Interface Q1 2025 Earnings Report

Interface EPS Results

• Actual EPS: $0.25
• Consensus EPS: $0.21
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $0.24

Interface Revenue Results

• Actual Revenue: $297.41 million
• Expected Revenue: $297.11 million
• Beat/Miss: Beat by +$299.00 thousand
• YoY Revenue Growth: +2.70%

Interface Announcement Details

• Quarter: Q1 2025
• Date: 5/2/2025
• Time: Before Market Opens
• Conference Call Date: Friday, May 2, 2025
• Conference Call Time: 8:00AM ET

Interface (NASDAQ:TILE) designs, produces, and sells modular carpet products primarily worldwide. The company operates in two segments, Americas (AMS), and Europe, Africa, Asia and Australia (EAAA). The company offers modular carpets under the Interface and FLOR brand names; luxury vinyl tiles; carpet tiles under the CQuestGB name for use in commercial interiors, include offices, healthcare facilities, airports, educational and other institutions, hospitality spaces, and retail facilities, as well as residential interiors; and modular resilient flooring products. It also provides carpet replacement, installation, and maintenance services; and rubber flooring under the norament and noraplan brand names; as well as produces and sells an adapted version of its carpet tile for the healthcare facilities market. In addition, the company sells a proprietary antimicrobial chemical compound under the Intersept name; sells TacTiles, a carpet tile installation system, as well as various adhesives and products; and provides turnkey project management services for global accounts and other customers through its InterfaceSERVICES business. The company sells its products directly to end-users, as well as indirectly through independent contractors, installers, or distributors. Interface, Inc. was incorporated in 1973 and is headquartered in Atlanta, Georgia.

Interface Q1 2025 Earnings Call Transcript

Key Takeaways

• Interface delivered a solid start to FY 25 with 4% currency-neutral net sales growth and 4% growth in adjusted EPS, driven by a 6% sales increase and 10% order growth in the Americas.
• The company’s diversification strategy paid off as global education billings rose 13% and health care billings climbed 16%, while corporate office billings were down 7% but are expected to recover over the full year.
• Under its One Interface strategy, Interface appointed its first VP of Global Product Category Management, launched two new i2 carpet tile collections (Material Impressions and Open Road), and continued simplifying operations through global supply-chain management.
• Interface reaffirmed its sustainability leadership, advancing toward Science Based Targets for 2030 and carbon negativity by 2040, including a strategic investment to incorporate captured carbon into U.S. and European manufacturing at no extra cost to customers.
• With an adjusted gross margin of 37.7% in Q1, strong operating cash flow, and a net leverage ratio of 1.1x, the company maintains that tariff exposure (impacting ~15% of product cost) is minimal and baked into guidance of $355–365 million in Q2 sales and $1.34–1.365 billion for FY 25.

Presentation

[Operator]

Thank you for standing by, and welcome to the Interface Inc. First Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you.

[Operator]

I'd now like to turn the call over to Christine Needles, Global Communications. You may begin.

[Christine Needles, Global Head, Corporate Communications at Interface]

Good morning, and welcome to Interface's conference call regarding first quarter results hosted by Laurel Heard, CEO and Bruce Hausman, CFO. During today's conference call, any management comments regarding Interface's business are not historical information are forward looking statements within the meaning of federal securities laws. Forward looking statements include statements regarding the intent, belief or current expectations of our management team as well as the assumptions on which such statements are based. Any forward looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from any such statements, including risks and uncertainties described in our most recent annual report on Form 10 ks filed with the SEC. The company assumes no responsibility to update forward looking statements.

[Christine Needles, Global Head, Corporate Communications at Interface]

Management's remarks during this call also refer to certain non GAAP measures. Reconciliations of the non GAAP measures to the most comparable GAAP measures and explanations for their use are contained in the company's earnings release and Form eight ks furnished with the SEC today. Lastly, this call is being recorded and broadcasted for interface. It contains copyrighted material and may not be rerecorded or rebroadcasted without Interface's expressed permission. Your participation on the call confirms your consent to the company's taping and broadcasting of it.

