Interface, Inc. Q2 FY2025 earnings call

• One Interface Strategy: Multiyear strategy driving growth, with 11% sales growth in Americas. Combined selling teams for carpet tile, LVT, and nora rubber outperforming expectations.
• Manufacturing and Supply Chain: Automation and robotics improving margins and efficiency. New automation systems in U.S. carpet tile manufacturing operational and rolling out to Australia and Europe.
• Brand and Product Launches: Made for More brand refresh driving impact. Strong presence at industry events, introducing new collections like dressed lines carpet tile and Lasting Impressions LVT.
• Sustainability: Progress toward carbon negative by 2040, with reduced carbon footprints, 52% recycled/bio-based materials, and 4% global greenhouse gas emissions cut.

Second quarter net sales totaled $375.5 million, up 8.3% year-over-year. Currency-neutral net sales grew 7%. Americas net sales grew 11%, while EAAA had 4% currency-neutral order growth. Carpet tile, LVT, and rubber all grew in both price and volume, with nora rubber seeing near 40% growth in the Americas. Global Education billings increased 11% year-over-year, Global Health care billings up 28% year-over-year, and Corporate office billings up 3% year-over-year. Growth was broad-based across other markets like government and retail. Key product segments contributed with Americas being a strong growth driver, and nora rubber emerging as a significant growth engine in certain segments.

For the third quarter of fiscal 2025, anticipates net sales $350 million to $360 million, adjusted gross profit margin ~38%, adjusted SG&A ~$92 million, etc. For full fiscal year 2025, anticipates net sales $1.370 billion to $1.390 billion, adjusted gross profit margin ~37.7%, etc. Raised full year guidance on strong Q2 results.

• Uncertain global macro environment poses risks. - Exposure to tariffs on approximately 15% of global product costs, managed through pricing and productivity initiatives.

Q: On Q2 performance shape, acceleration, and July's play in Americas and EAAA A: Order growth momentum had lightening in May/June but picked up, July strong, backlog up 24% year-to-date.

Q: Color on government, retail, etc., in global billing A: Broad-based growth, including government and retail, with corporate, education, and health care as primary markets.

Q: One Interface Strategy progress and future A: Still in early stages, nora rubber growth strong, room to grow with investments in automation and robotics.

Q: Margin drivers, mix, price, volume A: ~20% from price and mix, ~80% from manufacturing productivity; nora mix accretive.

Q: Timing of automation ROI in international assets A: Rollout to Europe and Australia starting next year, 2026 expected benefit.

Q: Tariffs impact on gross margins A: Largely neutral in quarter, offset by incremental pricing, ~15% of COGS subject to tariffs.

Q: Capital allocation, buy vs build, growth priorities A: Focus on internal growth, Americas as largest market, Europe opportunity, product categories including carpet tile and resilient flooring.