Mohawk(MHK) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Highlights Mohawk Industries reported Q2 2025 net sales were flat year-over-year, while both GAAP and adjusted net earnings and EPS declined Q2 & H1 2025 Key Financial Results (vs. Prior Year) | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change | H1 2025 (USD) | H1 2024 (USD) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2.8B | $2.8B | ~0% | $5.3B | $5.5B | -2.8% | | Net Earnings | $147M | $157M | -6.4% | $219M | $262M | -16.4% | | EPS | $2.34 | $2.46 | -4.9% | $3.49 | $4.10 | -14.9% | | Adjusted Net Earnings | $173M | $192M | -9.9% | $269M | $310M | -13.2% | | Adjusted EPS | $2.77 | $3.00 | -7.7% | $4.29 | $4.85 | -11.5% | Management Commentary & Business Outlook Management highlights operational improvements and tariff management, anticipating input cost pressures to peak in Q3 with adjusted EPS guidance of $2.56 to $2.66 Operational Performance and Strategy The company is executing restructuring plans for $100 million in benefits, enhancing product mix, and leveraging North American manufacturing to mitigate tariffs - Restructuring actions are on schedule and expected to deliver approximately $100 million in benefits this year[10] - The company is mitigating industry pricing pressure by strengthening its product and channel mix, with a focus on premium collections and new introductions[3] - To counter increasing tariffs, the company is emphasizing its locally produced collections, as approximately 85% of its U.S. sales are from goods produced in North America[6][10] Segment Performance In Q2 2025, Global Ceramic net sales and operating margin slightly increased, while Flooring Rest of World and North America segments experienced sales declines and margin pressures Q2 2025 Segment Performance vs. Prior Year | Segment | Net Sales Change (Reported) (%) | Net Sales Change (Adjusted) (%) | Operating Margin (Adjusted) (%) | | :--- | :--- | :--- | :--- | | Global Ceramic | +0.5% | +1.1% | 8.1% | | Flooring Rest of World | +1.0% | -3.0% | 10.4% | | Flooring North America | -1.2% | N/A | 7.3% | Future Outlook and Guidance The company anticipates continued sales constraints due to inflation and low consumer confidence, with input cost pressures peaking in Q3, and projects Q3 2025 adjusted EPS between $2.56 and $2.66 - Q3 2025 adjusted EPS is guided to be between $2.56 and $2.66, excluding any restructuring charges or potential new tariff impacts[11] - Input cost pressures are expected to continue, with the impact peaking in the third quarter as higher costs flow through inventory[10] - The company believes it is strategically positioned to capitalize on opportunities as the industry recovers from the current cyclical downturn[5][12] Capital Allocation Mohawk generated approximately $125 million in Q2 2025 free cash flow, repurchased $42 million in shares, and authorized a new $500 million share repurchase program - Generated approximately $125 million of free cash flow in Q2 2025[4] - Purchased approximately 393,000 shares for $42 million during the quarter[4] - The Board of Directors approved a new $500 million share repurchase authorization[4] Consolidated Financial Statements The consolidated financial statements show a decline in Q2 2025 gross profit and operating income, an increase in total assets, and a significant decrease in H1 2025 operating cash flow Condensed Consolidated Statements of Operations Q2 2025 net sales remained flat at $2.80 billion, while gross profit, operating income, and net earnings all experienced year-over-year declines Q2 2025 Statement of Operations Highlights (in millions) | Account | Q2 2025 (USD millions) | Q2 2024 (USD millions) | | :--- | :--- | :--- | | Net sales | $2,802.1 | $2,801.3 | | Gross profit | $714.4 | $723.8 | | Operating income | $188.7 | $214.0 | | Net earnings | $146.5 | $157.4 | Condensed Consolidated Balance Sheets As of June 28, 2025, total assets increased to $13.78 billion, total liabilities decreased to $5.48 billion, and total stockholders' equity rose to $8.30 billion Balance Sheet Summary (in millions) | Account | June 28, 2025 (USD millions) | June 29, 2024 (USD