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Interface logs record margins after quarterly earnings beat, but tariff refund looms
Adjusted gross margin rose to 45.0%, but most of that expansion came from a one-time $15.6 million IEEPA tariff refund that is not expected to repeat.
Interface (TILE) reported second-quarter results that beat expectations across nearly every line, driving net sales to $395.7 million, up 5.4% year over year, and lifting adjusted EPS 47% to $0.88. The company also said backlog rose 22% year to date.
Interface attributed ongoing demand to broad, consistent growth, with currency-neutral net sales up 4% and currency-neutral orders increasing 5% in the quarter. It also highlighted strength in healthcare global billings, which rose 19% following 28% growth a year earlier, as well as billings gains in education and corporate offices, each up 5%.
The company’s gross margin expansion is a key point for investors, with adjusted gross margin jumping 524 basis points to 45.0%. According to the report, only 131 basis points came from higher volumes, pricing, and manufacturing efficiency, while the remaining 393 basis points, about $0.19 of earnings per share, were linked to a one-time $15.6 million IEEPA tariff refund that was not included in prior guidance and will not be repeated.
Looking ahead, Interface guided to an adjusted gross margin of roughly 40.8% for the third quarter, below the level reached in the latest period. The report also noted the quarter benefited from investments in automation and a product pipeline that includes additions to its carpet tile lineup.