Interface, Inc. (TILE) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong financial performance with a significant increase in adjusted EPS and cash from operations. The company has shown growth across key segments like healthcare and education, and has a promising backlog. The Q&A session reveals confidence in managing costs and tariff impacts, with strategic investments in automation and product launches. Despite some vague responses, the overall sentiment is positive, with optimistic guidance and robust growth projections, likely leading to a positive stock price movement.
Key Financial Performance
Net Sales (Full Year 2025) $1.39 billion, up 5.4% year-over-year (currency-neutral net sales increased 4.3%). Growth driven by strong performance in the Americas (5.5% increase) and EAAA (2.4% increase), reflecting improving trends in international markets.
Net Sales (Q4 2025) $349.4 million, up 4.3% as reported and 1.6% on a currency-neutral basis. Growth driven by favorable pricing and product mix.
Adjusted Gross Profit Margin (Full Year 2025) 39%, up 187 basis points year-over-year. Improvement driven by favorable pricing, improved mix, and manufacturing efficiencies, partially offset by higher input costs.
Adjusted Gross Profit Margin (Q4 2025) 38.6%, up 169 basis points year-over-year. Improvement due to favorable pricing, product mix, and a nonrecurring inventory reserve adjustment (80 basis points benefit).
Adjusted Operating Income (Full Year 2025) $173.8 million, up 22.9% year-over-year. Growth attributed to strong execution of the One Interface strategy and operational efficiencies.
Adjusted Operating Income (Q4 2025) $38.2 million, up 16.7% year-over-year. Growth driven by increased sales and operational efficiencies.
Adjusted EBITDA (Full Year 2025) $217.9 million, up 15.3% year-over-year. Growth driven by operational efficiencies and increased sales.
Adjusted EBITDA (Q4 2025) $49.8 million, up 8.2% year-over-year. Growth attributed to increased sales and operational efficiencies.
Adjusted EPS (Full Year 2025) $1.94, up 33% year-over-year. Growth driven by increased sales, operational efficiencies, and a nonrecurring tax benefit.
Adjusted EPS (Q4 2025) $0.49, up 44.1% year-over-year. Growth driven by increased sales, operational efficiencies, and a nonrecurring tax benefit.
Cash from Operating Activities (Full Year 2025) $167.9 million, up from $148.4 million in 2024. Increase driven by strong operational performance and cash management.
Capital Expenditures (Full Year 2025) $46.2 million, up from $33.8 million in 2024. Increase due to investments in automation and productivity initiatives.
Global Rubber Billings (Full Year 2025) Up 17% year-over-year. Growth driven by strong performance in the nora rubber business and successful cross-selling efforts.
Global Healthcare Billings (Full Year 2025) Up 21% year-over-year. Growth driven by increased investment in healthcare facilities and a focus on preventative care.
Education Billings (Full Year 2025) Up 8% year-over-year. Growth driven by expanded product offerings and modernization efforts in the education sector.
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Operating Highlights
Introduction of noravant: A groundbreaking rubber flooring innovation that is PVC-free, combining high performance, design flexibility, and enhanced sustainability. It includes the industry's first wood grain design in rubber flooring, targeting health care and education markets.
Expansion of product offerings: Expanded collections at more approachable price points, such as the open air collection in carpet tile and 3-millimeter LVT, to drive market share gains and better serve customer needs.
Sustainability-focused innovation: Unveiled the first-ever cradle-to-gate carbon-negative rubber prototype and incorporated captured carbon in U.S. and European carpet tile manufacturing processes.
Health care market growth: Global health care billings increased by 21% year-over-year, driven by investments in health care facilities and a focus on aging populations and preventative care.
Education market growth: Education billings increased by 8% year-over-year, supported by expanded product collections and modernization efforts in K-12 and higher education.
Geographic market performance: Currency-neutral net sales increased 5.5% in the Americas and 2.4% in EAAA, reflecting strong performance in the Americas and improving trends in international markets.
Automation and robotics: Investments in automation and robotics in U.S. carpet tile operations and nora plant improved efficiency, reduced waste, and enhanced customer service levels. Plans to extend these solutions to Europe and Australia.
Supply chain optimization: Aligned global supply chain around productivity, continuous improvement, and technology-enabled solutions, contributing to margin expansion.
One Interface strategy: Focused on building strong global functions, accelerating growth through commercial productivity, expanding margins via supply chain management, and simplifying operations.
