Financial Data and Key Metrics Changes - Interface reported currency neutral net sales growth of 7% and adjusted earnings per share of $0.60, both exceeding expectations [5][14] - Second quarter net sales totaled $375.5 million, an increase of 8.3% year-over-year, with adjusted gross profit margin at 39.8%, up 402 basis points from the previous year [21][22] - Adjusted operating income rose to $55.9 million, a 41% increase compared to the previous year, while adjusted EBITDA was $64.8 million [22][24] Business Line Data and Key Metrics Changes - The Americas team achieved 11% sales growth, with significant market share gains in carpet tile and rubber, particularly a near 40% growth in Nora Rubber [6][14] - Global education billings increased by 11% year-over-year, while health care billings surged by 28% [15][16] - Corporate office billings returned to growth, up 3% year-over-year, reflecting ongoing investments in workplace refreshes [18] Market Data and Key Metrics Changes - Currency neutral consolidated orders were up 3% year-over-year, with a 2% increase in The Americas and a 4% increase in EAAA [19] - The backlog increased by 24% year-to-date, positioning the company strongly for future sales growth [19][67] Company Strategy and Development Direction - The "One Interface" strategy focuses on building strong global functions to support local selling teams, enhancing productivity, and expanding margins through global supply chain management [5][6] - The company is committed to strategic investments in automation and robotics to improve operational efficiency and support sustainable growth [9][10] - Interface aims to be carbon negative by 2040, having already reduced its carbon footprint significantly across various product lines [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position despite a dynamic macro environment, highlighting strong performance in The Americas and encouraging order growth in EAAA [14][31] - The company raised its full-year guidance based on strong Q2 results, anticipating net sales of $1.37 billion to $1.39 billion for the fiscal year [24][25] - Management emphasized the importance of maintaining a balanced capital allocation strategy while investing in growth and margin expansion [23][40] Other Important Information - Interface repurchased $4.3 million of common stock in the quarter, marking the first repurchase since 2022 [23][39] - The company is focused on expanding its addressable market through product offerings at more approachable price points [7][8] Q&A Session Summary Question: What was the shape of Q2 performance on a similar basis? - Management noted that order growth momentum was strong in April, saw a slight dip in May and June, but picked back up, with July also showing strong order growth [30][31] Question: Can you provide color on government and retail performance in Q2? - Management indicated that almost every market saw growth, including government and retail, with corporate, education, and health care being the primary markets [32][34] Question: What are the business conditions in Australia and Asia? - Management reported strong business conditions in Australia and Asia, with local teams and manufacturing mitigating macro impacts [36][37] Question: What are the plans for capital allocation regarding share repurchases? - Management confirmed that while the primary focus is on investing in the business, they will also return capital to shareholders through share repurchases and dividends [38][40] Question: Is the "One Interface" strategy at full run rate? - Management believes the strategy is still in the early stages, with significant growth potential remaining, particularly in the Nora Rubber business [44][47] Question: What drove the margin performance in the quarter? - Management attributed margin expansion to a combination of pricing, product mix, and manufacturing productivity, with a significant portion driven by operational excellence [48][50] Question: Was there any pull forward of sales in Q2? - Management stated there was no awareness of any sales being pulled forward, although some larger orders in health care may have contributed to lumpiness [59][60] Question: How sustainable are the market share gains? - Management expressed confidence in the sustainability of market share gains, supported by strong product offerings and a focus on expanding into mid-market price points [63][64] Question: What is the timeline for the backlog? - Most of the backlog is expected to ship within the year, with some longer-term contracts included [67] Question: What are the expected returns on investment in international manufacturing assets? - Management indicated that benefits from automation in The Americas will start to be seen in Europe and Australia next year [71] Question: What is the impact of tariffs on gross margins? - The impact of tariffs was largely neutral in the quarter, with some expenses offset by incremental pricing [72] Question: How does the company view the buy versus build decision for growth? - Management emphasized a focus on internal growth and innovation, while remaining open to acquisitions if they align with strategic goals [76]

