Q2 2026 Interface Inc Earnings Call

August 7, 2026

Speaker #1: Hello, everyone. Thank you for joining us, and welcome to the INTERFACE Q2 2026 earnings call. After today's prepared remarks, we will host a Q&A session.

Operator: Hello, everyone. Thank you for joining us, and welcome to the Interface Q2 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Christine Needles, corporate communications. Christine, please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Christine Needles, Corporate Communications.

Speaker #1: Christine, please go ahead.

Speaker #2: Good morning, and welcome to Interface's conference call regarding Q2 2026 results, hosted by Laurel Hurd, CEO, and Bruce Hausmann, CFO. During today's conference call, any management comments regarding Interface's business that are not historical information are forward-looking statements within the meaning of federal securities laws.

Christine Needles: Good morning, and welcome to Interface's conference call regarding Q2 2026 results, hosted by Laurel Hurd, CEO, and Bruce Hausmann, CFO. During today's conference call, any management comments regarding Interface's business, which are not historical information, are forward-looking statements within the meaning of federal securities laws. Forward-looking statements include statements regarding the intent, belief, or current expectations of our management team, as well as the assumptions on which such statements are based. Any forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from any such statements, including risks and uncertainties described in our most recent annual report on Form 10-K filed with the SEC. The company assumes no responsibility to update forward-looking statements. Management's remarks during this call also refer to certain non-GAAP measures.

Speaker #2: Forward-looking statements include statements regarding the intent, belief, or current expectations of our management team, as well as the assumptions on which such statements are based.

Speaker #2: Any forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from any such statements.

Speaker #2: Including risks and uncertainties described in our most recent annual report on Form 10-K filed with the SEC. The company assumes no responsibility to update forward-looking statements.

Speaker #2: Management's remarks during this call also refer to certain non-GAAP measures. Reconciliations of the non-GAAP measures to the most comparable GAAP measures and explanations for their use are contained in the company's earnings release and Form 8-K furnished with the SEC today.

Christine Needles: Reconciliations of the non-GAAP measures to the most comparable GAAP measures and explanations for their use are contained in the company's earnings release on Form 8-K furnished with the SEC today. Lastly, this call is being recorded and broadcasted for Interface. It contains copyrighted material and may not be re-recorded or rebroadcasted without Interface's express permission. Your participation on the call confirms your consent to the company's taping and broadcasting of it. After our prepared remarks, we will open up the call for questions. Now, I will turn the call over to Laurel Hurd, CEO.

Speaker #2: Lastly, this call is being recorded and broadcast for INTERFACE. It contains copyrighted material and may not be re-recorded or rebroadcast without INTERFACE's express permission.

Speaker #2: Your participation on the company’s taping and broadcasting of it. After our prepared remarks, we will open up the call for questions. Now, I will turn the call over to Laurel Hurd, CEO.

Speaker #3: Thank you, Christine, and good morning, everyone. INTERFACE delivered another strong quarter, exceeding our expectations, achieving 4% year-over-year currency-neutral, net sales growth, building on 7% currency-neutral growth in the second quarter of last year.

Laurel Hurd: Thank you, Christine, and good morning, everyone. Interface delivered another strong quarter, exceeding our expectations, achieving 4% year-over-year currency neutral net sales growth, building on 7% currency neutral growth in the Q2 of last year. Growth was broad-based across regions, product categories, and primary market segments. We saw healthy contributions from both price and volume, reflecting the strength of our diversified portfolio. Profitability also improved significantly this quarter, driven in part by the IEEPA tariff refunds we recognized. More importantly, continued operational execution improvements also contributed to margin expansion, highlighting the underlying strength and durability of the business. Our strong results continue to reinforce that our One Interface strategy is working.

Speaker #3: Growth was broad-based across regions, product categories, and primary market segments. We saw healthy contributions from both price and volume, reflecting the strength of our diversified portfolio.

Speaker #3: Profitability also improved significantly this quarter, driven in part by the AEPA tariff refunds we recognized. More importantly, continued operational execution improvements also contributed to margin expansion.

Speaker #3: Highlighting the underlying strength and durability of the business. Our strong results continue to reinforce that our One INTERFACE strategy is working. As we've discussed before, One INTERFACE is a multi-year strategy focused on building strong global functions to support our world-class local selling teams, accelerating growth through enhanced commercial productivity of our commercial teams, expanding margins through global supply chain management and simplifying operations, and leading in design, performance, and sustainability.

Laurel Hurd: As we've discussed before, One Interface is a multi-year strategy focused on building strong global functions to support our world-class local selling teams, accelerating growth through enhanced commercial productivity of our commercial teams, expanding margins through global supply chain management and simplifying operations, and leading in design, performance, and sustainability. We continue to invest in design and innovation that expands our addressable market. noravant timber, the rubber flooring innovation we launched earlier this year, which combines the durability and performance of rubber with a distinctive woodgrain aesthetic, is gaining momentum in the market. At Clerkenwell Design Week in London, it was named Best Product for Healthcare, and we're seeing encouraging specification activity from leading design firms. We believe noravant represents a meaningful opportunity to further expand in healthcare and other segments over time.

Speaker #3: We continue to invest in design and innovation that expands our addressable market. Noravant Timber, the rubber flooring innovation we launched earlier this year, which combines the durability and performance of rubber with the distinctive wood grain aesthetic, is gaining momentum in the market.

Speaker #3: At Clerkenwell Design Week in London, it was named Best Product for Healthcare. And we're seeing encouraging specification activity from leading design firms. We believe Noravant represents a meaningful opportunity to further expand in healthcare and other segments over time.

Speaker #3: We also continue to expand our reach across price points. With two notable additions to our carpet tile offering: first, building on our highly successful open-air platform, we launched Open Air Neutrals at Chicago Design Days.

Laurel Hurd: We also continue to expand our reach across price points, with two notable additions to our carpet tile offering. First, building on our highly successful Open Air platform, we launched Open Air Neutrals at Chicago Design Days. This offering extends the collection to warmer, more neutral tones and works seamlessly across our carpet tile, LVT, and nora rubber flooring portfolios. Second, we previewed Twist and Texture, which pairs textile-inspired design with an accessible price point and quick delivery, giving customers the options they are looking for and continuing to drive share gains in the market. Clerkenwell Design Week and Chicago Design Days provided strong platforms to connect with customers and the design community and to showcase our latest products and innovations. The interest we're seeing across the portfolio reinforces our confidence in the innovation investments we're making to expand our addressable market.

Speaker #3: This offering extends the collection to warmer, more neutral tones, and works seamlessly across our carpet tile, LVT, and nora rubber flooring portfolios. Second, we previewed Twist and Texture, which pairs textile-inspired design with an accessible price point and quick delivery.

Speaker #3: Giving customers the options they are looking for, and continuing to drive share gains in the market. Clerkenwell Design Week and Chicago Design Days provided strong platforms to connect with customers and the design community.

Speaker #3: And to showcase our latest products and innovations, the interest we're seeing across the portfolio reinforces our confidence in the innovation investments we're making to expand our addressable market.

Speaker #3: Turning to manufacturing and supply chain, we're continuing to invest in automation and robotics to improve efficiency and expand margins. Last quarter, we highlighted the robotics solutions we brought online in our carpet tile manufacturing facilities in Europe and Australia.

Laurel Hurd: Turning to manufacturing and supply chain, we're continuing to invest in automation and robotics to improve efficiency and expand margins. Last quarter, we highlighted the robotic solutions we brought online in our carpet tile manufacturing facilities in Europe and Australia, and I'm pleased to say those investments are exceeding expectations. We've also added new packaging automation in Australia and continue to invest in robotics in Germany to enhance efficiency in our rubber business. Overall, these investments are helping us reduce costs and support sustainable growth as we scale. I'd also like to share a few highlights from our recently published 2025 Impact Report. Sustainability is core to Interface and central to how we create long-term value for our employees, customers, shareholders, and the planet. In 2025, we reduced our product carbon footprint across all product lines by 4% compared to 2024. We achieve this improvement through material and manufacturing innovations.

Speaker #3: And I'm pleased to say those investments are exceeding expectations. We've also added new packaging automation in Australia and continue to invest in robotics in Germany to enhance efficiency in our rubber business.

Speaker #3: Overall, these investments are helping us reduce costs and support sustainable growth as we scale. I'd also like to share a few highlights from our recently published 2025 Impact Report.

Speaker #3: Sustainability is core to Interface, and central to how we create long-term value for our employees, customers, shareholders, and the planet. In 2025, we reduced our product carbon footprint across all product lines by 4% through improvements in material and manufacturing innovations.

Speaker #3: Across our portfolio, 51% of materials are now recycled or bio-based. The highest in the commercial flooring industry. With innovative materials like captured carbon, helping to further drive carbon reductions.

Laurel Hurd: Across our portfolio, 51% of materials are now recycled or bio-based, the highest in the commercial flooring industry, with innovative materials like captured carbon helping to further drive carbon reductions. In addition, 79% of our manufacturing energy came from renewable sources. Overall, we cut our global greenhouse gas emissions by 36% compared to our 2019 baseline. We are focused on reaching our 2030 science-based targets and making progress towards our ambitious all-in goal to be carbon negative by 2040 without offsets. Before we move to the financials, I'm proud to share that we were recently certified as a Great Place to Work in all 14 countries where we are eligible. This represents 95% of our global workforce, including those in US, Germany, the Netherlands, China, and Australia.

Speaker #3: In addition, 79% of our manufacturing energy came from renewable sources. Overall, we cut our global greenhouse gas emissions by 36% compared to our 2019 baseline.