[Christine Needles, Global Head, Corporate Communications at Interface]

After our prepared remarks, we will open up the call for questions. Now I will turn the call over to Laurel Heard, CEO.

[Laurel Hurd, Chief Executive Officer at Interface]

Thank you, Christine, and good morning, everyone. Interface delivered a solid start to 2025 with 4% year over year currency neutral growth in net sales, 4% growth in adjusted earnings per share and strong momentum going into the second quarter. Amid an uncertain and dynamic macro environment, I'm proud of our accomplishments this quarter, the disciplined execution of our global teams, and the passion that our team members bring every day to serve our customers. Our One Interface strategy is working, and it continues to position us for long term growth and success as we are still in early days of activation. As mentioned previously, One Interface is a multiyear strategy focused on building strong global functions to support our world class talent team, accelerating growth through enhanced productivity of our commercial team, expanding margins through global supply chain management and simplifying operations, and leading in design performance and sustainability.

[Laurel Hurd, Chief Executive Officer at Interface]

In the first quarter, we appointed our first VP of Global Product Category Management. This role is an important addition to the organization that will work cross functionally to accelerate and optimize our product innovation pipeline, ensuring we deliver world class products that meet the commercial needs of the markets we serve while I was embodying the essence of Interface. This new position will build our product portfolio with the customer at the center and prioritize category investments that will ensure our portfolio is aligned with the needs of the market as we focus on accelerating growth. On the product front, in Q1, we launched two carpet tile collections that expand on our i2 portfolio, Material Impressions and Open Road. We first introduced i2 with the launch of our popular Entropy product twenty five years ago.

[Laurel Hurd, Chief Executive Officer at Interface]

It was the first in the industry representing a major mindset shift in carpet tile design. I two styles are truly modular with mergeable dialogues and random installation. They continue to be a favorite of our customers because they're incredibly flexible and adaptable over time. We continue to expand this portfolio to offer even more design options, especially to suit the needs of our education and corporate office spaces. We also look forward to Clerk and Well Design Week in May and NeoCon in June, where we will showcase our latest global carpet tile and LVT collections as well as our innovative carbon negative nora rubber prototype and other new products.

[Laurel Hurd, Chief Executive Officer at Interface]

These events provide excellent opportunities to connect with our customers and industry partners and to demonstrate our design performance and sustainability leadership. Turning to sustainability, true to our roots, Interface continues to be at the forefront of innovation. We've made strides towards achieving our science based targets by 02/1930 and being carbon negative by 02/1940. As part of this journey, we recently announced a strategic investment to incorporate captured carbon into our manufacturing processes in The US and Europe. This raw material stores more carbon and lowers the carbon footprint of our carpet tile products without compromising on design and at no additional cost to our customers.

[Laurel Hurd, Chief Executive Officer at Interface]

This is a notable example of our sustainability leadership as we continue to innovate and activate tangible solutions that drive carbon reduction and storage while also helping customers meet their own sustainability commitments. Now let's turn to our first quarter results. We delivered a solid start to the year with year over year currency neutral net sales growth of 4%. Strong momentum continued in The Americas where net sales grew 6% and currency neutral orders were up 10%, partially offset by a softer macro environment in EAAA. Turning to our market segments.

[Laurel Hurd, Chief Executive Officer at Interface]

Our diversification strategy continues to drive growth. Global education billings were up 13% as Interface stands out in both k through 12 and higher education due to our reputation for design leadership and sustainable, durable, high performing solutions across a broad portfolio of products. Our education segment is supported by strong macro drivers, modernization initiatives, and regional migration. We also continue to broaden our addressable market with expanded collections and accessible price points. In health care, global billings were up 16% year over year as our strong health care orders from prior quarters converted to billings.