Financial Data and Key Metrics Changes - Net sales for the second quarter were $2.8 billion, essentially flat compared to the prior year [6][14] - Adjusted earnings per share for the quarter were $2.77, reflecting strong productivity and restructuring actions [6][14] - Gross margin for the quarter was 25.5%, a decrease of approximately 70 basis points year-over-year due to higher input costs [14][16] - Free cash flow generated during the quarter was approximately $125 million [7][19] Business Line Data and Key Metrics Changes - Global Ceramic segment sales exceeded $1.1 billion, a 0.5% increase as reported, benefiting from new product introductions [16][17] - Flooring North America had sales of $947 million, a 1.2% decrease primarily due to lower volumes in soft surfaces [18] - Flooring Rest of the World reported sales of $734 million, a 1% increase as reported, but a 3% decrease on a constant basis due to pricing pressure [18][19] Market Data and Key Metrics Changes - U.S. housing inventory has risen to its highest level since February 2007, impacting sales of new and existing homes [9][10] - The architectural billing index in the U.S. is forecasting slowing conditions, indicating potential challenges ahead [8][10] - European housing markets are experiencing a shortage of units and affordability issues, although lower interest rates may stimulate sales [11][12] Company Strategy and Development Direction - The company is focusing on operational improvements, cost containment, and market development initiatives to navigate challenging market conditions [6][7] - Restructuring actions are on schedule, expected to deliver approximately $100 million in annual cost savings [7][15] - The company is emphasizing locally produced collections to mitigate the impact of tariffs and enhance its competitive position [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted that ongoing inflation and low consumer confidence are constraining industry sales, with the timing of recovery remaining unpredictable [31][32] - The company expects input cost pressures to peak in the third quarter, with potential improvements in the fourth quarter as inflation eases [59][66] - Management remains optimistic about long-term growth as the industry recovers from the cyclical downturn [7][34] Other Important Information - The company repurchased approximately 393,000 shares for about $42 million during the quarter [7][19] - A new authorization to acquire $500 million of the company's outstanding stock was recently approved by the board [7][19] - The company released its annual sustainability report, highlighting its commitment to reducing carbon footprint and investing in green energy [13] Q&A Session Summary Question: Can you provide insights on the pricing environment in Flooring North America? - Management indicated that while the segment's sales were flat, stronger performance in hard surfaces was noted, with ongoing productivity initiatives helping to mitigate pricing pressures [36][37] Question: What is the expected impact of new tariffs on costs? - Management stated that the current tariff negotiations are ongoing, and while initial tariffs were around 10%, they could rise significantly, impacting pricing strategies [41][42] Question: How is the company addressing competitive pricing pressures? - The company has announced price increases of 8% to offset rising costs and is exploring supply chain optimizations to manage tariff impacts [46][47] Question: What is the outlook for profitability in the second half of the year? - Management anticipates continued challenges in the market but expects improvements in profitability driven by restructuring actions and a favorable product mix [58][66] Question: How is the M&A pipeline looking? - The M&A pipeline remains limited due to compressed earnings in the housing industry, but management expects opportunities to arise as market conditions improve [114][115]

Core Viewpoint - Mohawk Industries, Inc. is expected to report a decline in both earnings and net sales for the second quarter of 2025 due to ongoing macroeconomic challenges and industry headwinds, particularly in the residential remodeling market [2][4][10]. Financial Performance - The adjusted earnings for the last reported quarter beat the Zacks Consensus Estimate by 3.7% but declined 18.3% year over year [2]. - The consensus estimate for Mohawk's earnings per share (EPS) for the upcoming quarter is $2.63, reflecting a decrease of 12.3% from the previous year [3]. - Net sales are projected at $2.79 billion, indicating a 0.3% decrease from the year-earlier level [3][10]. Segment Performance - The Global Ceramic segment, which accounted for 39.3% of first-quarter 2025 net sales, is expected to decline by 0.5% to $1.1 billion year over year [5]. - The Flooring Rest of World segment, contributing 26.6% to net sales, is anticipated to decrease by 1.2% to $718.5 million [5]. - Conversely, the Flooring North America segment, which represents 34.1% of net sales, is expected to see a slight increase of 0.1% year over year to $959.1 million [5]. Cost and Margin Outlook - Cost inflation remains a significant challenge, particularly in raw materials, labor, and energy, making it difficult for the company to fully offset rising costs through pricing actions alone [6]. - The company expects adjusted EPS in the range of $2.52-$2.62, down from $3 in the previous year, with an adjusted gross margin decline of 170 basis points year over year to 25.4% [7][10]. Strategic Initiatives - Mohawk is implementing restructuring efforts expected to yield $100 million in incremental savings in 2025 and $285 million on a run-rate basis by 2026 [8]. - Strategic investments in new products, particularly in premium laminate and LVT, are anticipated to provide long-term pricing and margin benefits [8].