Speaker #3: We are focused on reaching our 2030 science-based targets and making progress toward our ambitious all-in goal to be carbon negative by 2040 without offsets. Before we move to the financials, I'm proud to share that we were recently certified as a Great Place to Work in all 14 countries where we are eligible.

Speaker #3: This represents 95% of our global workforce, including those in the U.S., Germany, the Netherlands, China, and Australia. Attracting and retaining great talent remains a crucial part of our success, and this recognition reflects the strength of our culture and the engagement of our teams around the world.

Laurel Hurd: Attracting and retaining great talent remains a crucial part of our success, and this recognition reflects the strength of our culture and the engagement of our teams around the world. Now let's turn to our Q2 results. We delivered 4% year-over-year currency neutral net sales growth in the Q2. In the Americas, currency neutral net sales increased 3% year-over-year, driven by our One Interface combined selling teams and demand across our key market segments. In EAAA, currency neutral net sales increased 5%, driven by stronger volumes and encouraging broad-based growth. Turning to our market segments, our diversification strategy continues to drive growth. Healthcare had a standout quarter, with global billings up 19% on top of 28% growth in the Q2 of last year.

Speaker #3: Now, let's turn to our second quarter results. We delivered 4% year-over-year, currency-neutral net sales growth in the second quarter. In the Americas, currency-neutral net sales increased 3% year-over-year, driven by our One INTERFACE combined selling teams and demand across our key market segments.

Speaker #3: In EAAA, currency-neutral net sales increased 5%, driven by stronger volumes and encouraging, broad-based growth. Turning to our market segments, our diversification strategy continues to drive growth.

Speaker #3: Healthcare had a standout quarter, with global billings up 19%, on top of 28% growth in the second quarter of last year. NORA continues to be a meaningful growth engine in this market segment, and we continue to benefit from our combined INTERFACE and NORA selling teams in the U.S.

Laurel Hurd: nora continues to be a meaningful growth engine in this market segment, and we continue to benefit from our combined Interface and nora selling teams in the US. Education billings were up 5% in the Q2, on top of 11% growth in the Q2 of last year. We remain well-positioned across both K-12 and higher education, supported by our low carbon, high-performing products, broad range of price points, and our design leadership. The market continues to benefit from strong macro drivers, including renovation, modernization initiatives, and new construction activity. Our ability to serve projects across a wide range of budgets is helping us win. Corporate office billings were up 5% in the Q2 on broad-based global growth, where we continue to gain share.

Speaker #3: Education billings were up 5% in the second quarter, on top of 11% growth in the second quarter of last year. We remain well-positioned across both K-12 and higher education, supported by our low-carbon, high-performing products, broad range of price points, and our design leadership.

Speaker #3: The market continues to benefit from strong macro drivers, including renovation, modernization initiatives, and new construction activity. Our ability to serve projects across a wide range of budgets is helping us win.

Speaker #3: Corporate office billings were up 5% in the second quarter, on broad-based global growth, where we continue to gain share. One factor contributing to our success is the Interface Design Studio.

Laurel Hurd: One factor contributing to our success is the Interface Design Studio, which pairs customers with experienced Interface design experts who help bring projects to life from concept to completion. By making it easier to evaluate flooring solutions across our portfolio, our Design Studio strengthens customer engagement and reinforces our competitive position as organizations make specification decisions. We continue to see healthy underlying demand supported by return to office trends, renovation activity, and an ongoing flight to quality in Class A space where our brand, design leadership, and broad product portfolio are well-positioned. Turning to orders. Consolidated currency neutral orders increased 5% year-over-year. Orders in the Americas grew 5%, while EAAA increased 6%, driven by strength across all regions and supported by continued development of our product portfolio.

Speaker #3: Which pairs customers with experienced INTERFACE design experts, who help bring projects to life from concept to completion. By making it easier to evaluate flooring solutions across our portfolio, our design studio strengthens customer engagement and reinforces our competitive position as organizations make specification decisions.

Speaker #3: We continue to see healthy underlying demand, supported by return-to-office trends, renovation activity, and an ongoing flight to quality in Class A space, where our brand, design leadership, and broad product portfolio are well-positioned.

Speaker #3: Turning to orders, consolidated currency-neutral orders increased 5% year-over-year. Orders in the Americas grew 5%, while EAAA increased 6%, driven by strength across all regions and supported by continued development of our product portfolio.

Speaker #3: Backlog was strong at the end of the quarter, up 22% year-to-date, reflecting continued momentum across the business, giving us confidence to raise our full-year guidance.

Laurel Hurd: Backlog was strong at the end of the quarter, up 22% year to date, reflecting continued momentum across the business, giving us confidence to raise our full year guidance. With that, I'll turn it over to Bruce.

Speaker #3: With that, I'll turn it over to Bruce.

Speaker #2: Well, thank you, Laurel. And good morning, everyone. All comparisons provided are year-over-year versus the second quarter of 2025, unless otherwise noted. Second quarter net sales were $395.7 million, up 5.4% as reported, and 3.8% on a currency-neutral basis.

Bruce Hausmann: Well, thank you, Laurel, and good morning, everyone. All comparisons provided are year-over-year versus Q2 2025, unless otherwise noted. Q2 net sales were $395.7 million, up 5.4% as reported and 3.8% on a currency neutral basis. Q2 currency neutral net sales were up 3.5% in the Americas and up 4.5% in EAAA. Q2 adjusted gross profit margin was 45%, up 524 basis points. Higher sales volumes, proactive pricing, favorable mix, and manufacturing efficiencies drove 131 basis points of that improvement, reflecting the strong operational execution that Laurel referenced. The remaining 393 basis points were driven by a $15.6 million benefit from IEEPA tariff refunds and represented approximately $0.19 of earnings per diluted share. As a reminder, this tariff refund was not included in our full-year guidance that we provided last quarter during our Q1 2026 earnings release.

Speaker #2: Second quarter currency-neutral net sales were up 3.5% in the Americas, and up 4.5% in EAAA. Second quarter adjusted gross profit margin was 45%, up 524 basis points, higher sales volumes, proactive pricing, favorable mix, and manufacturing efficiencies drove $131 basis points as that improvement, reflecting the strong operational execution that Laurel referenced.

Speaker #2: The remaining 393 basis points were driven by a $15.6 million benefit from IEPA tariff refunds and represented approximately $0.19 of earnings per diluted share.

Speaker #2: As a reminder, this tariff refund was not included in our full-year guidance that we provided last quarter, during our Q1 2026 earnings release. Second quarter adjusted SG&A expenses were $103.1 million, compared to $93.4 million, due to higher sales commissions and variable compensation on increased sales and profits, and foreign currency exchange variances.

Bruce Hausmann: Q2 adjusted SG&A expenses were $103.1 million, compared to $93.4 million, due to higher sales commissions and variable compensation on increased sales and profits and foreign currency exchange variances. Q2 adjusted operating income was $74.9 million, up 34% compared to $55.9 million. Q2 adjusted net income was $51.5 million compared to $35.4 million. Q2 adjusted EBITDA was $87.7 million compared to $64.8 million, and Q2 adjusted earnings per diluted share was $0.88, up 47% compared to $0.60. With these results in mind, I will turn to capital allocation. As a reminder, our capital allocation strategy is balanced and disciplined. First, we prioritize investing in the business in areas like innovation and productivity to drive growth and margin expansion. Second, we focus on managing leverage through a disciplined use of debt.

Speaker #2: Second quarter adjusted operating income was $74.9 million, up 34% compared to $55.9 million. Second quarter adjusted net income was $51.5 million, compared to $35.4 million.

Speaker #2: Second quarter adjusted EBITDA was $87.7 million, compared to $64.8 million. Second quarter adjusted earnings per diluted share was $0.88, up 47%, compared to $0.60.

Speaker #2: With these results in mind, I'll turn to capital allocation. As a reminder, our capital allocation strategy is balanced and disciplined. First, we prioritize investing in the business, in areas like innovation and productivity, to drive growth and margin expansion.

Speaker #2: Second, we focus on managing leverage through a disciplined use of debt. Third, we continue to evaluate potential M&A opportunities that align with our strategy and that can accelerate growth and margins.

Bruce Hausmann: Third, we continue to evaluate potential M&A opportunities that align with our strategy and that can accelerate growth and margins. Finally, and importantly, we remain committed to returning excess cash to shareholders through a combination of dividends and disciplined share repurchases. To recap our progress against these objectives in Q2, we generated $38.4 million of cash from operating activities. Capital expenditures were $12.2 million, which included continued investments in automation and robotics to support our growth and efficiency. We also repurchased $8.8 million of INTERFACE common stock and paid our quarterly dividend, reflecting our ongoing commitment to return excess cash to shareholders. Turning to our outlook, with a healthy backlog, strong order momentum, and the margin performance we achieved in H1, we are raising our full-year guidance. A few dynamics are worth noting as you think about the balance of the year.

Speaker #2: Finally, and importantly, we remain committed to returning excess cash to shareholders through a combination of dividends and disciplined share repurchases. To recap our progress against these objectives in the second quarter, we generated $38.4 million of cash from operating activities.

Speaker #2: And capital expenditures were $12.2 million, which included continued investments in automation, and robotics, to support our growth and efficiency. We also repurchased $8.8 million of INTERFACE common stock and paid our quarterly dividend, reflecting our ongoing commitment to return excess cash to shareholders.

Speaker #2: Turning to our outlook, with a healthy backlog, strong order momentum, and the margin performance we achieved in the first half, we are raising our full-year guidance.

