Interface Eyes Growth as One Interface Strategy Targets Commercial Flooring Share

Key Points

• Interface is targeting growth in commercial flooring through its “One Interface” global operating model, focused product portfolio and emphasis on design, performance and sustainability. The company serves more than 100 countries and generates about $1.4 billion in annual revenue, with 98% from commercial customers.
• The company estimates its addressable commercial flooring market at more than $9 billion, with opportunities in carpet tile, LVT and differentiated rubber flooring. It says it is gaining share in corporate office, healthcare and education, particularly in Class A properties and facilities undergoing refresh projects.
• Interface is investing $25 million to support growth while continuing to expand margins through manufacturing and operating efficiencies. With net debt at just 0.5 times EBITDA, management says it can balance reinvestment, selective acquisitions, dividends and share repurchases.

Interface NASDAQ: TILE Chief Financial Officer Bruce Hausmann told investors that the commercial flooring company is pursuing growth through a focused product portfolio, global operating model and emphasis on design, performance and sustainability.

Speaking at an investor conference, Hausmann said Interface operates three brands: Interface, nora rubber flooring and consumer-focused FLOR. The company generates about $1.4 billion in revenue, with approximately 60% coming from the Americas, 29% from Europe and 11% from Asia-Pacific, he said. About 98% of its business is commercial, while FLOR accounts for its roughly 2% residential exposure.

The company distributes products in more than 100 countries, manufactures on six continents and employs about 3,600 people globally, according to Hausmann.

Focused on Commercial End Markets

Hausmann said Interface concentrates primarily on corporate office, education and healthcare, while also participating in transportation, government, retail and hospitality. He described the company as a high-price-point provider focused on Class A office space and other areas where its products can be differentiated.

Interface’s three principal product lines are carpet tile, luxury vinyl tile, or LVT, and rubber flooring. The company invented carpet tile, according to Hausmann, entered LVT in 2017 and acquired nora flooring in 2018. He said nora was the company’s only acquisition in roughly 20 years and characterized the transaction as a success.

Hausmann estimated the global commercial flooring industry at about $39 billion and said Interface’s addressable market is more than $9 billion. He said carpet tile continues to take share from broadloom carpet, while LVT has taken share from hard-surface flooring categories. Rubber flooring is a differentiated category, he added.

• Carpet tile represents an approximately $5 billion market, according to Hausmann.
• Broadloom carpet is also roughly a $5 billion market.
• LVT represents an approximately $3 billion market, he said.

One Interface Operating Model

Hausmann said CEO Laurel Hurd, who joined the company about three years ago, identified opportunities to streamline Interface’s historically decentralized regional structure. The company previously operated separate Americas, EMEA and Asia-Pacific regions with their own functional organizations, he said.

Under its “One Interface” strategy, the company has reorganized global functions including supply chain, finance, information technology, marketing, product management and human resources. Hausmann said the changes were intended primarily to improve speed, agility and customer service, though they have also reduced certain costs. As an example, he said Interface went from four regional marketing vice presidents to one global leader.

Hausmann said the company’s sales teams remain central to the model, with global support functions intended to help them serve customers and win specifications from architects and designers.

Office, Healthcare and Education Demand

While corporate office has historically represented the largest part of Interface’s business, Hausmann said the company has become less dependent on that end market. He said the company is positioned in Class A office properties, where tenants may be upgrading space or landlords may be offering tenant-improvement dollars to retain or attract occupants. Such activity can result in flooring refresh projects, he said.

Hausmann also pointed to office lease turnover, which he said typically occurs every six to eight years and can create recurring refresh opportunities. He described healthcare and education as markets supported by favorable conditions for Interface, including demand from hospitals, laboratories and other healthcare facilities.

The CFO said the company’s products generally carry a 15-year warranty and often are replaced for design refreshes rather than because they are worn out. He also highlighted the recent launch of norament timber, a rubber flooring product targeted toward healthcare applications including patient and recovery rooms.

Margins, Capital Allocation and Market Share

Hausmann said Interface has expanded margins each year through manufacturing efficiency, go-to-market discipline and concentration on its chosen product categories and end markets. The company is investing an incremental $25 million in the business this year, which he said is helping support margin expansion.

He said Interface had a net debt-to-EBITDA ratio of 0.5 times and follows a balanced capital-allocation approach: invest for returns, maintain disciplined leverage, evaluate selective acquisitions and return excess cash to shareholders. Hausmann said the company has increased its dividend and made opportunistic share repurchases.

On competition, Hausmann said Interface has been taking market share in office, healthcare and education. He said management reviews win-loss reports and believes that, in most lost opportunities, the company did not fully execute its sales process or develop the required customer relationships. Price is part of the sales discussion because Interface operates at the higher end of the market, he said, but customers also weigh design, performance and other product attributes.

About Interface (NASDAQ:TILE)

Interface, Inc NASDAQ: TILE is a global manufacturer of modular flooring and resilient commercial flooring solutions. The company specializes in carpet tiles, luxury vinyl tile (LVT) and other environmentally responsible hard-surface products designed for use in corporate, education, healthcare, hospitality and retail environments. Interface's portfolio also includes broadloom carpet, rubber flooring and acoustic underlays, all engineered to meet performance, design and sustainability requirements in modern interior spaces.

Founded in 1973 by Ray C.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source