Capital allocation strategy: Prioritized investments in innovation and productivity, managed leverage conservatively, explored M&A opportunities, and returned excess cash to shareholders through dividends and share repurchases.
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Risk or Challenges
Macroeconomic Environment: Challenging macroeconomic conditions in certain international markets, particularly in EAAA, which could impact sales and growth.
Input Costs: Higher input costs partially offset favorable pricing and product mix, which could pressure margins.
Currency Fluctuations: Currency-neutral net sales growth was impacted by FX translation, which remains a risk for international operations.
Debt Management: The company has a disciplined use of debt, but high leverage and interest expenses could pose financial risks.
Automation Investments: Ongoing investments in automation and robotics require significant capital expenditures, which could strain financial resources if not managed effectively.
Product Launch Risks: The success of new products like noravant timber depends on market acceptance and longer selling cycles, which could delay revenue realization.
Healthcare and Education Segments: While these segments show growth, reliance on specific sectors could expose the company to sector-specific risks.
Competitive Pressures: The flooring industry remains highly competitive, which could impact market share and pricing power.
Regulatory and Sustainability Compliance: Commitment to sustainability and low-carbon products requires adherence to evolving regulations, which could increase operational costs.
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Guidance & Outlook
Global Rubber Billings: Global rubber billings were up 17% in 2025 compared to the prior year. The company plans to build on this growth in 2026 and beyond, leveraging the success of the U.S. model to expand business in health care and education globally.
Automation and Robotics: The company will continue to reinvest efficiency-driven savings into additional automation, productivity initiatives, and workflow optimization, scaling proven solutions across global operations. Robotic solutions will be extended to facilities in Europe and Australia, and further automation in carpet tile facilities will include more efficient cutting and packaging processes.
Noravant Product Launch: The company is launching noravant, a new rubber flooring innovation, expected to contribute to growth starting in Q4 2026. This product targets the premium end of the vinyl sheet category and is designed for applications in health care and education, particularly patient rooms and classrooms.
Capital Expenditures: Capital expenditures are expected to increase to $55 million in 2026, with investments in automation, productivity initiatives, and equipment for the new noravant product line.
Revenue Projections for 2026: Net sales are anticipated to range between $1.42 billion and $1.46 billion for the full fiscal year 2026, with an adjusted gross profit margin of approximately 38.5% to 39%.
Market Segment Growth: The company expects to deepen its presence in health care and education, leveraging innovative platforms like noravant timber and expanding offerings at both premium and approachable price points.
SG&A Expenses: Adjusted SG&A expenses for 2026 are projected to be approximately 26.2% to 26.4% of net sales.
Share Repurchases and Dividends: The company plans to continue executing share repurchases and has increased its quarterly dividend from $0.02 to $0.03 per share.
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Shareholder Return Plan
Quarterly Dividend Increase: The Board approved an increase in the quarterly dividend from $0.02 to $0.03 per share, reflecting confidence in cash flow generation and earnings durability.
Share Repurchase Program: In the fourth quarter of 2025, the company repurchased $13 million of Interface common stock. For the full fiscal year, $18.2 million worth of shares were repurchased. The company plans to continue executing share repurchases in a disciplined and opportunistic fashion in 2026.
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Key Q&A
Q:Can you talk about the One Interface selling strategy and its progress?
A:The One Interface strategy has been successful, especially with combined selling teams in the U.S. Health care billings were up 21%, and the nora business grew 17%. Key opportunities include the launch of noravant, a wood grain look in rubber, expected to generate $5-10 million in revenue this year and grow over time. The company is also expanding learnings from the U.S. globally, focusing on health care and education markets.
Q:What are the factors contributing to gross margin improvements and the 2026 guidance?
A:Gross margins reached 38.5%, ahead of schedule. For 2026, guidance is 38.5%-39%, with 100 basis points of improvement expected. Factors include offsetting 50 basis points of tariff-related headwinds and inventory adjustments, automation in factories, and investments in international markets like Australia and Northern Ireland.
Q:Are there more accessible price point products to be introduced in 2026?
A:The company continues to expand the Open Air platform with new colors and styles. A new collection with a different design will launch mid-year. The company has proven it can maintain premium offerings while expanding mid-price points without diluting margins.
Q:How is the corporate market performing compared to health care and education?
A:The corporate business grew 0.5% globally, in line with expectations. Class A spaces remain in demand, with markets like New York and San Francisco recovering. Health care and education grew significantly, while retail was soft in the quarter.
