Interface (TILE) Q2 2025: Backlog Climbs 24% as Nora Rubber and Automation Drive Margin Upside

August 1, 2025 | By EarningsIQ Research

Interface’s Q2 delivered a decisive inflection, with broad-based growth, margin expansion, and a 24% year-to-date backlog surge, signaling durable demand and robust execution. Nora rubber’s near 40% growth, operational automation, and successful pricing actions powered both top and bottom-line outperformance. Management’s tone and guidance reflect conviction in ongoing productivity and market share gains, positioning the business for continued upside in the second half.

Summary

• Backlog Momentum: Year-to-date backlog up 24%, providing strong sales visibility into H2.
• Operational Leverage: Automation and supply chain gains drove margin expansion well above expectations.
• Nora Rubber Acceleration: Near 40% Americas growth highlights new category traction and mix benefit.

Performance Analysis

Interface’s Q2 results showcased a clear step-up in execution, with currency-neutral net sales up 7% and broad-based growth across all product lines—carpet tile, LVT (luxury vinyl tile), and Nora rubber. The Americas led with 11% net sales growth, underpinned by the One Interface strategy, which unifies the sales force and expands addressable markets. Europe, Asia, Australia, and Africa (EAAA) remained soft, but order growth of 4% signals potential stabilization.

Margin expansion was the standout story, as adjusted gross profit margin rose 402 basis points to 39.8%, driven by a mix of pricing, favorable product mix, and—most notably—manufacturing productivity. The automation investments in US carpet tile manufacturing are now fully operational and exceeding expectations, with learnings being applied to Australia and Europe. Adjusted operating income climbed 41%, and adjusted earnings per share surged 50% year-over-year, reflecting both top-line momentum and cost leverage.

• Segment Diversification: Education billings rose 11%, healthcare surged 28%, and corporate office returned to growth, up 3%.
• Nora Rubber Mix Shift: Near 40% growth in the Americas, particularly in K-12 education and healthcare, boosted overall profitability.
• SG&A Discipline: Higher variable compensation and commissions weighed on expenses, but were offset by volume-driven operating leverage.

Order trends and a 24% increase in backlog provide strong visibility for the second half, with management noting no material pull-forward of sales, supporting the sustainability of these gains.

Executive Commentary

Strategic Positioning

1. One Interface Strategy Scaling

The “One Interface” approach—integrating sales, product, and operations—has moved from concept to execution, with tangible results in both market share and profitability. The combined selling team is unlocking cross-category opportunities, especially in carpet tile and Nora rubber, and is credited with significant share gains above market growth rates.

2. Automation and Manufacturing Productivity

Automation investments in US carpet tile manufacturing are now fully deployed, driving operational efficiency, reducing labor dependency, and lowering unit costs. These gains are being rolled out to Australia and Europe, with expected ROI benefits beginning in 2026, signaling a multi-year margin tailwind.

3. Nora Rubber as a Growth Engine

Nora, resilient rubber flooring, delivered nearly 40% growth in the Americas, with especially strong traction in K-12 education and healthcare. This category’s higher margin profile is accretive to the overall mix, and management sees further runway as new applications and geographies are penetrated.

4. Market Expansion at Accessible Price Points

Interface is broadening its product portfolio with more approachable price points, aiming to capture the “meat of the market” rather than just the premium end. Platforms like Open Air carpet tile and 3mm LVT are meeting demand from cost-conscious buyers, supporting volume growth and share gains.

5. Resilient Capital Allocation

Disciplined capital allocation remains a priority, balancing internal investment (automation, product innovation) with shareholder returns (modest buybacks and dividends). Net leverage sits at 0.9x, providing flexibility for opportunistic growth or M&A, though management’s focus remains on organic execution.

Key Considerations

Q2 marked a pivotal quarter where Interface’s strategic bets in automation, sales integration, and category expansion began to compound, setting up the business for sustained growth:

Key Considerations:

• Backlog Visibility: 24% year-to-date backlog growth supports confidence in H2 sales delivery.
• Segment Breadth: Education and healthcare are driving outsized gains, but growth was broad-based, including government and retail.
• Tariff Exposure Managed: Only 15% of COGS is tariff-exposed, with pricing and productivity actions largely neutralizing impacts.
• SG&A Investment: Higher commissions and healthcare costs reflect strong sales execution, not structural inefficiency.
• Automation ROI: US learnings will benefit Europe and Australia, with 2026 as the next inflection point.

Risks

Global macro uncertainty persists, particularly in EAAA markets where demand remains uneven. Tariff volatility and input cost inflation could reemerge despite current mitigation. Execution risk exists in scaling automation internationally, and competitive intensity in mid-market price points could pressure margins if not managed carefully. Management’s guidance assumes continued order conversion and stable macro, which could shift if external shocks arise.

Forward Outlook

For Q3 2025, Interface guided to:

• Net sales of $350 to $360 million
• Adjusted gross profit margin of approximately 38%
• SG&A expenses of approximately $92 million

For full-year 2025, management raised guidance:

• Net sales of $1.370 to $1.390 billion
• Adjusted gross profit margin of approximately 37.7%
• SG&A expenses of approximately $362 million

Management highlighted:

• Order momentum and backlog conversion as key confidence drivers
• Continued productivity and pricing actions to offset tariff impacts

Takeaways

Interface enters H2 2025 with tailwinds from backlog, automation, and category expansion, positioning the business to outperform in a dynamic environment.

• Margin Expansion is Durable: Productivity and mix gains from automation and Nora should persist as international rollouts progress.
• Sales Execution is Outperforming: The One Interface strategy is driving share gains and cross-category growth, with market expansion ongoing.
• Watch Global Demand Signals: EAAA green shoots and backlog conversion will be critical for sustaining multi-segment growth through FY25 and into FY26.

Conclusion

Interface’s Q2 2025 results mark a clear inflection, with backlog, margin, and category expansion all trending up. Execution on automation and integrated sales is translating to financial outperformance, with management signaling confidence in continued upside. The business is structurally stronger and better positioned for the evolving commercial interiors market.

Industry Read-Through

Interface’s results provide a positive read-through for the commercial flooring and building products industry, especially for those with exposure to education, healthcare, and resilient flooring. The success of automation and localized manufacturing highlights the value of operational flexibility in a volatile trade environment. Competitors lacking integrated sales models or trailing in automation may face increasing pressure as Interface’s productivity and mix advantages compound. Broader industry participants should monitor the shift toward mid-market price points and the rising importance of sustainability and design leadership in winning share.

TILE Industrials Building Products Automation Backlog Resilient Flooring Capital Allocation Margin Expansion