Modular flooring manufacturer Interface (NASDAQ:TILE) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 2.6% year on year to $297.4 million. The company expects next quarter’s revenue to be around $360 million, close to analysts’ estimates. Its non-GAAP profit of $0.25 per share was 17.5% above analysts’ consensus estimates.
Revenue: $297.4 million vs analyst estimates of $296.5 million (2.6% year-on-year growth, in line)
Adjusted EPS: $0.25 vs analyst estimates of $0.21 (17.5% beat)
Adjusted EBITDA: $37 million vs analyst estimates of $34.95 million (12.4% margin, 5.9% beat)
The company slightly lifted its revenue guidance for the full year to $1.35 billion at the midpoint from $1.34 billion
Operating Margin: 7.8%, in line with the same quarter last year
Free Cash Flow Margin: 1.4%, down from 3% in the same quarter last year
Market Capitalization: $1.22 billion
StockStory’s Take
Interface’s first quarter results reflected continued momentum in the company’s core Americas market, with management crediting the One Interface strategy and diversified product portfolio for steady demand. CEO Laurel Hurd emphasized growth in education and healthcare segments, noting that both categories posted double-digit gains. She also cited the expansion of the i2 carpet tile portfolio and new product launches as key enablers of this quarter’s performance.
Looking ahead, management’s guidance is anchored by a healthy backlog and robust order trends entering the second quarter. Hurd expressed confidence in offsetting recently announced tariffs through pricing adjustments and productivity improvements, stating these factors have been incorporated into current forecasts. The company remains focused on strategic investments in global product management and supply chain capabilities to sustain long-term growth, even as macroeconomic uncertainty persists.
Key Insights from Management’s Remarks
Management attributed Q1 performance to targeted growth in high-potential segments and ongoing operational improvements. Key points from the call underscore the impact of specific initiatives and market trends:
Diversification delivers growth: The company’s expansion into education and healthcare segments resulted in double-digit billing increases, driven by modernization initiatives and demand for durable, sustainable flooring solutions in these markets.
Product innovation pipeline: Appointment of a VP of Global Product Category Management aims to accelerate product innovation and align offerings more closely with customer needs, supporting longer-term growth.
Regional performance mixed: Americas posted 6% currency-neutral sales growth, with particularly strong order momentum, while Europe, Australia, and Asia-Pacific saw softer results, except for double-digit growth in Asia. Localized manufacturing limited exposure to currency swings and tariffs.
Tariff mitigation plans: Management addressed exposure to new U.S. tariffs on select imported products (nora rubber from Germany and LVT from South Korea), noting that these impact less than 15% of global product costs. Plans to offset costs through pricing and productivity are already reflected in guidance.
Supply chain optimization: Investments in global procurement, automation, and robotics—especially in U.S. carpet tile manufacturing—are delivering productivity gains, with plans to extend these improvements to Europe and Australia to support future margin expansion.
Drivers of Future Performance
Management’s outlook for the coming quarters is shaped by expectations of continued end-market diversification, proactive tariff mitigation, and productivity enhancements, while acknowledging ongoing global macroeconomic uncertainty.
Sustained segment momentum: Growth in education and healthcare markets is expected to continue, underpinned by modernization trends and demographic shifts, providing a buffer against softness in other segments like corporate office.
Tariff impact managed: Management anticipates minimal disruption from new tariffs, with incremental pricing and productivity initiatives offsetting higher input costs, though timing of these offsets will be closely monitored.
Strategic investments continue: Ongoing investment in product management, innovation, and global supply chain capabilities is expected to drive operational efficiencies and support margin stability, even as the economic environment remains unpredictable.
Top Analyst Questions
Brian Biros (Thompson Research Group): Asked how the One Interface strategy contributed to margin and SG&A outperformance. Management cited strong Americas growth and double-digit gains in healthcare and education, with combined selling teams driving success in all product categories.
Alex Paris (Barrington Research): Requested details on geographic growth, particularly in EMEA and Asia-Pacific. Management reported double-digit sales growth in Asia, with Europe and Australia described as softer.
Alex Paris (Barrington Research): Inquired about potential risks and opportunities in government-related business amid return-to-office mandates. Management noted the segment is small but saw growth in Q1, driven by both public building churn and return-to-work activity.
David MacGregor (Longbow Research): Pressed for clarification on the timing of tariff cost pass-through versus pricing actions. Management stated that commission-based selling and existing inventory should help align timing of cost recovery.
David MacGregor (Longbow Research): Asked about benefits and timing from new global product management and procurement roles. Management expects these roles to drive incremental long-term growth and productivity, with early signs already visible in supply chain efficiencies.
Catalysts in Upcoming Quarters
In the quarters ahead, our analysts will be watching (1) whether education and healthcare segments maintain double-digit growth amid broader macro uncertainty, (2) the effectiveness and timing of tariff cost recovery through pricing and productivity, and (3) progress on global supply chain and product management initiatives. Execution in offsetting input cost inflation and sustaining backlog momentum will also be key markers for ongoing performance.
Interface currently trades at a forward EV-to-EBITDA ratio of 7.6×. At this valuation, is it a buy or sell post earnings? Find out in our free research report.
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