Core Points - Interface, Inc. has declared a regular quarterly cash dividend of $0.02 per share [1] - The dividend is scheduled to be payable on December 12, 2025, to shareholders of record as of November 28, 2025 [1] - Interface, Inc. is recognized as a leader in sustainability within the global flooring solutions industry [1] Company Overview - Interface, Inc. operates as a global flooring solutions company [1] - The company offers an integrated portfolio of carpet tile and resilient flooring products [1]

Core Insights - Interface's third quarter results demonstrate effective execution of its One Interface strategy, with strong momentum in the health care segment and broad regional growth as key drivers [1] - CEO Laurel Hurd highlighted a 29% growth in global health care billings and improvements in manufacturing productivity [1] - The company reported benefits from product mix, automation, and a steady pace of orders, indicating resilience in a challenging macro environment [1] Financial Performance - Revenue reached $364.5 million, exceeding analyst estimates of $357.3 million, reflecting a 5.9% year-on-year growth and a 2% beat [6] - Adjusted EPS was $0.61, surpassing analyst estimates of $0.48, marking a 27.1% beat [6] - Adjusted EBITDA stood at $66.2 million, beating analyst estimates of $55.22 million, with an 18.2% margin [6] - The company slightly raised its full-year revenue guidance to $1.38 billion at the midpoint [6] - Operating margin improved to 14.6%, up from 12.3% in the same quarter last year [6] - Market capitalization is reported at $1.51 billion [6] Analyst Insights - Analyst Brian Biros inquired about the factors driving sales outperformance, to which CEO Hurd attributed strength in the health care segment and productive collaboration between Interface and Nora teams [6] - Biros also questioned the upcoming Nora Rubber investments, with Hurd explaining that these investments focus on capacity support, productivity, and innovation [6] - CFO Bruce Hausman discussed the balance between margin improvement and volume growth, indicating a focus on finding an optimal equilibrium [6] - Alexander Paris sought clarification on the education segment's softness, with Hurd noting a decline of less than 3% due to timing, while Hausman linked margin gains to manufacturing efficiencies and favorable product mix [6] - David S. MacGregor probed into the incremental margin potential from automation initiatives, with Hausman emphasizing ongoing efforts to drive efficiencies and expand product lines [6]

Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, but identifying such stocks can be challenging due to their inherent risks and volatility [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score system aids in identifying promising growth stocks by analyzing a company's real growth prospects beyond traditional metrics [2] - Interface (TILE) is highlighted as a recommended stock with a favorable Growth Score and a top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is a critical factor for growth investors, with double-digit growth being particularly attractive [4] - Interface has a historical EPS growth rate of 8.1%, but projected EPS growth for this year is 26.7%, significantly surpassing the industry average of 16.4% [5] Group 3: Asset Utilization - The asset utilization ratio, or sales-to-total-assets (S/TA) ratio, is an important indicator of efficiency in growth investing [6] - Interface has an S/TA ratio of 1.1, indicating it generates $1.1 in sales for every dollar in assets, outperforming the industry average of 1.04 [6] Group 4: Sales Growth - Sales growth is another key metric, with Interface expected to achieve a sales growth of 5.1% this year, compared to an industry average of 0% [7] Group 5: Earnings Estimate Revisions - Trends in earnings estimate revisions are crucial, with positive revisions indicating potential stock price movements [8] - Interface has seen an 8.8% increase in current-year earnings estimates over the past month, reflecting a positive trend [8] Group 6: Overall Positioning - Interface has earned a Growth Score of A and a Zacks Rank 1 due to favorable metrics and positive earnings estimate revisions, positioning it well for potential outperformance [10]

