Inquire if the long-term gross margin target (previously 38.5%) is changing given current performance, even without the tariff refund.

Laurel Hurd stated that the company is ahead of its previous 38.5% target for 2030 and continues to outperform due to price, mix, and efficiencies. While not stating a new specific target, she emphasized commitment to continuous margin improvement despite market volatility. “So I appreciate the question. And if you remember back a ways, we had about -- we have 38.5% as our destination. And we said that's where we want to get to by 2030. And we're there ahead of where we thought we'd be and we're higher than we thought we'd be because all these things are really coming together with price and mix and all the efficiencies are really working well together.”

Ask for a breakdown of the 131 basis points of operational gross margin improvement, specifically the contribution from volume leverage, mix, pricing, and efficiencies.

Bruce Hausman highlighted automation and robotics investments as a large piece of the 131 bps improvement, noting these are durable and structural changes. He also mentioned mix and proactive pricing as significant contributors. “The automation and robotics that we have put into our manufacturing facilities are a large piece of that 131 basis points of operational improvement. I think the key thing that is encouraging to us is these are durable and structural changes that we made to the business, which really help us on a go-forward situation.”

Inquire about the stage of the return-to-office journey and the visibility the company has on this trend.

Laurel Hurd believes the return-to-office trend is accelerating and feels like it's still in the early stages. She noted that companies are investing in office spaces to meet new ways of working and attract talent, with visibility coming from customer discussions, A&D firm trends, and the opportunity pipeline. “In Corporate, we've said for a while, we feel really good about the corporate space, and it fits so well with the Interface brand and our value proposition because there is such a strong return to work. I think it's accelerating. I would say people are really coming back to work around the world. I see it everywhere I go. And the need to update the office space to the new ways of working is happening.”

TILE

Interface (TILE) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Discretionary· Aug 7, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Net Sales	$370 million to $380 million high materiality	Q3 · FY26	High
Adjusted Gross Profit Margin	approximately 40.8% of net sales medium materiality	Q3 · FY26	High
Adjusted SG&A Expenses	approximately $100 million medium materiality	Q3 · FY26	High
Adjusted Interest and Other Expenses	approximately $4 million low materiality	Q3 · FY26	High
Adjusted Effective Income Tax Rate	approximately 27.5% low materiality	Q3 · FY26	High
Fully Diluted Weighted Average Share Count	approximately 58.2 million shares low materiality	Q3 · FY26	High
Net Sales	$1.455 billion to $1.485 billion high materiality	FY26	High
Adjusted Gross Profit Margin	approximately 40.6% of net sales high materiality	FY26	High
Adjusted SG&A Expenses	approximately $395 million medium materiality	FY26	High
Adjusted Interest and Other Expenses	approximately $15 million low materiality	FY26	High
Adjusted Effective Income Tax Rate	approximately 26% low materiality	FY26	High
Capital Expenditures	approximately $60 million medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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%	—	—

Orderbook & backlog

Total Backlog up 22% end of Q2 FY26

YTD

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

Product announcements

Product	Type	Timeline
Noravant Timber	launch	earlier this year
Open Air Neutrals	launch	—
Twist & Texture	launch	—

Capital programs

Automation and Robotics Investments underway

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

Raw material inflation future quarters

low single-digit cost increases

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

Market volatility ongoing

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 tariffs ongoing

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

Gross Margin Trajectory

Q3 FY26

Current Q2 adjusted gross profit margin 45%; back half run rate around 39%

Target Confirmation 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 impacts 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.

Find out whether TILE delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.