Speaker #2: A few dynamics are worth noting as you think about the balance of the year. Second-quarter margins benefited from proactive pricing implemented to offset raw material cost increases that will flow through the P&L in future quarters.

Bruce Hausmann: Q2 margins benefited from proactive pricing implemented to offset raw material cost increases that will flow through the P&L in future quarters. We also recorded a $15.6 million tariff refund in Q2 that equates to roughly 105 basis points of our improved full-year margin outlook. This is reflected in our updated full-year guidance. We are not assuming any additional refunds going forward. With that in mind, we anticipate for Q3 fiscal 2026, net sales of $370 million to $380 million, adjusted gross profit margin of approximately 40.8% of net sales, adjusted SG&A expenses of approximately $100 million, adjusted interest in other expenses of approximately $4 million, an adjusted effective income tax rate of approximately 27.5%, and fully diluted weighted average share count of approximately 58.2 million shares.

Speaker #2: We also recorded a $15.6 million tariff refund in the second quarter that equates to roughly 105 basis points of our improved full-year margin outlook.

Speaker #2: This is reflected in our updated full-year guidance. We are not assuming any additional refunds going forward. With that in mind, we anticipate, for the third quarter of fiscal 2026, net sales of $370 to $380 million, adjusted gross profit margin of approximately 40.8% of net sales, adjusted SG&A expenses of approximately $100 million, adjusted interest and other expenses of approximately $4 million, and an adjusted effective income tax rate of approximately 27.5%, with fully diluted weighted average share count of approximately 58.2 million shares.

Speaker #2: And for the full fiscal year of 2026—which, as a reminder, is a 53-week year for Interface, with the extra week occurring in the first quarter of 2026—we anticipate net sales of $1.455 to $1.485 billion.

Bruce Hausmann: For the full fiscal year of 2026, which as a reminder is a 53-week year for Interface with the extra week occurring in the Q1 of 2026, we anticipate net sales of $1.455 to 1.485 billion. Adjusted gross profit margin of approximately 40.6% of net sales. Adjusted SG&A expenses of approximately $395 million. Adjusted interest in other expenses of approximately $15 million. An adjusted effective income tax rate of approximately 26%, and capital expenditures of approximately $60 million. With that, I'll turn the call back to Laurel for concluding remarks.

Speaker #2: Adjusted gross profit margin of approximately 40.6% of net sales. Adjusted SG&A expenses of approximately $395 million. Adjusted interest and other expenses of approximately $15 million.

Speaker #2: An adjusted effective income tax rate of approximately 26%, and capital expenditures of approximately $60 million. With that, I'll turn the call back to Laurel for concluding remarks.

Speaker #3: Thank you, Bruce. INTERFACE delivered a strong second quarter, and we're encouraged by the momentum we're building across the business. Growth was broad-based across all regions, product categories, and primary market segments, reflecting the strength and diversification of our business.

Operator: Thank you, Bruce. Interface delivered a strong Q2, we're encouraged by the momentum we're building across the business. Growth was broad-based across all regions, product categories, and primary market segments, reflecting the strength and diversification of our business. Our strong financial position provides us with the flexibility to continue investing in the business while also returning capital to shareholders. With strong order momentum and backlog entering the H2 of the year, we are well-positioned to deliver another year of strong performance. I want to thank the entire Interface team for their continued execution and their passion for serving our customers every day. With that, I'll open it up to questions. Operator?

Laurel Hurd: Thank you, Bruce. Interface delivered a strong Q2, we're encouraged by the momentum we're building across the business. Growth was broad-based across all regions, product categories, and primary market segments, reflecting the strength and diversification of our business. Our strong financial position provides us with the flexibility to continue investing in the business while also returning capital to shareholders. With strong order momentum and backlog entering the H2 of the year, we are well-positioned to deliver another year of strong performance. I want to thank the entire Interface team for their continued execution and their passion for serving our customers every day. With that, I'll open it up to questions. Operator?

Speaker #3: Our strong financial position provides us with the flexibility to continue investing in the business, while also returning capital to shareholders. With strong order momentum and backlog entering the second half of the year, we are well-positioned to deliver another year of strong performance.

Speaker #3: I want to thank the entire INTERFACE team for their continued execution and their passion for serving our customers every day. And with that, I'll open it up to questions.

Speaker #3: Operator?

Speaker #4: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand.

Operator 2: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brian Biros with TRG. Your line is now open. Please go ahead.

Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brian Biros with TRG. Your line is now open. Please go ahead.

Speaker #4: To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #4: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brian Burrows with TRG.

Speaker #4: Your line is now open. Please go ahead.

Speaker #5: Hey, good morning. Thank you for taking my questions today.

Brian Biros: Hey, good morning. Thank you for taking my questions today.

Speaker #6: Hey, Brian.

Laurel Hurd: Hey, Brian.

Speaker #5: All right. Can you talk about the margins for Q3 and Q4 a little bit more? Q4 seems to imply, I think, a decline year over year.

Brian Biros: All right. Can you talk about the margins for Q3 and Q4 a little bit more? Q4 seems to imply seeing a decline year-over-year. It sounds like that's mostly the timing of the flow-through of kind of the increased costs that I think you already put price through. Maybe just a little bit more finer point on the puts and takes for that would be helpful.

Speaker #5: It sounds like that's mostly the timing of the flow-through of kind of the increased costs. But I think you already put price through. So maybe just a little bit more fine point on the puts and takes for that would be helpful.

Speaker #5: Yeah, you got it, Brian. It's just the timing of the flow-through. We feel really good about the gross margins, not just historical performance that we're seeing throughout the year, but also about our forward projection.

Bruce Hausmann: Yeah, you got it, Brian. It's just the timing of the flow-through. We feel really good about the gross margins, not just the historical performance that we're seeing throughout the year, but also about our forward projection. If you look at the H2 in total, gross margins are around 39% in the H2 in our guide, which is ahead of our ambition, as you might remember. If we can achieve that for the full year, if we can achieve that for Q4, or I'm sorry, for the H2, it'd be up about 60 basis points. If we can achieve that for the full year, we'd be up about 100 basis points off of our baseline. We feel really good about gross margins going forward.

Speaker #5: If you look at the back half in total, gross margins are around 39% in the back half in our guide, which is ahead of our ambition, as you might remember.

Speaker #5: And if we can achieve that for the full year, if we can achieve that for Q4 or, I'm sorry, for the back half, it'd be up about 60 bips.

Speaker #5: And if we can achieve that for the full year, we'd be up about 100 bips off of our baseline. So we feel really good about gross margins going forward.

Speaker #5: That's a good lead-in to my next question, which was going to be about gross margin going forward. And the long-term guidance before was kind of the 38.5%.

Brian Biros: That's a good lead into my next question, which was going to be about gross margin going forward. I know long-term guidance before was kind of the 38 and a half percent. I think it kind of ramped up a little bit to 39%, which I think is what you delivered last year.

Speaker #5: And I think it kind of ramped up a little bit to 39%, which I think is what you delivered last year. Like you said, you might finish above that this year, even without the tariff refund.

Brian Biros: Like you said, you might finish above that this year even without the tariff refund. Is there a different view of margins going forward, or how would you phrase that at the moment?

Speaker #5: So is there a different view of margins going forward, or how would you phrase that at the moment?

Speaker #2: Yeah, we're the way we're thinking about that, Brian, is you think about the back half run rate around 39%. It's we feel really good about that.

Bruce Hausmann: Yeah. The way we're thinking about that, Brian, is you think about the H2 run rate around 39%. We feel really good about that. Again, that'll be up about 60 basis points year over year off of our baseline. We feel really good about the run rate for the full year being up about 100 basis points off of our baseline. As we move into the year, we're going to continue to navigate it. We know that our job is to continue improving margins. We feel really good about how we're going into the H2 and how we're going into the future periods.

Speaker #2: Again, that'll be up about 60 basis points year-over-year off of our baseline. We feel really good about the run rate for the full year being up about 100 basis points off of our baseline.

Speaker #2: And as we move into the year, we're going to continue to navigate it and continue we know that we have our job is to continue improving margins.

Speaker #2: And we feel really good about how we're going into the back half and how we're going into the future periods.

Speaker #6: I'll just add on that, Brian.

Laurel Hurd: I'll just add on that, Brian.

Bruce Hausmann: Go ahead. Then.

Speaker #5: And.

Laurel Hurd: It's Laurel.

Speaker #6: We're—it's Laurel. We're committed to continuing margin expansion, so we're ahead of where we thought we'd be. We continue to outperform; our productivity initiatives are delivering ahead of our expectations.

Bruce Hausmann: Yeah.

Laurel Hurd: We're committed to continuing margin expansion, we're ahead of where we thought we'd be. We continue to outperform. Our productivity initiatives are delivering ahead of our expectations, and yet we know it's a really volatile marketplace. We're watching that, but we feel really good about our ability to continue to grow our margins.

Speaker #6: And yet we know it's a really volatile marketplace, so we're watching that. But we feel really good about our ability to continue to grow our margins.

Brian Biros: Understood. On the guidance raise, it seems like it was mostly on the Q2 beat maybe, but you also talked about the increase in backlog and the order momentum giving you the confidence to raise the guidance. Just trying to gauge, I guess, if there's anything in the H2 that is slightly expected to be better than you had previously thought, or if it really is just the Q2 beat.

Speaker #5: Understood. On the guidance raise, it seems like it was mostly on the Q2 beat, maybe, but you also talked about the increase in backlog and the order momentum giving you the confidence to raise the guidance.

