million.
• Net Debt at Year-End: $203.5 million.
• Net Leverage Ratio: 1.1 times.
• Capital Expenditures in 2024: $33.8 million, up from $26.1 million in 2023.
• 2025 First Quarter Net Sales Guidance: $290 million to $300 million.
• 2025 Full Year Net Sales Guidance: $1.315 billion to $1.365 billion.

• Warning! GuruFocus has detected 4 Warning Signs with TILE.

Release Date: February 25, 2025

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

Positive Points

• Interface Inc (NASDAQ:TILE) achieved a 4% increase in currency neutral net sales in 2024, demonstrating strong performance despite industry headwinds.
• The company's 'One Interface' strategy, which integrates NORA and Interface selling teams, resulted in double-digit order growth in the Americas.
• Investments in automation and robotics at key manufacturing plants have improved margins and operational efficiency.
• Interface Inc (NASDAQ:TILE) received top honors in Reuters 2024 sustainability awards for its commitment to becoming carbon negative by 2040.
• The company reported a strong financial position with a net leverage ratio of 1.1 times and significant debt repayment in 2024.

Negative Points

• Currency neutral net sales in the EAAA region were down 2% due to a softer macroeconomic environment.
• The healthcare segment saw a 2% decline in global billings year-over-year, despite a 12% increase in the fourth quarter.
• Fourth quarter adjusted gross profit margin decreased by 139 basis points compared to the prior year.
• Adjusted operating income for the fourth quarter was lower than the previous year, primarily due to lower adjusted gross profit margin and higher variable compensation.
• The corporate office segment experienced a 1% decline in global billings for the year, reflecting challenges in the market.

Q & A Highlights

Q: How is the One Interface strategy impacting 2025, and can we expect similar benefits as in 2024? A: Laurel Hurd, CEO, stated that the One Interface strategy and combined selling team have shown significant success, with the Americas business up 9%. The strategy is still in early stages, and they expect continued benefits in 2025, which are factored into their guidance.

Q: What is the outlook for the office segment in 2025, given the momentum seen at the end of 2024? A: Laurel Hurd noted that despite a 1% decline in corporate office billings in 2024, they are gaining market share. The rise in return-to-office mandates and demand for premium Class A space are positive indicators for 2025.

Q: With a strong balance sheet and reduced debt, what are the capital allocation priorities for 2025? A: Bruce Hausmann, CFO, emphasized continued investment in the business, particularly in manufacturing facilities to enhance efficiency and profit margins, leveraging their strong balance sheet.

Q: Is the $45 million capital expenditure for 2025 primarily for manufacturing automation, and is this the peak spending? A: Bruce Hausmann confirmed that the expenditure is for ongoing automation investments in U.S. and international plants. While this aligns with their typical CapEx range, they remain open to further investments if they offer strong returns.

Q: How are the capital projects affecting shipments, and what is the expected impact on gross margins? A: Laurel Hurd stated that capital projects are not impacting shipments; instead, they are increasing throughput. Bruce Hausmann added that the expected 50-70 basis point improvement in gross margins for 2025 is driven by various factors, including supply chain productivity and product mix.

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