Interface Inc. raised its full-year sales and profitability outlook after the commercial-flooring manufacturer reported stronger second-quarter demand across its geographic regions, product portfolio and three largest end markets, helping adjusted earnings comfortably surpass analysts’ expectations.

The Atlanta-based company reported net sales of $395.7 million for the quarter ended July 5, an increase of 5.4% from $375.5 million a year earlier. Excluding currency movements, sales rose 3.8% to $389.9 million. The reported total exceeded the approximately $390 million consensus reflected by several market-data providers, though estimates varied by source.

Adjusted diluted earnings were $0.88 a share, up 46.7% from $0.60 in the corresponding quarter of 2025. Published consensus estimates were clustered around $0.63 to $0.65 a share, making the earnings outperformance the central feature of the report. On a generally accepted accounting principles basis, diluted earnings also totaled $0.88 a share, compared with $0.55 a year earlier.

Net income increased 57.9% to $51.4 million. Adjusted net income rose 45.4% to $51.5 million, while adjusted operating income climbed 34.1% to $74.9 million. Adjusted earnings before interest, taxes, depreciation and amortization advanced 35.2% to $87.7 million.

The company’s improved outlook was supported by stronger forward demand as well as its first-half performance. Currency-neutral orders increased 5.4% from a year earlier during the quarter, including growth of 4.8% in the Americas segment and 6.4% in the segment comprising Europe, Africa, Asia and Australia, known as EAAA. Management said on the earnings call that backlog had grown 22% year to date at the end of the quarter.

Interface now forecasts full-year net sales of $1.455 billion to $1.485 billion, shifting both ends of its previous range higher by $5 million. The prior forecast called for sales of $1.450 billion to $1.480 billion. Although the revision is modest, the order and backlog figures suggest that the change rests on improved demand visibility rather than solely on foreign-exchange movements or the quarter’s one-time financial benefit.

The company made a much larger adjustment to its profitability forecast. Interface expects an adjusted gross margin of approximately 40.6% for 2026, compared with its earlier projection of 38.8% to 39.0%. The revised forecast includes a second-quarter refund of tariffs imposed under the International Emergency Economic Powers Act, or IEEPA.

That refund materially enhanced the quarter. Interface received $15.6 million, contributing 393 basis points to adjusted gross-margin expansion and approximately $0.19 to diluted earnings per share, according to management’s earnings-call discussion. The company did not include the refund in its previous guidance and is not assuming that it will receive further refunds during the remainder of the year.

Adjusted gross margin reached 45.0%, up 524 basis points from 39.8% a year earlier. The tariff refund accounted for most of that expansion, while operational improvements contributed 131 basis points. Those underlying gains came from higher sales volume, pricing, favorable product mix, lower manufacturing costs and efficiency initiatives.

The distinction is important for evaluating the durability of the quarter’s profit growth. Removing the refund would leave a lower, though still improved, margin and earnings result. The operational contribution nevertheless shows that Interface generated profitability gains independently of the one-time item, even as the company faced inflation in raw materials and tariff-related uncertainty.

Management expects second-half gross margin of roughly 39%, according to its earnings-call commentary. That would be about 60 basis points higher than a year earlier on a comparable basis excluding the refund, but below the exceptional second-quarter level. Interface said low-single-digit raw-material inflation will affect later periods as higher-cost inventory is sold, contributing to sequential margin normalization.

For the third quarter, Interface projected net sales of $370 million to $380 million and adjusted gross margin of approximately 40.8%. It expects adjusted selling, general and administrative expenses of about $100 million, adjusted interest and other expenses of approximately $4 million, and an adjusted effective tax rate of roughly 27.5%.

The midpoint of the third-quarter revenue forecast is $375 million, representing growth of about 2.9% from the corresponding period of 2025. Some published analyst estimates had been slightly higher, indicating that the immediate quarterly outlook was less forceful than the second-quarter beat. The raised annual forecast, however, signals confidence in the full backlog conversion and demand picture across the remaining reporting periods.

Healthcare was Interface’s strongest major end market. Global healthcare billings increased 19%, building on 28% growth in the prior-year quarter. The company attributed the performance in part to demand for nora rubber flooring and to coordination between the Interface and nora commercial teams, particularly in the United States.

Healthcare customers require flooring that can withstand heavy traffic, meet cleaning and safety needs, and support clinical environments. Interface has positioned its rubber products alongside carpet tile and luxury vinyl tile to sell a broader collection into hospitals, clinics and related facilities. Management said the cross-brand sales approach is helping the company address more surfaces within individual projects.

Education billings rose 5%, following 11% growth in the second quarter of 2025. Demand included K-12 and higher-education projects involving renovation, modernization and new construction. The company said its product range across different price points has helped it compete for carpet tile and luxury vinyl tile installations, while nora products have created additional opportunities in cafeterias, laboratories and other specialized spaces.

Corporate-office billings also increased 5%, with growth described as broad-based geographically. The office category represented approximately 44% of Interface’s year-to-date billings, retaining its position as the company’s largest market and a major determinant of its revenue trajectory.