Financial Performance - Consolidated net sales for the quarter ended September 28, 2025, were $364.5 million, a 5.9% increase from $344.3 million in the same quarter last year[96]. - Consolidated net income for the quarter was $46.1 million, or $0.78 per diluted share, compared to $28.4 million, or $0.48 per diluted share, in the prior year[96]. - For the first nine months of 2025, consolidated net sales reached $1,037.5 million, up 5.8% from $980.6 million in the same period last year[97]. Profitability Metrics - Gross profit margin for the quarter was 39.4%, an increase from 37.1% in the same quarter last year, driven by higher average sales prices and favorable product mix[105]. - AMS segment adjusted operating income (AOI) for the third quarter was $40.5 million, a 25.8% increase from $32.2 million in the prior year[112]. - AOI in AMS rose by 41.4% in the first nine months of 2025, with AOI as a percentage of net sales increasing to 17.1% from 13.0% in the prior year[116]. - AOI in EAAA for Q3 2025 increased by 21.0%, with AOI as a percentage of net sales rising to 9.4% from 8.4% in the same period last year[120]. Cost and Expenses - Consolidated cost of sales for the quarter was $220.9 million, a 2.0% increase from $216.6 million in the same period last year[102]. - Selling, general and administrative (SG&A) expenses for the quarter increased by $4.8 million (5.6%) to $90.3 million[107]. - The effective tax rate for the three months ended September 28, 2025, was 4.8%, down from 21.2% in the same period last year[110]. Segment Performance - AMS segment net sales for the third quarter were $218.6 million, a 4.0% increase from $210.2 million in the same quarter last year[112]. - Net sales in AMS increased by 7.2% during the first nine months of 2025 compared to the same period in 2024, driven by higher average sales prices and increased rubber flooring volume[114]. - EAAA segment net sales increased by 8.8% in Q3 2025, primarily due to favorable currency fluctuations of approximately $6.0 million (4.5%) and higher sales volume[118]. Cash Flow and Investments - Cash provided by operating activities was $118.6 million for the nine months ended September 28, 2025, an increase of $8.2 million from the prior year[126]. - Cash used in investing activities was $25.5 million for the nine months ended September 28, 2025, primarily due to increased capital investment in manufacturing automation[127]. - The company had $187.4 million in cash as of September 28, 2025, with additional borrowing capacity of $294.8 million under its Facility[122]. Future Outlook - As of October 19, 2025, the consolidated backlog of unshipped orders was approximately $244.4 million, up from $223.4 million in February 2025[132]. - The company anticipates net sales growth in Q4 2025 compared to the same period last year, despite a challenging global macroeconomic environment[130]. - The company plans to evaluate its cost structure and global manufacturing footprint to optimize costs amid macroeconomic challenges[98]. Shareholder Actions - The company repurchased 250,000 shares of common stock at a weighted average price of $20.57 per share during the nine months ended September 28, 2025[129].