[Laurel Hurd, Chief Executive Officer at Interface]

Our differentiated portfolio continues to meet the evolving needs of aging populations, technological advancements, and a growing emphasis on preventative care. In this expanding market, our U. S. Selling teams are gaining traction and uncovering new opportunities to deliver comprehensive solutions to health care systems. Corporate office billings were down 7% year over year in the quarter.

[Laurel Hurd, Chief Executive Officer at Interface]

We view this as timing as we are expecting growth in office for the full year. We are still seeing momentum with a continued flight to quality in Class A space, but we're well positioned to win. Companies also continue to refresh their spaces to adapt to the changing needs of their teams as more employees return to the office. We expect these trends to continue throughout the year, creating more opportunities for us in this segment. Turning to orders.

[Laurel Hurd, Chief Executive Officer at Interface]

In the first quarter of twenty twenty five, consolidated currency neutral orders increased 3% year over year. Currency neutral orders in The Americas were up 10% year over year, driven by the success of our One Interface strategy and combined selling team. In EAAA, first quarter currency neutral orders were down 6% year over year on a softer macro environment. Our backlog was strong at the end of the first quarter, up 12% year over year, which gives us confidence that our strategy is working and positions us well for the coming quarters. Before I turn the call over to Bruce, I want to take a moment to discuss the current global market dynamics and tariff environment.

[Laurel Hurd, Chief Executive Officer at Interface]

We benefit by having local carpet tile manufacturing in each of our regions, which limits our exposure to the recently announced tariffs to primarily U. S. Imports of nora rubber from Germany and LVT from South Korea. This represents approximately 15% of our global product costs that will be impacted by the recent tariff announcements. We have plans in place to offset this impact through incremental pricing and productivity, which has been baked into our guidance.

[Laurel Hurd, Chief Executive Officer at Interface]

This is obviously a dynamic environment, which we continue to monitor and respond as necessary to offset tariff related costs, grow our business and serve our customers. With that, I'll turn it over to Bruce to go over the financials. Bruce?

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Well, thank you, Laurel, and good morning, everyone. First quarter net sales totaled 297,400,000 an increase of 2.6% versus first quarter of twenty twenty four and slightly better than anticipated. FX neutral net sales increased 4.1% compared to the prior year's first quarter and first quarter FX neutral net sales were up 6.3% in Americas and up 1% in EAAA year over year. First quarter adjusted gross profit margin was 37.7%, a decrease of 82 basis points from the prior year's first quarter as expected due to higher manufacturing costs in EAAA and higher freight costs partially offset by higher pricing. Adjusted SG and A expenses were $86,800,000 in the first quarter compared to $86,200,000 in the first quarter of twenty twenty four.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

First quarter adjusted operating income was $25,500,000 flat compared to the adjusted operating income in the first quarter of twenty twenty four. First quarter adjusted EPS was $0.25 versus $0.24 in the first quarter of twenty twenty four. First quarter adjusted EBITDA was $37,000,000 versus $38,800,000 in the first quarter of twenty twenty four. We generated $11,700,000 of cash from operating activities in the first quarter of twenty twenty five, which was a positive outcome as we customarily had the largest use of cash from operations in the first quarter. And liquidity was strong at the end of the quarter, totaling $397,200,000 Net debt or total debt minus cash on hand was $205,100,000 at the end of the quarter.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Our net leverage ratio was 1.1 times calculated as net debt divided by the last twelve months of adjusted EBITDA. Our balance sheet remains strong, which provides optionality, flexibility and strength in today's dynamic macro environment. Our focus in 2025 is to continue investing strategically in the business while maintaining a disciplined capital allocation approach to drive long term value. Capital expenditures were $7,500,000 in the first quarter of twenty twenty five compared to $4,000,000 in 2024. And turning to our outlook, we are forecasting a strong second quarter.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

