Interface Q2 Earnings Call Highlights

Key Points

• Interface delivered broad-based Q2 growth: Net sales rose 5.4% to $395.7 million, while adjusted EPS increased 47% to $0.88. Healthcare led demand with a 19% increase in billings, alongside 5% growth in education and corporate office markets.
• Profitability benefited from operational improvements and a one-time tariff refund: Adjusted gross margin expanded to 45%, including a $15.6 million tariff-refund benefit, while adjusted operating income rose 34% to $74.9 million.
• The company raised its full-year outlook as orders increased 5% and backlog climbed 22% year to date. Interface now expects 2026 sales of $1.455 billion to $1.485 billion and adjusted gross margin of approximately 40.6%.

Interface NASDAQ: TILE reported second-quarter 2026 sales growth across regions, product categories and its largest end markets, while profitability benefited from operational improvements and a one-time tariff refund. The commercial flooring company raised its full-year outlook, citing order momentum and a backlog that was up 22% year to date at the end of the quarter.

Second-quarter net sales totaled $395.7 million, up 5.4% as reported and 3.8% on a currency-neutral basis. CEO Laurel Hurd said the company achieved 4% currency-neutral sales growth, building on 7% currency-neutral growth in the prior-year quarter.

“Growth was broad-based across regions, product categories, and primary market segments,” Hurd said, attributing the performance to contributions from both price and volume as well as the company’s diversified portfolio.

Margins Rise on Operations and Tariff Refund

Adjusted gross profit margin increased 524 basis points from a year earlier to 45% during the second quarter. CFO Bruce Hausmann said 131 basis points of the increase came from higher volumes, pricing, favorable product mix and manufacturing efficiencies.

The remaining 393 basis points reflected a $15.6 million benefit from IEEPA tariff refunds, equal to approximately $0.19 per diluted share, Hausmann said. He noted that the refund had not been included in the company’s previous full-year guidance and that Interface is not assuming additional refunds going forward.

Hausmann said Interface continues to face low-single-digit raw-material cost inflation and implemented proactive pricing during the second quarter. The increased input costs will flow through the income statement in future periods as inventory is sold, creating differences in expected quarterly margin performance during the second half.

For the back half of 2026, Interface expects gross margins of roughly 39%, which Hausmann said would represent about a 60-basis-point improvement from the comparable prior-year period, excluding the effects of the one-time tariff refund. Hurd said the company is ahead of its earlier margin objectives but has not established a new long-term gross-margin target amid volatile input costs and tariffs.

Second-quarter adjusted operating income rose 34% to $74.9 million, while adjusted net income increased to $51.5 million from $35.4 million a year earlier. Adjusted EBITDA was $87.7 million, compared with $64.8 million in the prior-year quarter. Adjusted diluted earnings per share rose 47% to $0.88 from $0.60.

Healthcare Leads Growth Across Key Markets

Healthcare was the company’s fastest-growing primary market, with global billings up 19% after rising 28% in the second quarter of 2025. Hurd said nora rubber flooring remained a meaningful driver in the segment, supported by combined Interface and nora sales teams in the United States.

Education billings increased 5%, following 11% growth in the previous year’s second quarter. Hurd said demand spans both K-12 and higher education, supported by renovation, modernization and new-construction activity. The company said it has been gaining share through its range of price points in carpet tile and luxury vinyl tile, as well as nora products used in K-12 cafeterias, laboratories and other settings.

Corporate office billings also rose 5%, driven by broad-based global growth. The segment represented approximately 44% of year-to-date billings, according to Hausmann. Management cited return-to-office trends, renovations and a “flight to quality” in Class A office space as supporting demand.

Hurd said customers are increasingly focused on designing offices for collaboration, concentrated work and employee recruitment and retention rather than simply outfitting workspace. The company’s Interface Design Studio, which pairs customers with design specialists, has helped customers evaluate flooring across the company’s carpet tile, LVT and rubber offerings, she said.

Product, Automation Investments Continue

Interface highlighted several newer products intended to broaden its addressable market. The company launched Open Air Neutrals, an extension of its carpet-tile platform with warmer and neutral tones, and previewed Twist and Texture, a textile-inspired carpet-tile offering positioned at an accessible price point with quick delivery.

Hurd also pointed to noravant timber, a rubber flooring product with a woodgrain appearance that was introduced earlier in 2026. The product was named Best Product for Healthcare at London’s Clerkenwell Design Week, and the company has seen specifications from design firms and healthcare systems. Management said the product’s contribution was not yet reflected meaningfully in second-quarter healthcare sales because it remains early in its commercial rollout.

In manufacturing, Interface continued to invest in automation and robotics across carpet tile and rubber flooring facilities. Hurd said robotic investments in Europe and Australia were exceeding expectations, while packaging automation in Australia and robotics investments in Germany are intended to reduce costs, increase throughput and support capacity.

Guidance Raised as Orders and Backlog Strengthen

Currency-neutral orders increased 5% in the quarter, including 5% growth in the Americas and 6% growth in EAAA. Management said strong order activity and backlog supported its decision to raise full-year guidance.

• Third-quarter net sales are expected to be $370 million to $380 million.
• Third-quarter adjusted gross margin is expected to be approximately 40.8%.
• Full-year 2026 net sales are projected at $1.455 billion to $1.485 billion.
• Full-year adjusted gross margin is expected to be approximately 40.6%.
• Capital expenditures are forecast at approximately $60 million for the 53-week fiscal year.

During the quarter, Interface generated $38.4 million in cash from operating activities and spent $12.2 million on capital expenditures. The company repurchased $8.8 million of common stock, or approximately 310,000 shares, and paid its quarterly dividend. Hausmann said share repurchases will remain “disciplined and opportunistic” as part of a capital-allocation approach that also prioritizes business investment, leverage management and potential acquisitions.

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.

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