Financial Data and Key Metrics Changes - Third quarter net sales were $364.5 million, up 5.9% as reported and 4.2% on a currency-neutral basis compared to the third quarter of 2024, both exceeding expectations [13] - Adjusted gross profit margin was 39.5%, an increase of 208 basis points year over year, driven by favorable pricing and product mix along with manufacturing efficiencies [14] - Adjusted operating income rose to $54.1 million, reflecting a 24.5% year-over-year increase [14] - Adjusted EBITDA for the third quarter was $66.2 million, compared to $53.7 million in the same quarter of 2024 [15] - Adjusted earnings per share increased by 27% to $0.61 from $0.48 in the third quarter of 2024 [15] - The company ended the quarter with $482 million in liquidity and a net leverage ratio of 0.6 times [15] Business Line Data and Key Metrics Changes - The nora rubber segment grew by 20% in the third quarter and is up 19% year to date, driven by the One Interface strategy [5] - Corporate office billings increased by 5% in the third quarter, with year-to-date growth expected [9] - Global healthcare billings surged by 29%, with double-digit gains across both the Americas and EAAA [9] - Education billings saw a slight decline of less than 3% in the third quarter but remain at high single digits year to date [10] Market Data and Key Metrics Changes - In the Americas, currency-neutral net sales increased by 4.1% year over year, while EAAA saw a 4.3% increase [13] - Consolidated currency-neutral orders rose by 2.4% year over year, with the Americas up 1.7% and EAAA up 3.5% [10] Company Strategy and Development Direction - The company is focused on its One Interface strategy, which aims to build strong global functions to support local selling teams and enhance commercial productivity [5] - Investments in automation, productivity, and innovation are being accelerated to strengthen the nora product portfolio and drive long-term growth [6] - The company is preparing to launch a new rubber flooring innovation in early 2026, targeting growth in the healthcare segment [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and disciplined execution, highlighting strong results despite a challenging macro environment [11] - The company is raising its full-year guidance based on year-to-date results, anticipating net sales of $1.375 to $1.390 billion for the fiscal year 2025 [17] Other Important Information - The company received multiple awards for design and sustainability, including Manufacturer of the Year in ED's Net Zero Awards [11] - Tariffs diluted the adjusted gross profit percentage by approximately 30 basis points in the third quarter, with a similar dilution expected in the fourth quarter [16] Q&A Session Summary Question: What drove the sales outperformance this quarter? - Management noted that healthcare was the outperformer, with a 29% increase, exceeding expectations due to a focus on expanding the product portfolio in that segment [21][23] Question: Can you provide more details on investments in nora rubber? - Management confirmed ongoing investments in capacity, productivity initiatives, and innovation to support the growth of the nora rubber business [25][26] Question: How do you view margins going forward? - Management indicated that while they aim for a gross profit margin of 38.5%, they will balance share growth and business expansion [28] Question: Can you provide insights on the tax rate and special items in Q3? - The unusual tax rate of 4.8% was due to a non-cash pickup related to changes in German tax legislation, which required remeasuring deferred tax assets and liabilities [39][40] Question: What is the outlook for capital expenditures in 2026? - Management anticipates a slight increase in capital expenditures, primarily associated with nora rubber and other automation investments [74][76]

Company Overview - Interface is a global leader in commercial flooring with net sales of $1.3 billion in FY2024[9] - The company has 3,600 global employees and 6 manufacturing locations on 4 continents[9] - Interface has a diversified revenue stream with 61% from the Americas, 28% from EMEA, and 10% from APAC[14] - The company's revenue is also diversified by customer segment, with 45% from Corporate Office, 20% from Education, 10% from Healthcare, and 25% from Other segments[15] Financial Performance (Q3 2025) - Net sales increased by 5.9% to $364.5 million compared to $344.3 million in Q3 2024[65, 66, 67] - Currency neutral net sales increased by 4.2% year-over-year to $358.6 million[65, 80] - Adjusted operating income was $54.1 million, representing 14.9% of net sales[65] - Adjusted earnings per share was $0.61[65] Financial Performance (LTM Q3 2025) - Adjusted EBITDA was $214 million, representing 15.6% of net sales[65] - Adjusted diluted earnings per share was $1.79[65] - Net debt to adjusted EBITDA ratio was 0.6x[65]