Speaker #5: So, just trying to gauge, I guess, if there's anything in the second half that is slightly expected to be better than you had previously thought, or if it really is just the Q2 beat.

Speaker #6: Q2 came in ahead of our expectations, as you said, and we're pleased with that. We feel good about our momentum, which we felt good about our momentum last quarter as well when we provided full-year guidance.

Laurel Hurd: Q2 came in ahead of our expectations, as you said, and we're pleased with that. We feel good about our momentum, which we felt good about our momentum last quarter as well when we provided full year guidance. Nothing's really changed on that front. We still feel good. We came in a little bit better in Q2, and we'll see what happens for the H2.

Speaker #6: So, nothing's really changed on that front. We still feel good. We came in a little bit better in Q2, and we'll see what happens for the back half.

Speaker #2: Yeah. And Brian, coming off a really strong quarter and strong first half operationally, it was great to see all the broad-based growth globally—across all of our geographies, all of our products, and all of our key market segments.

Bruce Hausmann: Yeah. Brian, coming off of a really strong quarter and strong H1 operationally, it was great to see all the broad-based growth globally across all of our geographies, all of our products, and all of our key market segments. It gives us confidence in the solid momentum going into the H2, which we feel really good about.

Speaker #2: So it gives us confidence in the solid momentum going into the second half, which we feel really good about.

Brian Biros: Great. Last one from me, I think just on education. Up 5% in the quarter on an 11% comp, which I think was also then on a 13% comp a year before that. Great growth there over the last two, three years. Can you talk about the strength of that market and your position there? It seems like the more approachable price points are working, and I just want to make sure that we aren't confusing the trend there of the lowering percentage.

Speaker #5: Great. And then last one for me, I think just on education. A 5% in the quarter on a 11% comp, which I think was also then on a 13% comp a year before that.

Speaker #5: So great growth there over the last two, three years. Can you talk about the strength of that market and your position there? I mean, it seems like the more approachable price points are working.

Speaker #5: And I just want to make sure that we aren't confusing the trend there. The lowering percentage is just how larger numbers work.

Brian Biros: Yeah, that's just how larger numbers work.

Laurel Hurd: Yeah, exactly.

Speaker #6: Yeah, exactly.

Speaker #5: But it's not a slowing—in fact, it almost seems like it's getting stronger. I just want to make sure that's clear and give you guys a chance to talk to that.

Brian Biros: It's not a slowing. It almost seems like it's getting stronger and just want to make sure that's clear.

Brian Biros: Yeah

Brian Biros: clear and give you guys a chance to talk to that.

Speaker #6: Yeah, that's great. So we feel great about our educations. Business, as you said, a strong quarter on it's sort of growth on growth on growth.

Laurel Hurd: Yeah, that's great. We feel great about our education business. As you said, a strong quarter. It's sort of growth on growth on growth. As you said, it's becoming a much bigger piece of our business. To grow on top of it is really impressive, and I think it's a few things. We love the macros in the education space. There's a lot of activity there, both in K-12 and higher education. We remain really well-positioned. Our approachable price points in both carpet tile and LVT have definitely helped us gain share there. We're also selling nora, especially in K-12, which is one of our fastest-growing markets as well. We're finding really selling across the portfolio is helping us grow that market as well.

Speaker #6: And as you said, it's becoming a much bigger, bigger piece of our business, so to grow on top of it is really impressive. And I think it's a few things.

Speaker #6: We love the macros in the education space. There's a lot of activity there, both in K-12 and higher education. But we remain really well-positioned.

Speaker #6: Our approachable price points in both carpet tile and LVT have definitely helped us gain share there. And we're also selling nora, especially in K-12, which is one of our fastest-growing markets as well.

Speaker #6: So we're finding really, selling across the portfolio is helping us grow that market as well.

Speaker #5: Great. Thank you. I'll pass it along.

Brian Biros: Great. Thank you. I'll pass along.

Speaker #6: Thanks, Brian.

Laurel Hurd: Thanks, Brian.

Speaker #1: Your next call comes from the line of David McGregor with Longvaux Research. Your line is now open. Please go ahead.

Operator 2: Your next call comes from the line of David MacGregor with Longbow Research. Your line is now open. Please go ahead.

Operator: Your next call comes from the line of David MacGregor with Longbow Research. Your line is now open. Please go ahead.

Speaker #4: Just good morning, everyone. Thanks for taking the questions. And congratulations on all the progress.

David MacGregor: Yes. Good morning, everyone, and thanks for taking the questions, and congratulations on all the progress.

Speaker #6: Thanks, David.

Laurel Hurd: Thanks, David.

Speaker #4: Fantastic. Obviously, a lot of focus around gross margins here and just what you have been able to accomplish. And I realize there's a lot of moving parts.

Bruce Hausmann: Thanks.

David MacGregor: Obviously, a lot of focus around gross margins here and just what you have been able to accomplish. I realize there's a lot of moving parts. You talked about sales volume and pricing and mix and efficiencies. Can you help us understand, just kind of maybe bridge for us 131 basis points and just help us understand the composition of that growth, how much of it is volume leverage versus the mix of pricing and the efficiencies?

Speaker #4: You talked about the sales volume and pricing and mix and efficiencies. Can you help us understand just kind of maybe bridge for us the 131 basis points and just help us understand the composition of that growth, how much of it is volume leverage versus the mix of pricing and the efficiencies?

Speaker #2: Yeah. As you pointed out, David, it's a mixture of all those things. The automation and robotics that we have put into our manufacturing facilities are a large piece of that 131 basis points of operational improvement.

Bruce Hausmann: Yeah. As you pointed out, David, it's a mixture of all those things. The automation and robotics that we have put into our manufacturing facilities are a large piece of that 131 basis points of operational improvement. I think the key thing that is encouraging to us is these are durable and structural changes that we've made to the business, which really help us on a go-forward situation. That's obviously has informed our strong guide around gross margins in the H2 of the year.

Speaker #2: I think the key thing that is encouraging to us is these are durable and structural changes that we've made to the business, which really help us in a go-forward situation.

Speaker #2: So and that's obviously has informed our strong guide around gross margins in the second half of the year.

David MacGregor: Mm-hmm. Maybe mix as well, if you could talk to the contribution from mix. It sounds like-

Speaker #4: And maybe mix as well, if you could talk to the contribution from mix. It sounds like Nora is pretty strong.

Bruce Hausmann: Yeah

David MacGregor: nora is pretty strong.

Bruce Hausmann: Mix definitely helps. That's one of the things I love about Laurel. She has just really helped ingrain that into the organization, how important that is. Really focusing on mix, and it's around geographic mix, product mix, and obviously, that's a huge helper, obviously, as well as helping us improve our margins.

Speaker #2: Mix definitely helps. That's one of the things I love about Laurel. She has just really, really helped ingrained that into the organization, how important that is.

Speaker #2: Really focusing on mix and it's around geographic mix, product mix. And obviously, that's a huge helper obviously as margins.

Speaker #6: And also David, the price that we took helped read through as well. Excuse me. So yeah. It was a mix of all those things.

Laurel Hurd: Also, David-

David MacGregor: Right

Laurel Hurd: the price that we took helped read through as well. Excuse me.

Bruce Hausmann: Yeah, we did-

Laurel Hurd: It was a mix of all those things

Speaker #2: We mentioned we did take some proactive pricing. We're seeing and you're aware of this, David. We mentioned this on our last call. We're seeing low single-digit inflation cost increases in our raw materials.

Bruce Hausmann: We mentioned we did take some proactive pricing. We are seeing, and you are aware of this, David, we mentioned this on our last call. We are seeing low single digit inflation cost increases in our raw materials. We did do some proactive pricing in Q2, and obviously, as you know, the mechanics of the accounting, those costs sit up in inventory, but they flow through the P&L in future quarters.

Speaker #2: So we did do some proactive pricing in Q2. And obviously, as you know, the mechanics of the accounting, that's those costs sit up in inventory, but they flow through the P&L and future quarters, so.

David MacGregor: Right. Which gets back to your timing observation around Q3 versus Q4 gross profits.

Speaker #4: Right. Which gets back to your timing observation around Q3 versus Q4 gross profits.

Speaker #2: Exactly.

Bruce Hausmann: Exactly. It is just out of flow.

Speaker #4: Sure. Within Nora, and I realize you've got a mix there, of different products, but and you talked about Noravant and the progress you made there with the PVC-free product.

David MacGregor: Sure. Within nora, I realize you've got a mix there of different product, you talked about noravant and the progress you made there with the PVC-free product. Can you just talk about norament and data centers and the extent to which you feel you're succeeding with that product in heavier gauges in data center markets?

Speaker #4: But can you just talk about Noravant and data centers, and the extent to which you feel you're succeeding with that product in heavier gauges in data center markets?

Speaker #6: Yeah, I think data centers is still small for us. It's something that we've got a bit of success in, but really where we're seeing the success is in labs.

Laurel Hurd: Yeah, I think data centers is still small for us. It's something that we've got a bit of success in, but really where we're seeing the success is in labs. We've got strong performance throughout in bio, in labs, in higher education, and a lot of our corporate relationships that historically we've sold carpet tile and LVT to some of the strong, whether it's pharma or biotech companies. We're now selling nora and norament into their labs. That's, I think, the play that has been really successful for us.

Speaker #6: So we've got strong performance throughout—in bio, in labs, in higher education. And a lot of our corporate relationships that, historically, we've sold carpet tile and LVT to—some of the strong, whether it's pharma or biotech companies—we're now selling Nora and Noravant into their labs.