millions) | | :--- | :--- | :--- | | Total current assets | $6,064.9 | $5,641.3 | | Total assets | $13,778.8 | $13,279.6 | | Total current liabilities | $2,853.2 | $2,937.7 | | Total liabilities | $5,481.2 | $5,627.1 | | Total stockholders' equity | $8,297.6 | $7,652.5 | Other Financial Information (Cash Flow) Net cash provided by operating activities for H1 2025 significantly decreased to $210.0 million, resulting in free cash flow of $40.7 million after capital expenditures Cash Flow Summary (in millions) | Metric | Six Months Ended 2025 (USD millions) | Six Months Ended 2024 (USD millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $210.0 | $417.3 | | Capital expenditures | $169.3 | $178.2 | | Free cash flow | $40.7 | $239.1 | Segment Information For H1 2025, all segments experienced year-over-year net sales declines, with Flooring North America's operating income halving, while Global Ceramic remained stable and Flooring Rest of World decreased Six Months Ended Segment Performance (in millions) | Segment | Net Sales H1 2025 (USD millions) | Net Sales H1 2024 (USD millions) | Operating Income H1 2025 (USD millions) | Operating Income H1 2024 (USD millions) | | :--- | :--- | :--- | :--- | :--- | | Global Ceramic | $2,114.7 | $2,160.4 | $130.0 | $131.9 | | Flooring NA | $1,809.2 | $1,858.7 | $61.8 | $123.3 | | Flooring ROW | $1,404.0 | $1,461.6 | $124.5 | $136.5 | Non-GAAP Financial Measures and Reconciliations This section details reconciliations of GAAP to non-GAAP financial measures, adjusting for items like restructuring costs and currency effects to provide a clearer view of core operating performance Reconciliation of Net Earnings to Adjusted Net Earnings and EPS Q2 2025 GAAP net earnings of $146.5 million were adjusted to $173.3 million, primarily due to $29.4 million in restructuring costs, resulting in an adjusted EPS of $2.77 Q2 2025 Reconciliation of Net Earnings to Adjusted Net Earnings (in millions) | Metric | Q2 2025 (USD millions) | Q2 2024 (USD millions) | | :--- | :--- | :--- | | Net earnings (GAAP) | $146.5 | $157.4 | | Restructuring & other costs | $29.4 | $41.4 | | Other adjustments (net) | $4.9 | $(7.3) | | Adjusted net earnings (Non-GAAP) | $173.3 | $191.5 | Reconciliation of Net Sales to Adjusted Net Sales Q2 2025 reported net sales of $2.802 billion were adjusted to $2.780 billion after accounting for constant shipping days and exchange rates, representing a 0.8% adjusted year-over-year decrease Q2 2025 Reconciliation of Net Sales (in millions) | Metric | Amount (USD millions) | | :--- | :--- | | Net sales (GAAP) | $2,802.1 | | Adjustment for constant shipping days | $12.0 | | Adjustment for constant exchange rates | $(34.4) | | Adjusted net sales (Non-GAAP) | $2,779.7 | Reconciliation of Profitability Metrics Q2 2025 adjusted operating income decreased to $223.0 million (8.0% margin) from $256.7 million (9.2% margin) in Q2 2024, primarily due to restructuring cost adjustments Q2 2025 Reconciliation of Operating Income (in millions) | Metric | Q2 2025 (USD millions) | Q2 2024 (USD millions) | | :--- | :--- | :--- | | Operating income (GAAP) | $188.7 | $214.0 | | Restructuring & other costs | $29.4 | $41.4 | | Legal settlements, etc. | $4.9 | $1.3 | | Adjusted operating income (Non-GAAP) | $223.0 | $256.7 | | Adjusted operating margin | 8.0% | 9.2% | Reconciliation of Net Earnings to Adjusted EBITDA Mohawk's TTM Adjusted EBITDA was $1,342.1 million as of June 28, 2025, resulting in a net debt to Adjusted EBITDA ratio of 1.2x - Trailing twelve months Adjusted EBITDA was $1,342.1 million[26] - The ratio of Net Debt to Adjusted EBITDA was 1.2x as of June 28, 2025[26] Reconciliation of Total Debt to Net Debt As of June 28, 2025, total debt was $2.201 billion, and after subtracting cash, net debt stood at $1.654 billion Net Debt Calculation as of June 28, 2025 (in millions) | Metric | Amount (USD millions) | | :--- | :--- | | Total debt | $2,201.0 | | Less: Cash and cash equivalents | $546.7 | | Net debt | $1,654.3 | - The company provides non-GAAP measures to help investors understand long-term profitability trends by excluding items that may not be indicative of core operating performance[34][36]