Financial Performance - Net sales for Q3 2025 totaled $364.5 million, representing a 5.9% increase year-over-year and a 4.2% increase on a currency-neutral basis[6] - GAAP earnings per diluted share increased by 62.5% to $0.78, while adjusted earnings per diluted share rose by 27.1% to $0.61[6] - Gross profit margin expanded by 233 basis points to 39.4%, driven by favorable product mix and manufacturing efficiencies[7] - Net sales for the three months ended September 28, 2025, were $364.5 million, a 5.3% increase from $344.3 million for the same period in 2024[22] - Gross profit for the three months ended September 28, 2025, was $143.6 million, representing a gross margin of 39.4%, compared to $127.6 million and a gross margin of 37.1% in the prior year[22] - Operating income increased to $53.4 million for the three months ended September 28, 2025, up 26.4% from $42.2 million in the same period last year[22] - Net income for the three months ended September 28, 2025, was $46.1 million, a significant increase of 62.1% compared to $28.4 million in the prior year[22] - Earnings per share (EPS) for the three months ended September 28, 2025, were $0.79 (basic) and $0.78 (diluted), compared to $0.49 (basic) and $0.48 (diluted) in the same period last year[22] - For the first nine months of 2025, GAAP net income was $91.7 million with diluted EPS of $1.55, compared to $65.2 million and $1.11 in the same period of 2024, marking a 40.7% increase in net income and a 39.6% increase in EPS[29] - The company experienced a total revenue of $1,037.5 million for the first nine months of 2025, up from $980.6 million in the same period of 2024, which is a 5.8% increase[31] Balance Sheet and Cash Flow - Cash increased by 88.8% to $187.4 million, while total debt rose slightly by 1.7% to $307.8 million[9] - The net leverage ratio improved to 0.6x, indicating a stronger balance sheet position[9] - Total assets as of September 28, 2025, were $1.33 billion, an increase of 13.6% from $1.17 billion as of December 29, 2024[24] - Cash and cash equivalents increased to $187.4 million as of September 28, 2025, compared to $99.2 million at the end of the previous fiscal year[24] - Cash provided by operating activities for the three months ended September 28, 2025, was $76.7 million, slightly up from $76.2 million in the same period last year[25] - The company reported a total current liabilities of $240.2 million as of September 28, 2025, compared to $216.7 million as of December 29, 2024[24] - Long-term debt stood at $307.3 million as of September 28, 2025, a slight increase from $302.3 million at the end of the previous fiscal year[24] Operational Efficiency - Adjusted SG&A expenses increased by $4.5 million year-over-year due to higher sales commissions and inflation[8] - Adjusted EBITDA for the last 12 months reached $214.1 million, reflecting robust operational performance[9] - Non-GAAP adjusted operating income for Q3 2025 was $54.1 million, up from $43.5 million in Q3 2024, reflecting a 24.8% year-over-year growth[26] - The company reported a GAAP operating income of $53.4 million in Q3 2025, compared to $42.2 million in Q3 2024, representing a 26.4% increase[33] - Adjusted (non-GAAP) operating income for the first nine months of 2025 was $135.5 million, compared to $108.6 million in the same period of 2024, reflecting a 24.8% increase[29] - Non-GAAP Adjusted Operating Income (AOI) for the first nine months of 2025 was $135.5 million, up from $108.6 million in 2024, reflecting a 24.8% growth[34] Strategic Initiatives - The One Interface strategy contributed to a 29% increase in Healthcare segment sales and a 5% increase in Corporate Office segment sales[4] - The company plans to continue focusing on market expansion and new product development as part of its strategic initiatives moving forward[38] - The company believes that non-GAAP performance measures provide a meaningful basis for comparing current results with prior periods, aiding in business evaluation[38] Tax and Currency Impact - The company recognized a non-cash credit to income tax expense in Q3 2025 due to a reduction in the German corporate income tax rate, which will decrease by 1% annually from 2028 to 2032[27] - The impact of changes in currency for the first nine months of 2025 was a decrease of $6.0 million in consolidated net sales[31] Adjustments and Expenses - The total adjustments for non-GAAP measures in Q3 2025 amounted to $10.2 million, primarily due to purchase accounting amortization and restructuring costs[26] - The company incurred a total of $6.9 million in non-GAAP adjustments for the first nine months of 2025, compared to $3.8 million in 2024, showing an increase of 81.6%[34] - Interest Expense for the first nine months of 2025 was $13.1 million, down from $18.3 million in the same period of 2024, a decrease of 28.0%[36] - Depreciation and Amortization expenses for the first nine months of 2025 were $28.3 million, slightly up from $27.7 million in 2024, reflecting a 2.2% increase[36] Cyber Event Impact - The company reported a Cyber Event Impact of $(5.1) million for the fiscal year 2024, which was a significant factor in the financial results[37]

