Interface (TILE) Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Net Sales: $395.7 million, up 5.4% as reported and 3.8% on a currency-neutral basis.

Adjusted Gross Profit Margin: 45%, an increase of 524 basis points year-over-year, primarily due to higher sales volumes, proactive pricing, and a $15.6 million benefit from IEEPA tariff refunds.

Adjusted Operating Income: $74.9 million, up 34% from $55.9 million.

Adjusted Net Income: $51.5 million, compared to $35.4 million.

Adjusted EBITDA: $87.7 million, up from $64.8 million.

Adjusted Earnings Per Diluted Share: $0.88, a 47% increase from $0.60.

Orders: Consolidated currency-neutral orders increased 5% year-over-year, with a strong backlog up 22% year-to-date.

2Strategic Updates and Business Highlights

Growth Strategy: The "One Interface" strategy continues to drive broad-based growth across regions and product categories, focusing on operational execution, margin expansion, and sustainability.

Product Innovations: The launch of Noravant timber flooring, recognized at Clerkenwell Design Week, and the introduction of new carpet tile offerings like Open Air Neutrals and Twist & Texture are expected to enhance market share.

Sustainability Efforts: 51% of materials used are recycled or bio-based, and the company aims to be carbon negative by 2040.

Employee Engagement: Certified as a Great Place to Work in 14 countries, reflecting strong organizational culture and employee satisfaction.

3Forward Guidance and Outlook

Q3 2026 Guidance: Expected net sales of $370 million to $380 million, with an adjusted gross profit margin of approximately 40.8%.

Full Year 2026 Guidance: Anticipated net sales of $1.455 billion to $1.485 billion, with an adjusted gross profit margin of approximately 40.6%.

Capital Expenditures: Projected at approximately $60 million, focusing on automation and robotics to enhance efficiency.

4Bad News, Challenges, or Points of Concern

Tariff Refunds: The $15.6 million tariff refund is a one-time benefit and not expected to recur, which may impact future margin performance.

Cost Increases: The company is facing low single-digit inflation in raw material costs, which could pressure margins in the future.

SG&A Expenses: Increased due to higher sales commissions and variable compensation linked to increased sales, raising concerns about cost management.

5Notable Q&A Insights

Margin Projections: Management expressed confidence in maintaining gross margins around 39% for the back half of the year, despite potential cost pressures.

Corporate Office Market: The return to office trend is gaining momentum, with companies investing in quality spaces to attract talent, which could drive further growth in this segment.

Education Market: Continued strong performance in the Education segment, with a focus on approachable price points and product diversity contributing to growth.

AI Impact: There is no significant slowdown in spending attributed to AI concerns; instead, companies are proactively investing in workplace environments to enhance employee engagement. Overall, Interface demonstrated strong financial performance in Q2 2026, driven by broad-based growth and strategic initiatives, while also navigating potential challenges related to tariffs and rising costs. The outlook remains positive, with raised guidance reflecting confidence in ongoing momentum.