Skip to content
    TILE
    Earnings call· Jun 2026(Q2 FY26)

    INTERFACE Q2 FY26 earnings call TILE

    Aug 7, 2026 Source

    Executive summary

    Interface Q2 FY26 — Strong Sales Growth and Margin Expansion Driven by Operational Execution and Tariff Refund

    Interface delivered a strong second quarter, exceeding expectations with broad-based currency-neutral net sales growth and significant margin expansion, partly due to a tariff refund and operational improvements. The company raised its full-year guidance, confident in its One Interface strategy, strong order momentum, and growing backlog, while actively managing raw material inflation and investing in innovation and productivity.

    Highlights

    5

    • Currency-neutral net sales grew 4% year-over-year, building on 7% growth in Q2 FY25.

    • Adjusted gross profit margin increased 524 basis points to 45%, driven by operational execution and a $15.6 million tariff refund.

    • Adjusted earnings per diluted share rose 47% to $0.88, up from $0.60 in the prior year.

    • Global Healthcare billings surged 19% year-over-year, following 28% growth in Q2 FY25.

    • Consolidated currency-neutral orders increased 5% year-over-year, with backlog up 22% year-to-date.

    Concerns

    2

    • Adjusted SG&A expenses increased to $103.1 million from $93.4 million, primarily due to higher sales commissions and variable compensation on increased sales and profits, and foreign currency exchange variances.

    • Low single-digit inflation cost increases in raw materials are expected to flow through the P&L in future quarters, impacting Q3/Q4 margins.

    Guidance & targets

    12
    CategoryTargetConfidence
    Net Sales
    $370 million to $380 million
    high materiality
    High
    Adjusted Gross Profit Margin
    approximately 40.8% of net sales
    medium materiality
    High
    Adjusted SG&A Expenses
    approximately $100 million
    medium materiality
    High
    Adjusted Interest and Other Expenses
    approximately $4 million
    low materiality
    High
    Adjusted Effective Income Tax Rate
    approximately 27.5%
    low materiality
    High
    Fully Diluted Weighted Average Share Count
    approximately 58.2 million shares
    low materiality
    High
    Net Sales
    $1.455 billion to $1.485 billion
    high materiality
    High
    Adjusted Gross Profit Margin
    approximately 40.6% of net sales
    high materiality
    High
    Adjusted SG&A Expenses
    approximately $395 million
    medium materiality
    High
    Adjusted Interest and Other Expenses
    approximately $15 million
    low materiality
    High
    Adjusted Effective Income Tax Rate
    approximately 26%
    low materiality
    High
    Capital Expenditures
    approximately $60 million
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Americas
    Currency-neutral net sales increased, driven by One Interface combined selling teams and demand across key market segments. Orders grew 5%.
    		—3%——
    EAAA
    Currency-neutral net sales increased, driven by stronger volumes and encouraging broad-based growth. Orders increased 6%.
    		—5%——
    Healthcare
    Standout quarter, building on 28% growth in Q2 FY25. Nora continues to be a meaningful growth engine, benefiting from combined selling teams.
    Global Billings: 19%
    		—19%——
    Education
    Strong growth on top of 11% growth in Q2 FY25. Well-positioned across K-12 and higher education, supported by low-carbon products, broad price points, and design leadership. Nora is a strong growth driver in K-12.
    Billings: 5%
    		—5%——
    Corporate Office
    Broad-based global growth, gaining share. Supported by return-to-office trends, renovation activities, and flight to quality in Class A space. Represents approximately 44% of total billings year-to-date.
    Billings: 5%
    		—5%——

    Operational metrics

    24
    Net Sales
    $395.7 millionup 5.4% as reported
    Q2 FY26

    Reported net sales for the quarter.

    Currency-Neutral Net Sales Growth
    3.8%YoY
    Q2 FY26

    Currency-neutral growth rate for net sales.

    Adjusted Gross Profit Margin
    45%up 524 basis points YoY
    Q2 FY26

    Significantly improved, driven by operational execution and a one-time tariff refund.