Management linked office demand to return-to-work programs, renovation activity and a flight to higher-quality Class A properties. Employers and landlords continue to redesign premium spaces around collaboration, focused work and employee recruitment rather than merely replacing conventional office layouts. That trend can benefit suppliers offering coordinated design, acoustic and surface solutions, although the broader office-property market remains uneven.

Interface’s Design Studio has become part of that commercial strategy by connecting customers with specialists who can combine carpet tile, luxury vinyl tile and rubber products. The model is intended to increase the number of product categories specified within a project and reinforce the company’s “One Interface” strategy, which seeks to present its portfolio and regional organization as an integrated offering.

Growth was also distributed across Interface’s operating segments. Americas net sales increased 3.4% to $247.7 million, or 3.5% on a currency-neutral basis. Adjusted operating income in the segment climbed 24.9% to $61.0 million.

EAAA sales rose 8.8% as reported to $148.0 million and increased 4.5% on a currency-neutral basis to $142.2 million. Adjusted operating income nearly doubled to $14.0 million from $7.1 million, a 97.6% increase. The gap between reported and currency-neutral sales growth shows that exchange-rate movements provided a tailwind to the segment’s dollar-denominated result.

The segment figures indicate that the quarter was not dependent on a single region. Americas sales produced moderate growth from a larger base, while EAAA supplied faster reported expansion and a substantial improvement in operating profit. Currency-neutral order increases in both divisions provided additional support for the company’s description of demand as broad-based.

Product development is another component of Interface’s effort to broaden its addressable market. During its earnings discussion, management highlighted Open Air Neutrals, an extension of a carpet-tile platform featuring warmer and neutral colors, and Twist and Texture, a textile-inspired carpet-tile product designed for accessible pricing and rapid delivery.

The company also pointed to noravant timber, a rubber-flooring product with a woodgrain appearance introduced earlier in 2026. Interface said the product has attracted specifications from design firms and healthcare systems, though it had not yet made a meaningful contribution to second-quarter healthcare sales because the rollout remained at an early stage.

On the manufacturing side, the company continued investing in automation and robotics across carpet-tile and rubber-flooring facilities. Management said robotics projects in Europe and Australia were performing ahead of expectations. Packaging automation in Australia and additional robotics in Germany are intended to reduce costs, improve throughput and support capacity.

Those initiatives underpin the operational portion of the margin expansion and are particularly relevant as input costs rise. Pricing can offset inflation, but it may take time to take effect and can encounter customer resistance. Automation and manufacturing efficiencies provide a separate lever that can improve unit economics without depending entirely on price increases.

SG&A expenses increased as profitability grew. Reported SG&A rose 7.5% to $103.2 million, while adjusted SG&A increased 10.4% to $103.1 million. The adjusted figure equaled 26.1% of sales, compared with 24.9% a year earlier. Interface attributed the increase primarily to higher sales commissions, variable compensation tied to stronger sales and profits, and foreign-exchange variances.

For the full year, Interface expects adjusted SG&A of approximately $395 million. Its previous forecast expressed the expense as 26.2% to 26.4% of sales. The company retained its approximately 26% adjusted effective tax-rate assumption and its capital-expenditure plan of roughly $60 million for the 53-week fiscal year. Adjusted interest and other expenses are projected at about $15 million, compared with the previous $14 million-to-$16 million range.

Cash generated by operating activities totaled $38.4 million during the second quarter, while capital expenditures were $12.2 million. Interface repurchased approximately 310,000 shares for $8.8 million and paid its regular quarterly dividend. Management said repurchases would remain disciplined and opportunistic, alongside internal investment, leverage management and potential acquisitions.

Interface ended the quarter with $81.5 million of cash, up from $71.3 million at the end of fiscal 2025. Total debt increased to $204.4 million from $181.6 million, and net debt rose to $122.8 million from $110.3 million. Even with the increase, net debt represented approximately 0.5 times last-12-month adjusted EBITDA of $250.5 million, leaving the company with relatively modest leverage.

For the first six months of 2026, net sales increased 8.0% to $726.7 million and currency-neutral sales rose 5.1%. GAAP operating income advanced 42.5% to $107.2 million, while adjusted operating income increased 32.3% to $107.7 million. Adjusted diluted earnings grew 50.6% to $1.28 a share, reinforcing management’s argument that the revised forecast reflects more than a single strong quarter.

The main question for the second half is how much of Interface’s profitability improvement remains after the tariff refund drops out and higher input costs reach the income statement. Management’s guidance anticipates lower margins than in the second quarter while still projecting year-over-year improvement on an underlying basis.

Demand indicators offer support for that forecast. Orders are growing, backlog is higher, and gains span healthcare, education and corporate offices rather than being concentrated in one project type. At the same time, the company acknowledged a dynamic and uncertain global macroeconomic environment, leaving project timing, construction activity, tariffs, exchange rates and raw-material costs as material variables.

Interface’s second-quarter report ultimately paired a clear earnings beat with a more measured revenue outlook. The one-time refund amplified the headline profit numbers, but higher volumes, pricing, product mix and manufacturing efficiencies also improved underlying margins. Sustaining those operational gains while converting the enlarged backlog will determine whether the raised 2026 outlook becomes a base for continued earnings growth or marks a temporary high point for profitability.