Financial Data and Key Metrics Changes - The company reported sales of $2,500,000,000, a decrease of 5.7% as reported or about flat on a constant basis, impacted by two fewer shipping days and foreign exchange headwinds [6][16]. - Earnings per share (EPS) were $1.52, benefiting from productivity gains, restructuring actions, and a lower tax rate, which offset pricing pressure and higher input costs [7][19]. - Gross margin for the quarter was 23.1% as reported, and 24.1% excluding charges, in line with the prior year [17]. - Operating income was $96,000,000 or 3.8%, with adjusted operating margin at 4.8%, a decrease of 130 basis points year-over-year due to higher input costs [17][18]. Business Line Data and Key Metrics Changes - **Global Ceramic**: Sales were just over $990,000,000, a 4.9% decrease as reported but a 1.2% increase on a constant basis, driven by improved product and channel mix [20]. - **Flooring North America**: Sales were $862,000,000, a decrease of 4.2% as reported or 1.1% on a constant basis, impacted by the order management system conversion [20]. - **Flooring Rest of the World**: Sales were $670,000,000, an 8.8% decrease as reported and 2.9% on an adjusted basis, driven by lower sales volume and unfavorable price mix [21]. Market Data and Key Metrics Changes - Conditions in the first quarter weakened sequentially, with residential remodeling remaining the lowest sector [12]. - Consumer confidence in the U.S. has been declining, affecting spending and housing activity [13]. - In Europe, consumer confidence has also declined due to economic uncertainty, leading to postponed home sales and remodeling activities [14]. Company Strategy and Development Direction - The company aims to grow market share in a challenging environment by optimizing product mix and reducing costs [24]. - Restructuring projects are on schedule, with expected savings of approximately $100,000,000 this year [18][34]. - The company is focusing on enhancing domestic manufacturing capabilities to mitigate tariff impacts and improve competitive positioning [9][24]. Management's Comments on Operating Environment and Future Outlook - Management anticipates that the impact of tariffs will influence consumer spending and new construction, though the extent is unpredictable [11]. - The company expects pricing pressure to continue across all regions due to low demand and competitive markets [35]. - The outlook for the second quarter adjusted EPS is projected to be between $2.52 and $2.62, excluding any restructuring or one-time charges [36]. Other Important Information - The company purchased 225,000 shares of its stock for approximately $26,000,000 during the quarter [8]. - Cash and cash equivalents were just over $700,000,000, with free cash flow expected to remain strong despite a use of approximately $85,000,000 in Q1 [22][23]. Q&A Session Summary Question: Timing of tariff impact and pricing actions - The CFO indicated that the $50,000,000 annualized cost impact from tariffs would be more evident in the late third to fourth quarter, as inventory turnover takes time [41]. Question: Domestic capacity and pricing strategy - Management emphasized the advantage of domestic production capacity in the U.S. market, which will be leveraged to optimize results amid tariff increases [43]. Question: Balancing pricing power and demand - Management acknowledged the challenge of balancing pricing power with slower demand, indicating that pricing actions are being assessed continuously [49][50]. Question: EPS growth outlook amid tariff impacts - Management expressed that EPS growth would depend on market conditions, with efforts to offset tariff impacts through pricing and cost-cutting measures [58][59]. Question: Inventory levels and market dynamics - The company noted an increase in inventory levels due to preemptive imports ahead of tariffs, with no significant changes in downstream volumes observed [105][106]. Question: Breakdown of imports and tariff exposure - The company clarified that a significant portion of imports comes from countries like Vietnam and India, with minimal exposure to China [111][112].

