Interface(TILE) - 2024 Q4 - Earnings Call Transcript

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]