Speaker #6: So that's, I think, the play that has been really successful for us.

Speaker #4: Okay. And just sort of leveraging off this story of success, maybe just talk about product innovation as a driver behind expanding total available markets.

David MacGregor: Okay. Just sort of leveraging off this story of success, maybe just talk about product innovation as a driver behind expanding total available markets and just what that might represent or as you think longer, maybe two, three years out.

Speaker #4: And just what that might represent. Or, as you think longer—maybe two, three years out—how does that expand the total available market? You've got the medium price point now with the carpet tiles as well.

Laurel Hurd: Yeah.

David MacGregor: How is it expanding the total available market? You've got the medium price point now with the carpet tiles as well. I realize it's happening in a number of different places within the mix, just how should we think about that as a top-line driver?

Speaker #4: So I realize it's happening in a number of different places within the mix, but just how should we think about that as a top line driver?

Speaker #6: Yeah, it's a great question. And we're really focused on the product portfolio. I'm pleased with the progress that we're making, and we think about it really in two buckets.

Laurel Hurd: Yeah, it's a great question. We're really focused on the product portfolio. I'm pleased with the progress that we're making. We think about it really in two buckets. The first is how we drive market share gains in our existing markets. We're focused on that day in and day out. Really, as you said, continue to focus on where and how can we best expand our addressable market in a way that really suits our brand and also holds up our margin requirements and fits our selling system. A few examples. As you said, there's approachable price point in carpet tile. That's been really successful with expanding the Open Air collection. We're also launching our next platform on that. We're really pleased in carpet tile. We've done that consistently across our other product forms.

Speaker #6: The first is how we drive market share gains in our existing market, and we're focused on that day in and day out. And then really, as you said, continue to focus on where and how we can best expand our addressable market in a way that really suits our brand.

Speaker #6: And also holds up our margin requirements and fits our selling system. So a few examples. As you said, there's approachable price point in carpet tile.

Speaker #6: And that's been really successful. We've expanded the Open Air Collection, and we're also launching our next platform on that. So, we're really pleased in carpet tile.

Speaker #6: We've done that consistently across our other product forms. So, for LVT, we have a more approachable price point and a thinner gauge. And then we also have some nora pond rolled goods that are at more approachable price points.

Laurel Hurd: LVT, we have a more approachable price point of LVT and a thinner gauge. We also have some noraplan rolled goods that are at more approachable price points. We've been taking that consistently across our product portfolio. The other example of that, as you said, is noravant and our first launch of noravant timber, the wood grain look, which takes all the benefits of rubber and adds this new design element, which the primary opportunity for that incrementally is really patient rooms, as we've talked about. That's another example of that's really going after the premium end of the vinyl sheet market that we don't play in today. We're thinking about that really systematically, looking category by category on how we can continue to expand the market.

Speaker #6: So we've been taking that consistently across our product portfolio. And then the other example of that, as you said, is Noravant and our first launch of Noravant timber, the wood grain look, which takes all the benefits of rubber and adds this new design element, which is primarily the primary opportunity for that incrementally is really patient rooms, as we've talked about.

Speaker #6: So that's another example that's really going after the premium end of the vinyl sheet market that we don't play in today. So we're thinking about that really systematically, looking category by category at how we can continue to expand the market.

Bruce Hausmann: David, with all that, interesting stuff, with all that stuff that Laurel articulated, I think it's really helped us diversify the company. I think we're seeing the results of that on the P&L. When we're able to say quarter after quarter, we've been able to say this for a while, all product lines are growing. That we're growing in our key market segments consistently. This quarter, we grew very broadly across geographies. It's really encouraging to see the innovation really kicking in on the P&L and on the results.

Speaker #2: And David, with all that, and interesting stuff that with all that stuff that Laurel articulated, I think it's really helped us diversify the company.

Speaker #2: And I think we're seeing the results of that on the P&L. When we're able to say, quarter after quarter—and we've been able to say this for a while—all product lines are growing.

Speaker #2: And that we're growing in our key market segments consistently. And this quarter, we grew very broadly across geographies. It's really encouraging to see the innovation really kicking in on the P&L and on the results.

Speaker #4: Yeah, it definitely is. And just to tie this back to capital allocation, do you feel like you've got sufficient capacity in place right now to support the expansion of your total available markets?

David MacGregor: Yeah, it definitely is. Just to tie this back to capital allocation, do you feel like you've got sufficient capacity in place right now to support the expansion of your total available markets?

Speaker #6: Yeah, I would say at this point, we feel good about our ability to support demand. And the good news about things like the productivity and automation investments in our Nora facility in Germany is those kind of they do a few things for us.

Laurel Hurd: Yeah, I would say at this point, we feel good about our ability to support demand. The good news about things like the productivity and automation investments in our nora facility in Germany is they do a few things for us. They help improve our efficiencies. They're actually some of the toughest jobs to fill that we're automating. They help us drive more throughput, so it helps enhance our customer service levels and increases our available capacity. That's how we're looking at it today, but we're watching it regularly to see if we need to continue to expand and invest, which we'll do.

Speaker #6: They help improve our efficiencies. They're actually some of the toughest jobs to fill that we're automating. And they help us drive more throughput. So it helps enhance our customer service levels and increases our available capacity.

Speaker #6: So that's how we're looking at it today, but we're watching it regularly to see if we need to continue to expand and invest, which we'll do.

Speaker #4: Great. Last question for me is, you mentioned back to the office or back to work as a driver in the corporate segment. Where do you think we are in that journey?

David MacGregor: Great. Last question from me is just you mentioned back to the office or back to work as a driver in the corporate segment. Where do you think we are in that journey? Are we in early innings, mid innings, late innings? Just what's your sense from what you're hearing back to your salespeople?

Speaker #4: Are we in early innings, mid-innings, or late innings? What's your sense based on what you're hearing back from your salespeople?

Laurel Hurd: Yeah. We've said for a while we feel really good about the corporate space, and it fits so well with the Interface brand and our value proposition because there is such a strong return to work. I think it's accelerating. I would say people are really coming back to work around the world. I see it everywhere I go. The need to update the office space to the new ways of working is happening. We're seeing a lot of renovation work, and it feels on the early end of that, certainly, as more and more companies are bringing people back.

Speaker #6: Yeah, corporate, we've said for a while we feel really good about the corporate space and it fits so well with the interface brand and our value proposition because there is such a strong return to work.

Speaker #6: I think it's accelerating. I would say people are really coming back to work around the world. I see it everywhere I go. And the need to update the office space to the new ways of working is happening.

Speaker #6: So, we're seeing a lot of renovation work, and it feels on the early end of that, certainly, as more and more companies are bringing people back.

Speaker #4: How much corporate visibility do you have on that?

David MacGregor: How much forward visibility do you have on that?

Speaker #6: I mean, it's talking to customers and the trending that we're getting and thinking about the work that's coming through the A&D firms. So it's we see it in our opportunity pipeline.

Laurel Hurd: It's talking to customers and the trending that we're getting and thinking about the work that's coming through the A&D firms. We see it on our opportunity pipeline. Certainly. Obviously in the order book as it flows through. A lot of it's just feeling the market and getting out there with customers.

Speaker #6: Certainly. And then obviously in the order book as it flows through. A lot of it's just feeling the market and getting out there with customers.

Speaker #2: And David, you're aware of one of the great dynamics of our business is just the least turn rates. So when leases are turning, it typically means some sort of renovation remodel around oftentimes flooring and paint.

Bruce Hausmann: David, you're aware one of the great dynamics of our business is just the lease turn rates. When leases are turning, it typically means some sort of renovation remodel around, oftentimes flooring and paint. As those leases are turning, and as companies are thinking about the design of the future of their office or landlords are encouraging tenants to stay and providing tenant improvement dollars to do that, all that kind of goes into this mix around the R&R work that we're seeing in office, which is really helpful for our business.

Speaker #2: And so as those leases are turning, and as companies are thinking about the design of the future of their office, or landlords are encouraging tenants to stay and providing tenant improvement dollars to do that, all that kind of goes into this mix around the R&R work that we're seeing in office, which is really helpful for our business.

Speaker #4: Are you still seeing pretty high levels of tenant improvement budgeting?

David MacGregor: Are you still seeing pretty high levels of tenant improvement budgeting?

Speaker #2: Yeah, we are.

Bruce Hausmann: Yeah. We are.

Speaker #6: Yeah.

Laurel Hurd: Yeah.

Speaker #4: Those dollars are still there. Okay. Thanks very much and congrats on all the progress.

David MacGregor: Those dollars are still there. Okay. Thanks very much. Congrats on all the progress.

Speaker #6: Great. Thanks, David.

Laurel Hurd: Great. Thanks, David.

Operator 2: Your next question comes from the line of Alex Paris with Barrington Research. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Alex Paris with Barrington Research. Your line is now open. Please go ahead.

Speaker #1: Your next question comes from the line of Alex Paris with Barrington Research. Your line is now open. Please go ahead.

Speaker #5: Hi guys. Thanks for taking my questions and congrats on the beat and raise. I got a couple of questions. First off, performance was led by healthcare, with global buildings up 19%, corporate and education were both up 5%.

Alex Paris: Hi, guys. Thanks for taking my questions. Congrats on the beat and raise. I got a couple of questions. First off, performance was led by healthcare with global billings up 19%. Corporate and education were both up 5%. Are there any other markets to call out, customer segments to call out, beyond the big three, government, retail, et cetera?

Speaker #5: Are there any other markets to call out, customer segments to call out beyond the big three—government, retail, etc.?