We remain focused on delivering a strong year amid a dynamic macro environment with increased global macro uncertainty. We entered the second quarter with a healthy backlog and order momentum, which supports our expectations for a strong second quarter. With that backdrop in mind, we anticipate the following. For the second quarter of fiscal twenty twenty five, we anticipate net sales of $355,000,000 to $365,000,000 adjusted gross profit margin of approximately 37.2% of net sales, adjusted SG and A expenses of approximately 90,000,000 adjusted interest and other expenses of approximately $6,000,000 and adjusted effective income tax rate of approximately 27.5% and fully diluted weighted average share count of approximately 59,300,000 shares. And for the full fiscal year of 2025, we anticipate the following: net sales of $1,340,000,000 to $1,365,000,000 adjusted gross profit margin of approximately 37.2% to 37.4% of net sales, adjusted SG and A expenses of approximately 26% of net sales, adjusted interest and other expenses of approximately 24,000,000 an adjusted effective income tax rate of approximately 27% and capital expenditures of approximately $45,000,000 And with that, I'll turn the

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

call back to Laurel for closing remarks.

[Laurel Hurd, Chief Executive Officer at Interface]

Thank you, Bruce. Thank you all for joining our call today. Interface delivered a solid start to the year, and we are encouraged by the continued momentum as we enter the second quarter. While there is considerable uncertainty in the global economy, we are well positioned with a strong balance sheet, a regional carpet tile manufacturing approach, and a global team that is more connected than ever. I would like to thank the entire Interface team for their disciplined execution, commitment, and passion to serving our customers each and every day.

[Laurel Hurd, Chief Executive Officer at Interface]

With that, I'll open it up to questions. Operator?

[Operator]

Thank you. We will now begin the question and answer session. Your first question comes from the line of Brian Bureaus from Thompson Research Group. Your line is open.

[Brian Biros, Equity Analyst at Thompson Research Group]

Hey, good morning. Thank you for taking my question. Q1 results Hornet. The Q1 results, slightly better than expected, I think notably on the gross margin and SG and A line, both slightly better than guidance. I assume part of that is the success of the one interface strategy paying off.

[Brian Biros, Equity Analyst at Thompson Research Group]

Can you just expand more on how those two items kind of performed in the quarter to come in ahead of expectations?

[Laurel Hurd, Chief Executive Officer at Interface]

Sure, Brian. Our our you know, I feel like we had a really good start to the quarter, as you said, to the year. And our one one interface strategy continues to deliver results. We had a really strong America's business. That business continues to grow due to the combined selling teams.

[Laurel Hurd, Chief Executive Officer at Interface]

A couple of things I'll note from a growth standpoint. All product categories grew for us in the quarter globally. So carpet tile, LVT, and rubber, and they grew in volume as well as a little bit in price, mostly volume, a little bit price. And then the success we're seeing in health care and education growing double digits globally. We've been really focused on diversifying our business, and we're seeing the success pay out in those areas.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

I would just add too, we continue to see momentum as we move into second quarter. The orders continue to be strong. Our backlog continues to be up and great momentum in the business as we're moving through Q2.

[Laurel Hurd, Chief Executive Officer at Interface]

I'll I'll piggyback on that for a second. And what we didn't mention is, that our momentum really strengthened throughout the quarter from an order generation perspective. In the month of April, our orders were up double digits globally, up double digits in The Americas and up double digits in E Triple A. So we feel like we've got a really solid, growth plan.

[Brian Biros, Equity Analyst at Thompson Research Group]

That sounds pretty good. And I guess a good segue to my next question on guidance, just raised a little bit on the lower end. Was just wondering what the driver of that was, if it was kind of just FX or if it was confidence in the visibility here given q one and q two. It sounds like it's more like that. So maybe just some comments on on guidance given the strength you're seeing.

[Brian Biros, Equity Analyst at Thompson Research Group]

Thank you.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

I'm sorry, Brian. You're you we couldn't hear the word that you used. Something is on the lower end. We we didn't catch that word.

[Brian Biros, Equity Analyst at Thompson Research Group]

Just I think guidance was revenue guidance was raised on the lower end from 1.315 to 1.34.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Yes. Yes.