Financial Data and Key Metrics Changes - Reported sales for the first quarter were $2.5 billion, a decrease of 5.7% as reported or approximately flat on a constant basis, impacted by two fewer shipping days and foreign exchange headwinds [3][12] - Earnings per share (EPS) for the quarter was $1.52, benefiting from productivity gains, restructuring actions, and a lower tax rate, which offset pricing pressure and higher input costs [4][14] - Gross margin for the quarter was 23.1% as reported, and 24.1% excluding charges, consistent with the prior year [13] - Operating income was reported at $96 million, or 3.8%, with adjusted operating margin at 4.8%, a decrease of 130 basis points year-over-year due to higher input costs [14][18] Business Line Data and Key Metrics Changes - Global Ceramic segment had sales of over $990 million, a 4.9% decrease as reported but a 1.2% increase on a constant basis, driven by improved product and channel mix [15] - Flooring North America sales were $862 million, a decrease of 4.2% as reported or 1.1% on a constant basis, impacted by the order management system conversion [15] - Flooring Rest of the World reported sales of $670 million, an 8.8% decrease as reported and 2.9% on an adjusted basis, driven by lower sales volume and unfavorable price mix [16] Market Data and Key Metrics Changes - Conditions in the first quarter weakened sequentially, with residential remodeling remaining the lowest sector [8][11] - Consumer confidence in the U.S. has been declining, affecting home sales and remodeling activities [10][11] - In Europe, consumer confidence has also declined due to economic uncertainty, leading to postponed home sales and remodeling activities [11][12] Company Strategy and Development Direction - The company aims to grow market share in a challenging environment by optimizing product mix and reducing costs [19] - Restructuring projects are on schedule, with expected savings of approximately $100 million this year [14][30] - The company is focusing on enhancing domestic manufacturing capabilities to mitigate tariff impacts and improve competitive positioning [5][21] Management Comments on Operating Environment and Future Outlook - Management anticipates that the impact of tariffs will influence consumer and business spending, though the extent is unpredictable [7][29] - The company expects pricing pressure to continue across all regions due to low demand and competitive markets [30] - Long-term prospects for the flooring category remain optimistic, with expectations of significant improvement when industry volumes return to historical levels [31] Other Important Information - The company purchased 225,000 shares of its stock for approximately $26 million during the quarter [4] - Cash and cash equivalents were over $700 million, with free cash flow usage of approximately $85 million primarily due to delayed invoicing and increased imports ahead of tariffs [16][17] Q&A Session Summary Question: Timing of tariff impact - The company expects the $50 million annualized cost impact from tariffs to be more pronounced in the late third quarter and fourth quarter, as inventory turnover takes time [34][36] Question: Pricing power in a promotional environment - The company believes that tariffs will be passed through to consumers, with selective pricing actions being taken to offset costs [42][44] Question: EPS growth outlook - Management indicated that EPS growth will depend on market conditions, with efforts to offset tariff impacts through pricing and cost-cutting measures [51][52] Question: Energy cost headwinds - The company expects energy costs to be slightly higher in Q2, with potential benefits from lower natural gas prices in the fourth quarter [118][120] Question: Inventory levels and market share - The company has increased inventory levels due to imports ahead of tariffs, and is focused on maintaining market share without leading with price [97][95]

Financial Data and Key Metrics Changes - Interface reported a 4% year-over-year currency neutral growth in net sales for Q1 2025, with net sales totaling $297.4 million, an increase of 2.6% compared to Q1 2024 [5][16] - Adjusted earnings per share grew by 4% year-over-year, reaching $0.25 compared to $0.24 in Q1 2024 [5][18] - Adjusted gross profit margin was 37.7%, a decrease of 82 basis points from the prior year due to higher manufacturing and freight costs [16][17] - Adjusted operating income remained flat at $25.5 million compared to Q1 2024 [18] Business Line Data and Key Metrics Changes - Global education billings increased by 13%, driven by modernization initiatives and strong demand in both K-12 and higher education sectors [11] - Health care segment saw a 16% increase in global billings, supported by strong orders converting to billings [12] - Corporate office billings decreased by 7% year-over-year, attributed to timing, but growth is expected for the full year [12][13] Market Data and Key Metrics Changes - In the Americas, net sales grew by 6% with currency neutral orders up 10%, while EAAA experienced a decline in orders by 6% due to a softer macro environment [10][14] - Consolidated currency neutral orders increased by 3% year-over-year, with a strong backlog up 12% [14] Company Strategy and Development Direction - The "One Interface" strategy is focused on building strong global functions, enhancing productivity, expanding margins, and leading in design performance and sustainability [5][6] - A new VP of Global Product Category Management was appointed to optimize the product innovation pipeline [6] - The company is committed to sustainability, aiming to be carbon negative by 2040 and incorporating captured carbon into manufacturing processes [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong balance sheet and regional manufacturing approach, which mitigates tariff impacts [15][22] - The outlook for Q2 2025 is strong, with expectations of net sales between $355 million and $365 million [20] - The company anticipates continued growth driven by strong order momentum and a healthy backlog [20][22] Other Important Information - Capital expenditures for Q1 2025 were $7.5 million, up from $4 million in 2024, reflecting strategic investments in the business [19] - The company is facing tariff impacts on approximately 15% of global product costs, primarily affecting U.S. imports of nora rubber and LVT [15][50] Q&A Session Summary Question: Q1 results were better than expected, can you elaborate on gross margin and SG&A performance? - Management noted strong performance in the Americas and growth across all product categories, contributing to better-than-expected results [24][26] Question: What drove the raised guidance on revenue? - The raised guidance was based on strong Q1 results and positive outlook for Q2, supported by order growth and a strong backlog [29][33] Question: How did EAAA perform compared to the Americas? - EAAA had softer results, but Asia Pacific showed strong double-digit growth, particularly in local currency [36][38] Question: What is the status of the government business segment? - The government business, while small, showed strength in Q1, benefiting from return-to-work mandates despite some staff reductions [41][43] Question: What are the plans for capital allocation given the strong balance sheet? - The primary focus for capital allocation is to invest in the business and execute on those investments to drive growth [46][48] Question: How will the company manage tariff-related costs? - The company plans to offset tariff costs through pricing and productivity measures, with minimal impact expected due to local manufacturing [49][52] Question: What is the outlook on the return to office dynamic? - Management sees ongoing churn in the return to office trend, which presents opportunities for growth as companies modernize their office spaces [67][69]

Financial Data and Key Metrics Changes - In 2024, the company achieved a 4% increase in currency-neutral net sales, with nearly doubled GAAP earnings per diluted share [7][17] - Fourth quarter net sales totaled $335 million, a 3% increase compared to the fourth quarter of 2023 [31] - Full year 2024 net sales reached $1.32 billion, a 4.3% increase versus fiscal year 2023 [36] - Adjusted gross profit margin for 2024 was 37.1%, an increase of 173 basis points from the prior year [37] - Fourth quarter adjusted EPS was $0.34 compared to $0.41 in the fourth quarter of 2023 [35] Business Line Data and Key Metrics Changes - Global billings in the education segment were up 10% for the year, driven by strength in the Americas [19] - Health care global billings were down 2% year-over-year in 2024, but up 12% in the fourth quarter [23] - Corporate office segment global billings were down 1% for the year, which was favorable compared to the overall industry [24] - Retail billings were up in 2024 compared to a soft 2023, positively impacting net sales [25] Market Data and Key Metrics Changes - In the Americas, currency-neutral net sales increased by 9% year-over-year [18] - In EAAA, currency-neutral net sales were down 2% due to a softer macro environment [18] - The backlog at the end of 2024 was strong, up 15% year-over-year, indicating a solid position heading into fiscal 2025 [27] Company Strategy and Development Direction - The company is focused on its One Interface strategy, which aims to build strong global functions and enhance productivity [8] - Investments in automation and robotics at key manufacturing plants are expected to improve margins and operational efficiency [11][12] - The company aims to be carbon negative by 2040 without the use of carbon offsets, enhancing its sustainability strategy [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategy's effectiveness, noting solid initial results and expectations for continued growth [17][28] - The company is closely monitoring global geopolitical and macroeconomic environments, particularly in Europe and Australia, which are currently softer [29] - For 2025, the company anticipates net sales of $1.315 billion to $1.365 billion, with a focus on maintaining a disciplined capital allocation strategy [43] Other Important Information - The company generated $148.4 million of cash from operating activities in 2024, with strong liquidity of $398.5 million at year-end [39] - Capital expenditures for 2024 were $33.8 million, with a projection of $45 million for 2025 [40][42] Q&A Session Summary Question: Impact of One Interface selling strategy on 2025 - Management is proud of the success of the One Interface strategy and expects continued benefits in 2025, with solid momentum in the Americas business [50][51] Question: Outlook for the office segment in 2025 - Management is optimistic about the office segment due to rising return-to-office mandates and demand for premium Class A spaces [55][56] Question: Capital allocation priorities with reduced debt - The company plans to continue investing in manufacturing facilities to drive efficiency and profit margin expansion, given its strong balance sheet [58][59] Question: CapEx guidance for 2025 - The $45 million CapEx for 2025 includes investments in manufacturing automation, with a focus on proven technology that yields strong returns [62][64] Question: Gross margin improvement expectations - Management is committed to driving gross profit margin expansion, with various factors influencing the expected improvement [75][76] Question: Exposure to government business - The company's government business is a small portion of total revenue, including various government buildings and institutions [95][96] Question: Retail performance in 2024 - Retail was up in the second half of 2024, primarily due to previously deferred projects being activated [98][99] Question: Tariff exposure and sourcing of raw materials - The company has limited exposure to tariffs, with local manufacturing for carpet and sourcing LVT from South Korea [103][108]