Speaker #6: Now, if I look at it, the big three really account for the majority of our business and our primary focus. The government was up a little bit.

Laurel Hurd: No. If I look at the list, the big three really account for the majority of our business and our primary focus. The government was up a little bit. Our retail business was up a little bit. Nothing really notable outside of the ones that we've highlighted.

Speaker #6: Our retail business was up a little bit. So nothing really notable outside of the ones that we've highlighted.

Speaker #5: All right. Then perhaps we can dive a little deeper into education. Q2 is really the education season, but I think that also bleeds into Q3 as well.

Alex Paris: All right, perhaps we can dive a little deeper into education. Q2 is really the education season. I think that also bleeds into Q3 as well. What does Q3 look like?

Speaker #5: What does Q3 look like?

Speaker #6: So it's really most of the billing has happened in Q2 as we shipped the product in time for renovations that happened before kids go back to school.

Laurel Hurd: Most of the billings happen in Q2 as we ship the product in time for renovations that happen before kids go back to school. Again, as you said, we had a really strong Q2, and feel good about where we are for Q3 as well.

Speaker #6: So again, as you said, we had a really strong Q2. And I feel good about where we are for Q3 as well.

Speaker #2: And it's coming off a double-digit growth. Feel really good. Education is we have such a great value proposition in that space. We feel really good about our momentum there and about our value proposition and about the future, so.

Bruce Hausmann: Yeah. It's coming off of double-digit growth. Feel really good. Education is. We have such a great value proposition in that space. We feel really good about that, about our momentum there, and about our value proposition, about the future.

Speaker #5: And within education, what are the strong product lines? Obviously, you've talked about it before, design leadership, low carbon, high-performing products. Carpet tile, LVP, maybe some additional color there on product categories.

Alex Paris: Within education, what are the strong product lines? Obviously, you've talked about it before, design leadership, low carbon, high-performing products. Carpet tile, LVT, maybe some additional color there on product categories.

Speaker #6: Yeah, it's really so what does if I take I'll take it in pieces. K through 12 are carpet tile does well in the kind of approachable price points.

Laurel Hurd: Yeah. I'll take it in pieces. K-12, our carpet tiles does well in the kind of approachable price points. The brighter colors are strong for that market. We've got some new collections that are doing well there. As well as LVT, has also historically been really strong in K-12. Excuse me. As I mentioned briefly, nora has been a really strong growth driver in K-12 as well. It sort of started in the cafeteria space, and the maintenance folks in K-12, really, they love working with the product. It's easy to clean. We've seen growth in nora as well. In higher education, again, it's really across categories. We'll see LVT in some of the living spaces.

Speaker #6: We've launched some color. So brighter colors are strong for that market. So we've got some new collections that are doing well there, as well as LVT.

Speaker #6: Has also historically been really strong in K through 12. Excuse me. And then as I mentioned briefly, Nora has the cafeteria space and the maintenance folks in K through 12 really they love working with the product.

Speaker #6: It's easy to clean. So we've seen growth in Nora as well. And then in higher education, again, it's really across categories. So we'll see LVT in some of the living spaces.

Speaker #6: We'll see carpet throughout the education buildings. And in labs, and science spaces, we've got Nora. So it's across category sell there as well.

Laurel Hurd: We'll see carpet throughout the education buildings and in labs, and science spaces, we've got nora. It's a cross-category sell there as well.

Speaker #5: Great. And then regarding the tariff refunds, I think you had said last year that about 15 to 20 percent of your COGS are subject to tariffs.

Alex Paris: Great. Regarding the tariff refunds, I think you had said last year that about 15% to 20% of your COGS are subject to tariffs. What did you pay in tariffs in 2025? I know there's no further tariff refunds in your guidance, is this one and done?

Speaker #5: What is your pay in tariffs in 2025? And is this I know there's no further tariff refunds in your guidance, but is this one and done?

Speaker #2: Well, it still holds true that about 15 to 20 percent of our COGS are subject to tariffs we're paying those every day still. The refund that we got was the IEPA tariff refunds that we and it was a one-time refund.

Bruce Hausmann: Well, it still holds true that about 15% to 20% of our COGS are subject to tariffs. We're paying those every day still. The refund that we got was the IEEPA tariff refunds, and it was a one-time refund. That's the Supreme Court ruling, that those were deemed illegal, so we filed for the refund. That was for tariffs that we paid as a blend of last year and this year, sort of blended over the two different periods. We're still subject to tariffs, and we're still paying tariffs every single day, going forward.

Speaker #2: That's the Supreme Court ruling that those were deemed illegal. So we filed for the refund. That was for tariffs that we paid as a blend of last year and this year, sort of blended over the two different periods.

Speaker #2: But we're still subject to tariffs, so we're still paying tariffs every single day going forward. And that's baked into our guide, so.

Alex Paris: Got you.

Bruce Hausmann: That's baked into our guide.

Speaker #5: Yeah. So the 15.6 million you got, that's part of the new revised full year guidance.

Alex Paris: Yeah. The $15.6 million you got, that's part of the new revised full year guidance.

Speaker #2: Correct. And the ongoing tariffs that we're going to that we believe are going to have to continue paying around 15 to 20 percent of our COGS are subject to tariffs.

Bruce Hausmann: Correct. The ongoing tariffs that we believe we're gonna have to continue paying, around 15% to 20% of our COGS are subject to tariffs. That's in our guide as well.

Speaker #2: That's in our guide as well.

Speaker #5: Gotcha. And then on proactive pricing, just to be clear, you said you're seeing raw material cost increases, inflation, and this is an attempt to get ahead of those increases.

Alex Paris: Got you. On proactive pricing, just to be clear, you said you're seeing raw material, cost increases, inflation, and this is an attempt to get ahead of those increases.

Speaker #6: Yeah, I think as we've said, we took we've taken price across the market really across the globe in response to the known increases that we were getting in our input costs.

Laurel Hurd: Yeah. I think, as we've said, we've taken price across the market, really across the globe in response to the known increases that we were getting in our input costs. Our teams are really effective at executing price increases. I'm proud of the work that they've done to get ahead of it, and it flows through the P&L over time with inventory.

Speaker #6: And our teams are really effective at executing price increases I'm proud of the work that they've done to get ahead of it. And it flows through the P&L over time with inventory.

Speaker #5: Great. And then last question from me. Repurchases in the second quarter, repurchases in the first half—I think it was $8.8 million in the second quarter, dollars.

Alex Paris: Great. Last question from me. Repurchases in Q2, repurchases in H1. I think it was $8.8 million in Q2, and around $21 million year to date. Is this new or accelerating? It is opportunistic, obviously. What color can you put around share repurchases?

Speaker #5: And around $21 million year to date. Is this new or accelerating? It is opportunistic, obviously. What color can you put around share repurchases?

Speaker #2: Yeah. You've got the numbers right. So it's around 21 million year to date. Our thinking on that is just disciplined and opportunistic. And we're going to continue to return excess cash to shareholders through share repurchases and through dividends.

Bruce Hausmann: Yeah. You've got the numbers right. It's around $21 million year to date. Our thinking on that is just disciplined and opportunistic. We're going to continue to return excess cash to shareholders through share repurchases and through dividends. That's a key part of our balanced capital allocation strategy.

Speaker #2: That's a key part of our balanced capital allocation strategy.

Alex Paris: How many shares did you repurchase in Q2? How many shares did you repurchase year to date?

Speaker #5: And how many shares did you repurchase in the second quarter? How many shares did you repurchase year to date?

Alex Paris: How many shares did you repurchase in Q2? How many shares did you repurchase year to date?

Bruce Hausmann: Around 310,000 shares.

Speaker #2: Around 310,000 shares. So.

Speaker #5: That's year to date?

Alex Paris: That's year to date?

Speaker #2: No, that was in the second quarter. The first quarter was around.

Bruce Hausmann: No, that was in Q2. Q1 was around.

Alex Paris: Oh, that was in Q2.

Speaker #5: Oh, that was in the second quarter.

Speaker #2: Yeah, 461,000 in the first quarter, so.

Bruce Hausmann: Yeah, 461,000 in Q1.

Speaker #5: Great. I appreciate the extra color. Thanks again. Congrats.

Alex Paris: Great. I appreciate the extra color. Thanks again. Congrats.

Speaker #2: Yep.

Bruce Hausmann: Yep.

Speaker #6: Thanks, Alex.

Laurel Hurd: Thanks, Alex.

Speaker #1: Your next question comes from the line of Ruben Garner, with Benchmark. Your line is now open. Please go ahead.

Operator 2: Your next question comes from the line of Reuben Gardner with Benchmark. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Reuben Gardner with Benchmark. Your line is now open. Please go ahead.

Speaker #3: Thank you. Good morning, guys. Congrats on the strong quarter.

Reuben Gardner: Thank you. Good morning, guys. Congrats on the strong quarter.

Reuben Garner: Thank you. Good morning, guys. Congrats on the strong quarter.

Laurel Hurd: Thank you.

Speaker #6: Thank you.

Speaker #3: Let's see. So, healthcare and education—obviously very strong. If you said a corporate or office growth rate, I didn't hear it, but I'm just curious what the opportunity is there to see an acceleration.

Reuben Gardner: Healthcare and education, obviously very strong. If you said a corporate or an office growth rate, I did not hear it, but just curious. What the opportunity there is to see an acceleration? You mentioned return to office. There is also some other pretty strong leading indicators, whether it is lease turnover, absorption, just general business confidence recoveries that have been on the way up. How do you think about the office portion of your business on a go forward? Can you remind us what percentage of your business that is today? I know it is probably much smaller than it was even just a few years ago.