[Laurel Hurd, Chief Executive Officer at Interface]

Yes. So so that's a great question. So we brought up the lower end of the range, and that really has to do with how we landed q one and our outlook for q two. So as we said, we're guiding for a really strong q two, and we feel like we've got strong order growth up 3% globally in q one. Our backlog is strong and a strong month for April, so order growth for April.

[Laurel Hurd, Chief Executive Officer at Interface]

So that gave us the confidence to take up the lower end of the guide.

[Brian Biros, Equity Analyst at Thompson Research Group]

Great. I'll pass along. Thank you.

[Laurel Hurd, Chief Executive Officer at Interface]

Thanks.

[Operator]

Your next question comes from the line of Alex Paris from Barrington Research. Your line is open.

[Alexander Paris, President & SMD at Barrington Research Associates]

Hi guys. Thanks for taking my questions. I wanted to ask a question about geographic growth. So in The Americas, we were up 6.4% currency neutral net sales. And in EAAA, we were up 1.1% on the same basis.

[Alexander Paris, President & SMD at Barrington Research Associates]

I was wondering, can you unpack EMEA and APAC, how they did? And I'm particularly interested in China.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Alex, it was we had a good result there in local currency. Obviously, the currency gave us a little bit of a headwind in the quarter, hence the difference between FX neutral and as reported growth. Asia Pac was Asia, in particular, was a strong quarter. It was up double digits. So we saw some really nice growth there.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

In Europe, it was a little softer. In Australia, it was a little softer. So it was a it was a it was a decent mix of business, but with Asia, particularly strong.

[Alexander Paris, President & SMD at Barrington Research Associates]

And were you referring to currency neutral or reported net sales?

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Referring to currency. Yeah. Yeah. As you know, the currency gyrated a lot in Q1, month to month. And so and that's how we like to look

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

at the business, to look

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

at the underlying and intrinsic growth rates of the business.

[Alexander Paris, President & SMD at Barrington Research Associates]

Okay. So on a currency neutral basis, sales were up double digits in APAC? Or was that bookings?

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Sales. Billings. Billings were great. In Asia. When we talk about Asia Pac, we normally say Asia plus Australia.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

So they were up in Asia double digits.

[Alexander Paris, President & SMD at Barrington Research Associates]

Got you.

[Alexander Paris, President & SMD at Barrington Research Associates]

And then

[Alexander Paris, President & SMD at Barrington Research Associates]

ask you about government also. I know that's a small part of the business, percent or 4% or so. You're working with all types of government buildings, museums, military, etcetera, both local and at the federal level. And I'm just wondering what the pushes and the pulls are in there, you know, return to office, layoffs, doge. Yeah.

[Alexander Paris, President & SMD at Barrington Research Associates]

There's both a risk and opportunity in there, I think.

[Laurel Hurd, Chief Executive Officer at Interface]

Mhmm. I I agree, Alex. And I'll tell you what we thought. It is exactly as you said. It's really a mix of return to work mandates offset by staff reductions.

[Laurel Hurd, Chief Executive Officer at Interface]

And with that comes a lot of churn. And as you said also, public building, our government business is a small percentage of our total. It actually was up in Q1, and we're seeing some strength there as well. So there's a lot of activity. The net is it's small, and it's holding steady.

[Laurel Hurd, Chief Executive Officer at Interface]

It was up in Q1.

[Alexander Paris, President & SMD at Barrington Research Associates]

Got you. I asked the question only because you covered tariffs in the prepared remarks, and I thought that, that could be a potential area of risk. But as I thought about it, opportunity given the churn likelihood.

[Laurel Hurd, Chief Executive Officer at Interface]

That's right. That's right.