    Adjusted SG&A Expenses
    $103.1 millioncompared to $93.4 million
    Q2 FY26

    Increased due to higher variable compensation and FX impacts.

    Adjusted Operating Income
    $74.9 millionup 34% compared to $55.9 million
    Q2 FY26

    Strong growth in operating income.

    Adjusted Net Income
    $51.5 millioncompared to $35.4 million
    Q2 FY26

    Increased net income for the quarter.

    Adjusted EBITDA
    $87.7 millioncompared to $64.8 million
    Q2 FY26

    Increased EBITDA for the quarter.

    Adjusted Earnings Per Diluted Share
    $0.88up 47% compared to $0.60
    Q2 FY26

    Significant increase in EPS.

    Cash from Operating Activities
    $38.4 million
    Q2 FY26

    Cash generated from core operations.

    Capital Expenditures
    $12.2 million
    Q2 FY26

    Investments in the business, including automation and robotics.

    Share Repurchases
    $8.8 million
    Q2 FY26

    Part of the capital allocation strategy to return excess cash to shareholders.

    Share Repurchases Year-to-Date
    $21 million
    YTD Q2 FY26

    Total share repurchases for the fiscal year to date.

    IEEPA Tariff Refund Benefit
    $15.6 million
    Q2 FY26

    Benefit from a Supreme Court ruling deeming tariffs illegal, covering tariffs paid last year and this year.

    Raw Material Inflation
    low single-digitcost increases
    Q2 FY26

    Ongoing cost increases that the company is offsetting with proactive pricing.

    Corporate Office Segment % of Total Billings
    44%
    YTD Q2 FY26

    Proportion of total billings represented by the Corporate Office segment.

    Product Carbon Footprint Reduction
    4%
    2025 vs 2024

    Achieved through material and manufacturing innovations.

    Recycled or Bio-based Materials
    51%
    2025

    Proportion of materials from recycled or bio-based sources.

    Manufacturing Energy from Renewable Sources
    79%
    2025

    Proportion of manufacturing energy derived from renewable sources.

    Global Greenhouse Gas Emissions Reduction
    36%
    vs 2019 baseline

    Progress towards 2030 science-based targets and carbon-negative goal by 2040.

    Consolidated Currency-Neutral Orders Growth
    5%YoY
    Q2 FY26

    Growth in orders across the business.

    Gross Margin Run Rate
    around 39%up about 60 bps YoY off baseline
    back half

    Expected gross margin run rate for the second half of the fiscal year.

    Full Year Gross Margin Improvement
    about 100 bpsoff baseline
    FY26

    Expected full year gross margin improvement compared to the baseline.

    Ongoing Tariff Exposure
    15% to 20%
    ongoing

    The proportion of cost of goods sold still subject to tariffs, which are paid daily and baked into guidance.

    FX Impact on Net Sales
    1.6%positive impact
    Q2 FY26

    Calculated as the difference between reported net sales growth (5.4%) and currency-neutral net sales growth (3.8%).

    Orderbook & backlog

    1
    Total Backlogup 22%end of Q2 FY26

    YTD

    Reflects continued momentum across the business, giving confidence to raise full year guidance.

    Product announcements

    3
    ProductTypeDetails
    Noravant Timberlaunch
    Open Air Neutralslaunch
    Twist & Texturelaunch

    Capital programs

    1
    Automation and Robotics Investmentsunderway
    Period spend: $12.2 million

    Benefit: Improved efficiency, expanded margins, reduced costs, sustainable growth, more throughput, enhanced customer service levels, increased available capacity

    Investments in carpet tile manufacturing facilities in Europe and Australia, and new packaging automation in Australia, and robotics in Germany for the rubber business. Investments are exceeding expectations.

    Risks & headwinds

    3
    Raw material inflationfuture quarters

    low single-digit cost increases

    Mitigation: Proactive pricing implemented in Q2 to offset these costs.

    Market volatilityongoing

    dynamic world out there with a lot of input cost challenges

    Mitigation: Committed to continuing margin expansion, disciplined SG&A spend, focus on driving innovation and mix.