Reuben Garner: Healthcare and education, obviously very strong. If you said a corporate or an office growth rate, I did not hear it, but just curious. What the opportunity there is to see an acceleration? You mentioned return to office. There is also some other pretty strong leading indicators, whether it is lease turnover, absorption, just general business confidence recoveries that have been on the way up. How do you think about the office portion of your business on a go forward? Can you remind us what percentage of your business that is today? I know it is probably much smaller than it was even just a few years ago.

Speaker #3: You mentioned return to office. There's also some other pretty strong leading indicators whether it's lease turnover or absorption. Just general business confidence, recoveries. That have been on the way up.

Speaker #3: How do you think about the office portion of your business on a go-forward? And can you remind us what percentage of your business that is today?

Speaker #3: I know it's probably much smaller than it was even just a few years ago.

Speaker #6: Yeah. So the corporate office grew 5% in the quarter. So we had strong and it was really broad-based growth across the globe. So we're seeing that return to work trend really helping us.

Laurel Hurd: The corporate office grew 5% in the quarter. We had strong, and it was really broad-based growth across the globe. We are seeing that return to work trend really helping us. It is a few things. It is not only return to work, but there is also a flight to quality. When companies are looking at their space, it is that Class A space that is really driving the activity. Sorry, excuse me. Fighting a cold. The underlying trends there are great, really around the globe, and we are continuing to see that. It represents, Bruce, what is the number year to date on

Speaker #6: And it's a few things. It's not only return to work, but there's also a flight to quality. So when folks are companies are looking at their space, it's that class A space.

Speaker #6: Excuse me. That's really driving the activity. And, sorry, excuse me—battling a cold. So the underlying trends there are great, really, really around the globe.

Speaker #6: And we're continuing to see that. It represents what's the number year to date on?

Speaker #2: Yeah. Office is around year to date was around 44% of our total billings. Yeah.

Bruce Hausmann: Year to date was around 44% of our total billings.

Speaker #6: But we feel great about it. We've felt great about it for a while. I think it's still early days, as folks are coming back to work.

Laurel Hurd: We feel great about it. We felt great about it for a while. I think it is still early days as folks are coming back to work, and we are selling across the product portfolio. We are also leveraging our Interface Design Studio, does a really nice job helping our customers design for what comes next after return to work and more need for collaboration space. Sometimes it makes the floor plate more complex to design, and they do a great job helping them. When they work with our customers, we really sell across the portfolio, across LVT, carpet tile, and nora as well.

Speaker #6: And we've got a really good—we're selling across the product portfolio. We're also leveraging our Interface Design Studio. It does a really nice job helping our customers design for what comes next after return to work and more need for collaboration space.

Speaker #6: Sometimes it makes the floor plate more complex to design. And they do a great job helping them and when they work with our customers, we really sell across the portfolio, across LBT, carpet, tile, and Nora as well.

Speaker #3: Great. And then, new products-wise, I can't remember the name of the product, but at Neocon, there was a new healthcare product launched. How has that launch gone?

Reuben Gardner: Great. New products wise, I can't remember the name of the product, but at NeoCon, there was a new healthcare product launched. How has that launch gone? Is that a meaningful portion of the growth that you've seen, or is that something that will take a little bit more time to kind of be material within your healthcare results?

Reuben Garner: Great. New products wise, I can't remember the name of the product, but at NeoCon, there was a new healthcare product launched. How has that launch gone? Is that a meaningful portion of the growth that you've seen, or is that something that will take a little bit more time to kind of be material within your healthcare results?

Speaker #3: Is that a meaningful portion of the growth that you've seen, or is that something that will take a little bit more time to kind of be material and in your within your healthcare results?

Speaker #6: Yeah, thanks for mentioning that. The Noravant Timber is the new product that brings all the benefits of rubber without the wood grain look that you saw at NeoCon.

Laurel Hurd: Yeah. Thanks for mentioning that. The noravant timber is the new product that it brings all the benefits of rubber with a wood grain look that you saw at NeoCon. That's not really reflected in our Q2 healthcare numbers. We just launched that to the market. NeoCon was the first place that we showcased it and got samples to our sellers in late Q1. That really starts with sampling and then mock-ups. We're really pleased with the progress to date. It's early days. It'll be a meaningful new platform for us. We've gotten some strong specs from our A&D customers and some major healthcare systems. We're feeling really confident about it, but that's yet to come. That'll really help impact our long-term growth in healthcare as we continue to expand the portfolio with noravant.

Speaker #6: And that's not really reflected in our Q2 healthcare numbers. So we just launched that to the market. Neocon was the first place that we showcased it and got samples to our sellers in late Q1.

Speaker #6: And that really starts with sampling and then mock-ups. We're really pleased with the progress to date. It's early days. It'll be a meaningful new platform for us.

Speaker #6: We've gotten some strong specs from our A&D customers and some major healthcare systems, so we're feeling really confident about it. But that's yet to come.

Speaker #6: That'll really help impact our long-term growth in healthcare as we continue to expand the portfolio with Noravant.

Speaker #3: Got it. And then last one for me, the SG&A spending was a little bit higher than we had. And I think it came up. Can you just talk about a couple of things?

Reuben Gardner: Got it. Last one for me. The SG&A spending a little bit higher than we had, and I think it came up. Can you just talk about a couple of things? One, is that where we would see the bulk of the freight inflation impact? Two, the mix benefits that you're getting on the gross margin line, are there offsets in terms of selling expenses or otherwise that we need to think about going forward?

Reuben Garner: Got it. Last one for me. The SG&A spending a little bit higher than we had, and I think it came up. Can you just talk about a couple of things? One, is that where we would see the bulk of the freight inflation impact? Two, the mix benefits that you're getting on the gross margin line, are there offsets in terms of selling expenses or otherwise that we need to think about going forward?

Speaker #3: First, is that where we would see the bulk of the freight inflation impact? And second, regarding the mixed benefits that you're getting on the gross margin line, are there offsets in terms of selling expenses or otherwise that we need to consider going forward?

Speaker #2: Yeah. So, just to clarify the geography of the P&L, most of the freight lands on the cost of goods sold line, not the SG&A line.

Bruce Hausmann: Yeah. Just to clarify the geography of the P&L. Most of the freight lands on the cost of goods sold line, not the SG&A line. What we're seeing on the SG&A line, the increase in dollars is mostly due to variable selling commissions. I'm sure you noticed that we overachieved the high end of our net sales guide. I'll take that all day long. We had to pay more variable sales commissions to our selling people as a result of that. By the way, I think I'll take that all day long. Also just variable comp across. We do have variable comp that affects all employees around the globe. That has also increased the dollars as a result of the stronger sales and strong business performance that we're seeing. One last thing.

Speaker #2: So, what we're seeing on the SG&A line—the increase in dollars—is mostly due to variable selling commissions. I'm sure you noticed that we overachieved the high end of our net sales guide.

Speaker #2: So I'll take that all day long. We had to pay more variable sales commissions to our selling people as a result of that. And by the way, I think I'll take that all day long.

Speaker #2: So and also just variable comp across we do have a we do have variable comp that affects all employees around the globe. That has also increased the dollars as a result of the stronger sales.

Speaker #2: And strong business performance that we're seeing. And then one last thing. We had foreign if you just look at it in US dollars, foreign currency actually in USD also was affected the dollars as we translated things like euro and Australian dollars into US dollars.

Bruce Hausmann: If you just look at it in US dollars, foreign currency actually in USD also has affected the dollars as we translated things like euro and Australian dollars into US dollars. It increased the dollars of SG&A spend that you see on the P&L when we translate everything into USD. I want to just get out in front of it. We are all over SG&A. We know where every dollar is spent. We have a ton of discipline in this area and a management team that knows that we need to continue being really disciplined with our SG&A spend, being really thoughtful about it, and being really thoughtful and knowing that we need to be generating margin expansion on that line. I don't want that to get past us because it's a really important topic that we talk about regularly as a team.

Speaker #2: It increased the dollars of ST&A spend that you see on the P&L when we translate everything into USD. So but I want to just.

Speaker #2: Get on front. We are all over SG&A. We know where every dollar is spent. We have a ton of discipline in this area, and a management team that knows we need to continue being really disciplined with our SG&A spend, being really thoughtful about it.

Speaker #2: And being really thoughtful, and knowing that we need to be generating margin expansion on that line. So I don’t want that to get past us, because it’s a really important topic that we talk about regularly as a team.

Speaker #5: And I'll jump

Laurel Hurd: I'll jump in on that too, Reuben. As we've said a couple times, we're focused on really disciplined, and Bruce is an amazing partner in helping make sure that we stay really disciplined in our SG&A. On the front end of the business, so sales commissions, our selling organization, innovation, we're spending in that area and really tightening up everything that doesn't touch the customer or innovation.

Speaker #6: in on that too, Ruben. As we've said a couple of times, we're focused on really discipline and Bruce is an amazing partner in helping make sure that we stay really disciplined in our ST&A.

Speaker #6: On the front end of the business, so sales commissions, our selling organization, innovation, we're spending in that area. And really tightening up everything that doesn't touch the customer or innovation.

Speaker #3: Great. Thanks for the detail, guys. Congrats again on the results. And keep it up. Good luck with the rest of the year.

Reuben Gardner: Great. Thanks for the detail, guys. Congrats again on the results and keep it up. Good luck with the rest of the year.

Reuben Garner: Great. Thanks for the detail, guys. Congrats again on the results and keep it up. Good luck with the rest of the year.