Core Insights - Interface, Inc. reported strong third-quarter results for 2025, exceeding expectations with significant year-over-year growth and profitability expansion [2][6] - The company raised its full-year guidance based on robust year-to-date performance, despite acknowledging a challenging global macro environment [8] Financial Performance - Net sales for Q3 2025 reached $364.5 million, a 5.9% increase from $344.3 million in Q3 2024, with a currency-neutral growth of 4.2% [5][6] - Gross profit margin improved by 233 basis points to 39.4% compared to 37.1% in the previous year, driven by favorable product mix and manufacturing efficiencies [4][5] - Operating income rose by 26.5% to $53.4 million, while net income surged by 62.2% to $46.1 million [5][6] - Earnings per diluted share increased to $0.78, reflecting a 62.5% rise from $0.48 in the prior year [5][6] Strategic Initiatives - The "One Interface" strategy is credited with driving growth by enhancing global functions, empowering local sales teams, and streamlining operations [3][6] - The company experienced a 29% increase in Healthcare segment sales and a 5% increase in Corporate Office sales, indicating strong performance across various market segments [3][5] Outlook - Interface raised its full fiscal year 2025 outlook for net sales to a range of $1.375 billion to $1.390 billion, up from the previous estimate of $1.370 billion to $1.390 billion [8] - The adjusted gross profit margin expectation for the full year is now set at 38.5% of net sales, an increase from the prior estimate of 37.7% [8] Segment Performance - In the Americas, net sales increased by 4.0% to $218.6 million, while the EAAA segment saw an 8.8% rise to $145.9 million [7] - Operating income in the Americas grew by 26.8% to $40.4 million, while the EAAA segment's operating income increased by 25.5% to $12.9 million [7]

Market Overview - The carpet and rugs market size is projected to grow from USD 52.46 billion in 2025 to USD 66.26 billion by 2030, reflecting a compound annual growth rate (CAGR) of 4.78% driven by rising residential spending, urbanization, and increasing online retail adoption [1][11] - North America is the largest market, while Asia-Pacific is emerging as a significant contributor to market expansion [1] Consumer Trends - There is a shift in consumer preferences towards sustainable and premium products, leading to diversification in materials, designs, and sales channels [2] - Eco-conscious consumers are favoring carpets made from recycled or bio-based fibers, and companies adopting environmentally friendly practices are strengthening their market presence [4] Design and Aesthetics - Increasing demand for home décor and interior design is evident as consumers view carpets and rugs as statement pieces, with bold colors and custom patterns gaining popularity [3] - Suppliers are innovating designs to enhance home aesthetics, catering to the desire for unique and stylish flooring solutions [3] E-Commerce Impact - The growth of e-commerce is reshaping the carpet and rugs market by providing customers with visualization tools, a wide range of designs, and flexible delivery options [5] - Online platforms are enabling manufacturers and retailers to reach a larger audience, particularly in regions with limited traditional showrooms [5] Regulatory Environment - Government policies, trade regulations, and export incentives are influencing market dynamics, with tariff adjustments and regional trade agreements facilitating market entry for manufacturers [6] Market Segmentation - The market is segmented by product type (tufted, woven, needle-punched, knotted, etc.), distribution channels (mass merchandisers, home centers, specialty stores), and end-use sectors (residential, commercial, industrial) [10] Key Players - Major players in the carpet and rugs market include Mohawk Industries Inc., Shaw Industries Group, Inc., and Oriental Weavers Carpet Co., each known for their diverse product offerings and strong distribution networks [10][12] Conclusion - The carpet and rugs market is on a steady growth path, driven by consumer interest in home décor, sustainability, and digital shopping convenience, with strong residential demand supported by premiumization in mature markets and urbanization in Asia-Pacific [11]

Core Points - Interface plans to release its third quarter 2025 results on October 31, 2025, before the market opens [1]