What Interface (TILE) Said on Its Q3 Earnings Call

Key Points

• Q3 adjusted earnings beat expectations: Adjusted EPS rose 11.5% to $0.68, while net sales increased 0.6% to $366.7 million. Adjusted gross margin expanded 103 basis points to 40.6%, supported by pricing, product mix and manufacturing efficiencies.
• Regional demand was mixed: Currency-neutral orders grew 6% in the Americas but fell 7% in EAAA, as European projects took longer to convert and several major markets softened. Backlog was up 14% year to date.
• Interface lowered its full-year sales outlook but maintained its earnings outlook: It now expects fiscal 2026 net sales of $1.440 billion to $1.455 billion, citing weaker European demand.

Interface NASDAQ: TILE reported higher adjusted earnings for the third quarter of 2026, even as sales growth slowed and softer European demand prompted the flooring company to revise its full-year revenue outlook.

Net sales rose 0.6% from a year earlier to $366.7 million, while adjusted earnings per diluted share increased 11.5% to $0.68. CEO Laurel Hurd said adjusted earnings growth exceeded the company’s expectations and that billings rose across its three primary market segments.

Chief Financial Officer Bruce Hausmann said sales came in slightly below the low end of the company’s outlook, primarily because of the timing of retail billings and weaker conditions in Europe. Interface reaffirmed its full-year earnings outlook while revising its sales outlook to reflect the softer European market.

Margins improve despite higher costs

Adjusted gross profit margin expanded 103 basis points to 40.6% in the third quarter. Hausmann attributed the improvement to favorable pricing, product mix and manufacturing efficiencies, which more than offset higher raw material and tariff-related costs.

Adjusted operating income rose 5.7% to $57.2 million, and adjusted net income increased to $39.9 million from $35.9 million a year earlier. Adjusted EBITDA rose 4.7% to $69.3 million. Adjusted selling, general and administrative expenses were $91.5 million, up from $90 million but below the company’s prior guidance.

Hausmann said new Canadian tariffs and higher oil and energy costs added to expenses during the quarter. He estimated the Canadian tariffs at $5 million to $10 million annually, while noting that oil prices were volatile.

Hurd said Interface plans to protect margins through pricing, productivity initiatives and a focus on more profitable products and markets. The company is expanding automation in carpet tile manufacturing and investing in its nora rubber flooring operations to improve efficiency and capacity.

Americas orders grow as Europe softens

On a currency-neutral basis, third-quarter sales rose 0.5% in the Americas and 0.3% in EAAA. Currency-neutral orders increased 6% in the Americas but fell 7% in EAAA, leaving consolidated orders up 1%. Backlog was up 14% year to date.

Hurd said the timing of retail store remodels and nora installation cycles weighed on Americas sales in the quarter, but the company had not lost the business. “We haven’t seen any order cancellations. We haven’t seen a slowdown in momentum,” she said of the Americas.

In Europe, Hurd said the opportunity pipeline was up year over year and win rates remained consistent, but projects were taking longer to convert into orders and billings. She described Germany, Switzerland and France as softer markets, while the U.K. continued to grow.

Interface has placed its EMEA commercial organization under a single leader and plans to move to a unified selling structure next year, supported by centralized customer service and commercial analytics. Hurd said the changes would draw on the company’s experience with combined selling teams in the U.S.

By market segment, healthcare billings rose 5% in the quarter, following 29% growth in the year-earlier period. Education billings increased 3%, and corporate office billings rose 2%.

Updated sales outlook

For fiscal 2026, Interface expects net sales of $1.440 billion to $1.455 billion and an adjusted gross profit margin of approximately 40.4%. The sales outlook covers a 53-week fiscal year, with the extra week included in the first quarter.

The gross margin forecast includes a one-time benefit from IEEPA tariff refunds received in the second quarter. Excluding that benefit, Hausmann said the company’s baseline full-year adjusted gross margin is approximately 39.3%. Interface also expects adjusted selling, general and administrative expenses of approximately $387 million and capital expenditures of approximately $60 million.

The company generated $86.3 million in cash from operating activities during the third quarter, up from $76.7 million a year earlier, and spent $9.1 million on capital expenditures.

About Interface (NASDAQ:TILE)

Interface, Inc designs and manufactures modular flooring products for commercial, institutional and residential interiors. Its portfolio includes carpet tile, broadloom carpet and resilient flooring, including luxury vinyl tile. The company serves markets such as corporate offices, hospitality, education, healthcare and retail.

Founded in 1973 by Ray Anderson, Interface is headquartered in Atlanta, Georgia, and sells its products through a global network serving customers in North America, Europe and the Asia-Pacific region.

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