    Ongoing tariffsongoing

    15% to 20% of COGS

    Mitigation: Tariffs are paid every day and baked into current guidance; the $15.6 million refund was a one-time event.

    What to watch in Q3 FY26

    5

    Gross Margin Trajectory

    Q3 FY26
    CurrentQ2 adjusted gross profit margin 45%; back half run rate around 39%
    TargetConfirmation of back half gross margin around 39% and full year up 100 bps from baseline.

    Why it matters

    Gross margin is a key profitability driver, and the company noted timing impact📎s from proactive pricing and raw material costs for Q3/Q4.

    If you look at the back half in total, gross margins are around 39% in the back half in our guide, which is ahead of our ambition, as you might remember. And if we can achieve that for the full year, if we can achieve that for Q4 -- or I'm sorry, for the back half, it'd be up about 60 bps. And if we can achieve that for the full year, we'd be up about 100 bps off of our baseline.

    Q&A highlights

    6

    Clarify the puts and takes for Q3 and Q4 margins, especially the implied Q4 decline, and confirm if it's due to timing of cost flow-through.

    Management confirmed the Q3/Q4 margin dynamics are due to the timing of raw material cost flow-through, which were proactively priced for in Q2. They expressed confidence in the back-half gross margins (around 39%) and full-year improvement (100 bps up from baseline).

    “Yes, you got it, Brian. It's just the timing of the flow-through. We feel really good about the gross margins, not just the historical performance that we're seeing throughout the year, but also about our forward projection.”

    asked by Brian Biros · answered by Bruce Hausman

    2 min read6 chapters

    Detailed Narrative

    01

    One Interface Strategy & Operational Execution

    The company's "One Interface" strategy, focusing on global functions, commercial productivity, supply chain management, and design leadership, continues to drive strong results. Operational execution improvements, including investments in automation and robotics in manufacturing facilities in Europe and Australia, contributed to margin expansion and efficiency gains, exceeding expectations. These investments are helping reduce costs and support sustainable growth as the company scales.

    02

    Product Innovation & Market Expansion

    Interface is expanding its addressable market through innovation, exemplified by the launch of Noravant Timber, a rubber flooring with a wood grain aesthetic, gaining traction in Healthcare. New carpet tile offerings like Open Air Neutrals and Twist & Texture cater to diverse price points and design preferences, reinforcing confidence in innovation investments. The company is systematically looking category by category to expand its market reach.

    03

    Sustainability & ESG Leadership

    Interface highlighted its 2025 Impact Report, showcasing a 4% reduction in product carbon footprint across all product lines compared to 2024. 51% of materials are now recycled or bio-based, and 79% of manufacturing energy came from renewable sources. Global greenhouse gas emissions were cut by 36% from a 2019 baseline, demonstrating progress towards ambitious carbon-negative goals by 2040 without offsets.

    04

    Market Segment Performance & Diversification

    The diversification strategy continues to drive growth across key market segments. Healthcare billings were up 19%, Education up 5%, and Corporate Office billings also increased 5%, with strong underlying demand supported by renovation, modernization, and return-to-office trends. The company's ability to serve various price points and design needs, including through its Design Studio, is key to winning projects and gaining share.

    05

    Capital Allocation & Shareholder Returns

    Interface maintains a balanced capital allocation strategy, prioritizing investments in innovation and productivity, disciplined debt management, and evaluating M&A opportunities. The company remains committed to returning excess cash to shareholders through dividends and disciplined share repurchases, with $8.8 million repurchased in Q2 and $21 million year-to-date, representing 310,000 shares in Q2 and 461,000 shares in Q1.

    06

    Gross Margin Trajectory & Tariff Refund Impact

    The significant improvement in adjusted gross profit margin to 45% was largely due to a $15.6 million IEEPA tariff refund, which contributed 393 basis points. The remaining 131 basis points were driven by higher sales volumes, proactive pricing, favorable mix, and manufacturing efficiencies, reflecting durable operational improvements. The company expects back-half gross margins around 39% and full-year margins up about 100 bps off its baseline.

    AI-generated summary of the company’s earnings call. Not investment advice.