Q:Can you provide details on the 7% increase in backlog?
A:The backlog is solid and evenly spread across initiatives, providing confidence for 2026 and Q1 guidance.
Q:How is SG&A being managed while pursuing growth opportunities?
A:SG&A is tightly controlled, with disciplined spending and gating processes. Investments focus on sales and innovation, while back-end efficiency is prioritized. Variable compensation tied to revenue provides flexibility.
Q:What are the cost assumptions and potential surprises in the 2026 guidance?
A:The company assumes modest inflation in raw materials and status quo on tariff-related costs. Management is prepared to navigate surprises, such as tariff increases, through pricing and productivity initiatives.
Q:Are there signs of acceleration in U.S. business by geography or customer size?
A:New York and the Bay Area are recovering strongly, while Texas and the Southeast remain strong. About 80% of the business is renovation, with low customer concentration being a strength.
Q:What is driving growth in health care and education segments?
A:Education benefits from investments in K-12 and higher ed, with share gains due to approachable price points. Health care growth is driven by macro trends like an aging population and combined selling teams offering a full suite of products.
Q:What is the impact of tariffs on gross margins?
A:In 2025, tariffs diluted gross margins by 20 basis points. For 2026, a 50 basis point impact is expected due to the timing of tariff implementation. The company offsets tariff costs dollar-for-dollar but faces a dilutive impact on gross profit percentage.
Q:What is the significance of the noravant product launch?
A:Noravant is a new product category with potential to generate $50-100 million over the next 5 years. It offers design flexibility and aligns with Interface's sustainability and innovation strategy.
Q:Review of Unclear Management Responses
A:Management avoided providing detailed breakdowns of the backlog by region or product category, citing it as a 'normal blended business.' They also used vague language regarding potential surprises in cost assumptions, stating they would navigate through them without specifying concrete measures.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Currency sale
FX translation
PVC
addition
adjustment
automation productivity
billing success
calendar
care education
care room
comparison sale
confidence
context
credit
debt maturity
efficiency
facility
floor plate
fringe merit
gain margin
goal
grain
inflation compensation
input
inventory reserve
investment health
leverage use
margin basis
merit inflation
model
noravant
objective
offering
opportunity health
phase Interface
platform
process
product market
profit income
timber
week
TILE Transcript
Interface, Inc. (TILE) Q4 2025 Earnings Call Transcript
Positive2-24
The earnings call indicates strong financial performance with a significant increase in adjusted EPS and cash from operations. The company has shown growth across key segments like healthcare and education, and has a promising backlog. The Q&A session reveals confidence in managing costs and tariff impacts, with strategic investments in automation and product launches. Despite some vague responses, the overall sentiment is positive, with optimistic guidance and robust growth projections, likely leading to a positive stock price movement.
Interface, Inc. (TILE) Q3 2025 Earnings Call Transcript
Positive10-31
The earnings call summary indicates strong financial performance, particularly in healthcare and corporate office billings. Despite a slight decline in education billings, the overall growth trends and strategic investments in automation and innovation are promising. The Q&A section reveals analysts' positive sentiment towards healthcare growth and automation benefits, although some concerns remain about margin details. The company's optimistic guidance and strategic focus on market expansion and product innovation suggest a positive outlook. Without market cap data, a precise prediction is challenging, but overall sentiment leans positive, likely resulting in a stock price increase of 2% to 8%.
Interface, Inc. (TILE) Q2 2025 Earnings Call Transcript
Positive8-1
The earnings call summary and Q&A indicate strong financial performance, operational efficiency, and broad-based growth across markets. The company has exceeded sales guidance, improved margins, and maintains a strong balance sheet. While there are no new partnerships or significant shareholder return announcements, the optimistic guidance and sustainable market share gains suggest a positive outlook. The lack of detailed guidance on specific areas is a minor concern, but overall, the sentiment leans positive with an expected stock price increase of 2% to 8% over the next two weeks.
Interface, Inc. (NASDAQ:TILE) Q1 2025 Earnings Call Transcript
Unknown5-3
The financial performance showed slight growth in net sales and EPS, but with decreased gross profit margins due to higher costs. The guidance was slightly raised, indicating cautious optimism. However, macroeconomic uncertainties, supply chain challenges, and competitive pressures present risks. The absence of a share repurchase program and unclear responses in the Q&A section further temper positive sentiment. Overall, the mixed signals and external challenges suggest a neutral outlook for the stock price in the coming weeks.
TILE Slides
TILE Report
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