[Alexander Paris, President & SMD at Barrington Research Associates]

Good. And then the last

[Alexander Paris, President & SMD at Barrington Research Associates]

question for me is balance sheet. Given where debt stands today and where the leverage ratio is 1.1 times, it looks like you paid off the vast majority of the variable rate debt and all we have left is the 5.5 senior notes due 2028. Wondering if you are contemplating any changes to capital allocation going forward as such.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Yes. Agree, Alex. The balance sheet is strong. And I would just say with this all the macro uncertainty right now, it's a great time to be in that situation. It puts us in a position of strength.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

For this year, our number one capital allocation priority is to invest in the business and to execute flawlessly on those investments so that they yield their intended return. And you might remember, we're investing in some plant equipment that's going to help us drive some margin expansion, And we're making some investments in our selling organization to drive growth. And so for this year, that's really where our primary focus is.

[Alexander Paris, President & SMD at Barrington Research Associates]

Great. And then I just want to add one on back to the tariffs as think about it. You said basically the exposure is fairly limited nora in Germany and LTV from South Korea. It's about 15% of your total global cost. Is that what you said?

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Yes. It's fairly minimal. It's less than 15% of our product cost. And if you sort of size that, it's roughly 10,000,000 to $15,000,000 of expense annualized. And again, we are planning to offset that through pricing and productivity.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

And you got it exactly right. Our primary exposure is rubber imported from Germany into The U. S. And LVT imported from South Korea into The U. S.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

And again, we have plans in place to offset, these fairly minimal tariff related costs.

[Alexander Paris, President & SMD at Barrington Research Associates]

And I think you

[Alexander Paris, President & SMD at Barrington Research Associates]

said those plans are reflected in your guidance.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

They are.

[Laurel Hurd, Chief Executive Officer at Interface]

They are.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

One thing I should also add, we benefit by manufacturing carpet tile locally, and we source most of our raw materials locally. So we despite all the noise that we're all reading in the newspapers, we feel really good, like we're in a good position competitively and to manage through the tariff situation.

[Alexander Paris, President & SMD at Barrington Research Associates]

Excellent. Thanks. That'll do it for me for now.

[Laurel Hurd, Chief Executive Officer at Interface]

Thanks,

[Operator]

Your next question comes from the line of David MacGregor from Longbow Research. Your line is open.

[David Macgregor, President at Longbow Research]

Good morning everyone. Thanks for taking the questions. If I could just pick up on hey, good morning, Laurel. If I could just pick up on the last topic of tariffs, Bruce, talked about 10,000,000 to $15,000,000 annualized. Is there perhaps some timing concern or timing mismatch in 2Q as the expense kicks in immediately,

[David Macgregor, President at Longbow Research]

but maybe there's a little

[David Macgregor, President at Longbow Research]

bit of a delay in in the ramping of the pricing and productivity as an offset?

[Laurel Hurd, Chief Executive Officer at Interface]

Yeah. I'll I'll take that, then you can you can follow it up. From a pricing standpoint, the thing that works so well in our America's organization is that, you know, we've got a commission based selling team. And when we put that price in the market, it it hits pretty quick. We also have inventory in house that is not impacted by tariffs.

[Laurel Hurd, Chief Executive Officer at Interface]

So we feel pretty good that the timing should flow, you know, when we're working to add inventory is when those new orders will come in.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

I think there's gonna be a good math timing of the cost versus the revenue and the and the incremental pricing and productivity to offset the costs.

[David Macgregor, President at Longbow Research]

I'm sorry, Bruce. You cut out there just at the beginning. If I could trouble you to repeat that.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Yeah. I think I think the timing will be pretty in sync between covering the costs and when we have mitigation plans in place to cover those costs through pricing and productivity. Pretty good lineup on the timing.

[David Macgregor, President at Longbow Research]

For that. Got it. And on inventory, I noticed on the increase, how much of the increase was seasonal versus pre buy ahead of tariffs versus maybe some of the investments in education and health care? Just trying to understand that increase. Yes.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

I love that you're looking at the balance sheet. Very, very little pre buying due to it's really just seasonal. You might remember that we often build a little inventory around this time of year, is because we're getting ready for a strong q two, around education as well as in And also

[David Macgregor, President at Longbow Research]

Okay. Hey, Bruce, you're fading away again, but I think I got the gist of the answer. Laurel, global product category management, could you just talk about how you're thinking about the incremental benefits of bringing that position into play? And also from a timing standpoint, is this somewhat of a longer term incremental benefit? Or do we expect to see something a little more immediate?

[Laurel Hurd, Chief Executive Officer at Interface]

Yes. Great question. And I would say that adding this role is, it's an important step in our, one interface journey, and we're really working to accelerate and optimize our innovation funnel to focus on driving growth across our categories. The more we work as one team around the globe, the more we're uncovering opportunities to better service our customer from a product perspective. So we felt the need to, really add this role to help us amplify that.

[Laurel Hurd, Chief Executive Officer at Interface]

And, you know, innovation takes time. So this is not something you're gonna see read through in the next couple of quarters, but it's something that we think will really help us accelerate our growth over the long term. It's exciting.

[David Macgregor, President at Longbow Research]

Okay. And it brings to mind that you more recently added resources within your procurement organization. Can you just talk about the extent to which you think that is contributing to gross margins now and how long it took to get a payback on that?

[Laurel Hurd, Chief Executive Officer at Interface]

Yeah. So we we have our chief supply chain officer who's really globalizing not just procurement, but also things like our productivity initiatives and automation and robotics and looking at that from a global lens. So we're seeing some nice benefits of that paying off. So an example of that, the robotics and automation that we put into our carpet tile manufacturing in The US, We've got great lessons from that, and we're rolling that now to Europe as well as to Australia. So really nice look at and we wouldn't have done that necessarily have done that before because we've been much more focused regionally.

[Laurel Hurd, Chief Executive Officer at Interface]

So we've got a real strong global look across from a manufacturing standpoint. And then similarly from procurement, in these times, it's really nice to have a global lead. We have a fantastic lead who's driving global procurement with both our strong finished goods suppliers as well as our material suppliers. So it's been it's been a really, really good opportunity, and we have real real confidence in the productivity funnel that we have to continue to expand our margin.

[David Macgregor, President at Longbow Research]

Great. Last question for me. I guess, just high level question, but it came up in an earlier conversation, the whole return to the office dynamic. I think it was with respect to government. But maybe my question is in broader terms, if you could just talk about the extent to which you see that coming into play across your your many verticals and and, you know, what inning you think we're in in the whole return to office dynamic as a as a demand driver?

[Laurel Hurd, Chief Executive Officer at Interface]

You know, it's it we're still feeling like that. There's so much churn happening. I'll I'll use the word churn, but there are so many people who are returning to work, and what they're finding is that the office that they that they entered needs updating or needs to be modernized into how we work today. There's also the flight to quality, so people are moving into much more premium buildings, which aligns with our brand. So I'd say we're encouraged by the opportunity to continue to help us grow for the long term.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Yes. Would say hopefully, can hear me better on this microphone, David. I would say early innings on Office. The momentum in Office continues. All those macro dynamics that Laurel articulated are real.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

And again, the churn is helpful for our business. We really benefit from that. So and that's what we're seeing. We're seeing strong momentum in the business, and we're seeing particularly a lot of strength in Americas.

[David Macgregor, President at Longbow Research]

Great. Thanks very much and congratulations on all the progress.

[Bruce Hausmann, Vice President and Chief Financial Officer at Interface]

Thank you.

[Laurel Hurd, Chief Executive Officer at Interface]

Thanks, David.

[Operator]

And that concludes our question and answer session. I will now turn the call back over to Laurel for closing remarks.

[Laurel Hurd, Chief Executive Officer at Interface]

Great. Well, thanks for everyone for joining the call this morning, and thanks to the entire Interface team to a really solid start to the year and for everything that you do every day. Appreciate you all.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Christine Needles, Global Head, Corporate Communications
• Laurel Hurd, Chief Executive Officer
• Bruce Hausmann, Vice President and Chief Financial Officer

Analysts

• Brian Biros, Equity Analyst at Thompson Research Group
• Alexander Paris, President & SMD at Barrington Research Associates
• David Macgregor, President at Longbow Research