Speaker #6: Thanks, Ruben.

Laurel Hurd: Thanks, Reuben.

Bruce Hausmann: Thank you.

Speaker #2: Thank you.

Speaker #1: Your next question comes from the line of David McGregor with Longbow Research. Your line is now open. Please go ahead.

Operator 2: Your next question comes from the line of David MacGregor with Longbow Research. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of David MacGregor with Longbow Research. Your line is now open. Please go ahead.

Speaker #3: Yeah. Thanks for taking the follow-up. I saw I circled back with a couple of sort of bigger picture questions. And you had mentioned that you're ahead of plan on the gross margin journey, if we can call it that.

David MacGregor: Yeah, thanks for taking the follow-up. I thought I'd circle back with a couple of sort of bigger picture questions. You had mentioned that you're ahead of plan on the gross margin journey, if we can call it that. I guess what I'm trying to get at is how much of this is maybe how you're thinking about the destination or the terminal rate. Or as you think through the implementation of everything you're working on here, I'm sure in the back of your mind you've got some sense of this is ultimately where I think maybe two, three, four years down the road we can get gross margins. Is that number changing? Is that number migrating higher and higher as we go? Or is this really just kind of, we're just pulling things forward faster and terminal rate probably hasn't changed much?

Speaker #3: I guess what I'm trying to get at is: How much of this is maybe how you're thinking about the destination, or the terminal rate? As you think through the implementation of everything you're working on here, I'm sure in the back of your mind you've got some sense of, "This is ultimately where I think, maybe two, three, four years down the road, we can get gross margins."

Speaker #3: Is that number changing? Is that number migrating higher and higher as we go, or is this really just kind of we're just pulling things forward faster and terminal rate probably hasn't changed much?

Speaker #6: So I appreciate the question. And if you remember back a ways, we had 38.5 as our destination. And we'd said that's where we want to get to by 2030.

Laurel Hurd: I appreciate the question, and if you remember back a ways, we had 38.5 as our destination.

David MacGregor: Yeah.

Laurel Hurd: We said that's where we want to get to by 2030. We're there ahead of where we thought we'd be, and we're higher than we thought we'd be because all these things are really coming together with price and mix and all the efficiencies are really working well together. That said, I'd say it's a dynamic world out there with a lot of input cost challenges and the tariffs back and forth and all of that. We haven't stated a new destination, but our goal is to continue to improve our margins and navigate the uncertainty while driving growth and making sure that we're focused on driving innovation and mix and everything else so we can continue to expand our margins.

Speaker #6: And we're there ahead of where we thought we'd be. And we're higher than we thought we'd be because all these things are really coming together with price and mix and all the efficiencies.

Speaker #6: Are really working well together. And with that said, I'd say it's a really dynamic world out there with a lot of input cost challenges, the tariffs back and forth, and all of that.

Speaker #6: So we've been we haven't stated a new destination. But our goal is to continue to improve our margins and navigate the uncertainty while driving growth and making sure that we're focused on driving innovation and mix and everything else so we can continue to expand our margins.

Speaker #3: Got it. I guess, second question—and you talked about kind of back to the office, and I asked you about that earlier. I guess what I'm trying to get a sense of is, you talk to architects and designers, and you talk to corporate sponsors on a lot of these projects.

David MacGregor: Got it. I guess second question. You talked about kind of back to the office, and I asked you about that earlier, and I guess what I'm trying to get a sense of is you talk to architects and designers, and you talk to corporate sponsors on a lot of these projects. To what extent do you think people have sort of moved on from thinking about workplace furnishings and the finishing of the environment of the office as just we need to spend this money so our people have a place to work, and thinking about it more in terms of a recruiting strategy

Speaker #3: To what extent do you think people of sort of moved on from thinking about workplace furnishings and the finishing of the environment of the office as just we need to spend this money so our people have a place to work?

Speaker #3: And thinking more thinking about it more in terms of a recruiting strategy and if I'm going to get the very best in human capital, I have to really invest in the workplace and all the amenities to attract the best and the brightest.

Laurel Hurd: Totally

David MacGregor: If I'm going to get the very best in human capital, I have to really invest in the workplace and all the amenities to attract the best and the brightest. All this money that's being spent on the workplace environment is really more integrated into how people are thinking about human capital costs rather than just outfitting a workspace.

Speaker #3: And so all this money that's being spent on the workplace environment is really more integrated within to help people are thinking about human capital costs rather than just outfitting a workspace.

Speaker #6: Yeah. Absolutely. You're absolutely right there. And I think initially, we felt it was a everybody come back to work. And I think what companies found is that when they mandated their employees came back and they came back to maybe the same office space that they had left, it wasn't what they needed anymore.

Laurel Hurd: Yeah, absolutely. You're absolutely right there, and I think initially we felt it was a everybody come back to work. I think what companies found is that when they mandated their employees came back, and they came back to maybe the same office space that they had left, it wasn't what they needed anymore. There was a lot of employee dissatisfaction with, "Man, I came back to the office. I don't have a place for collaboration. I don't have a quiet room for a Teams or a Zoom call." Just as you said, the customers have really found that they need to invest in their office space to get the best and brightest talent, and we're seeing more and more of that. I mean, the discussions that we have with our customers aren't about what color carpet they want.

Speaker #6: And so there was a lot of employee dissatisfaction with, "Man, I came back to the office. I don't have a place for collaboration. I don't have a quiet room for a Teams or a Zoom call."

Speaker #6: And so just as you said, the customers have really found that they need to invest in their office space to get the best and brightest talent.

Speaker #6: And we're seeing more and more of that. I mean, the discussions that we have with our customers aren't about what color carpet they want.

Speaker #6: It's really about what environment are they trying to create for their employees? How can they denote one space as this is the space to collaborate?

Laurel Hurd: It's really about what environment are they trying to create for their employees. How can they denote one space as this is the space to collaborate, and in another part, they denote that it's a really quiet space for concentrated work. Those are things that our customers are trying to solve, and we help them do every day. You're absolutely right. It's much more about human capital management, and having a workplace that they can be really proud of to encourage recruitment and retention.

Speaker #6: And in another part, they've noted that it's a really quiet space for concentrated work. Those are things that our customers are trying to solve.

Speaker #6: And we help them do that every day. But you're absolutely right. It's much more about human capital management and having a workplace that they can be really proud of to encourage recruitment and retention.

Speaker #2: And another dynamic that we're seeing is that this is becoming more and more of a data-driven decision. Employee engagement surveys have been around for a long time.

Bruce Hausmann: Another dynamic that we're seeing, Dave, is that this is becoming more and more of a data-driven decision. Employee engagement surveys have been around for a long time, more and more companies are doing them, paying attention to them, so many of the employee engagement surveys ask employees about their work environment and how they feel about it. As companies are trying to improve those scores and trying to have stronger employee engagement and trying to have stronger employee engagement scores, this is a very tangible way that they can address, by improving their space, improve those scores. We were so pleased at our scores and the certifications that we were able to get. Full disclosure, we had one remote location where we get some feedback that we need to upgrade the space, and we're going to do that because we know that that's important.

Speaker #2: But more and more companies are doing them, paying attention to them. And so many of the employee engagement surveys ask employees about their work environment.

Speaker #2: And how they feel about it. And as companies are trying to improve those scores, and trying to have stronger employee engagement, and trying to have stronger employee engagement scores, they're trying this is a very tangible way that they can address by improving their space, improve those scores.

Speaker #2: We were so pleased at our scores in a certifications that we were able to get and full disclosure, we had one remote location where we get some feedback that we need to upgrade the space.

Speaker #2: And we're going to do that. Because we know that that's important. And so it's just pulling out the mirror. It's a tangible way that we're going to help improve our scores internally.

Bruce Hausmann: Just pulling out the mirror, it's a tangible way that we're going to help improve our scores internally, and we see our customers doing the same thing.

Speaker #2: And we see our customers doing the same thing.

Speaker #3: Right. And then let me ask you one last one here, since it looks like we've got a couple of minutes. AI — I mean, are you seeing people bringing up AI as a reason to sort of pause on spending, or saying, 'I'm not quite sure what our headcount is going to look like a year or two years from now?'

David MacGregor: Right. Let me ask you one more last one here. It looks like we've got a couple of minutes. AI. Are you seeing people bringing up AI as a reason to sort of pause on spending or, I'm not quite sure what our headcount's going to look like a year or two years from now. I think we're going to hold off on these projects? Or is this just not a non-issue in your world?

Speaker #3: I think we're going to hold off on these projects. Or is this just a non-issue in your world?

Laurel Hurd: I would say we're not hearing that. We get the question a lot of like, how is this going to impact the workplace environment? Yet, whether I'm out in the Bay Area meeting with tech customers or anywhere else around the world, it's not something that we're feeling slowing anything down. I think if anything, people want to encourage their workers to come back. As you said, we're not seeing people pause to say, I need to see what happens with AI before I make any transition. I think it's the opposite. They're getting ahead of it to really encourage and have the best and brightest talent.

Speaker #6: I would say we're not hearing that. We certainly hear we get the question a lot of how is this going to impact our the workplace environment.

Speaker #6: And yet, whether I'm out in the Bay Area meeting with tech customers, or anywhere else around the world, it's not something that we're feeling is slowing anything down.

Speaker #6: I think if anything, people want to encourage their workers to come back, as you said, we're not seeing people pause to say, I need to see what happens with AI before I make any transition.

Speaker #6: I think it's the opposite. They're getting ahead of it to really encourage and have the best and brightest talent.

Speaker #3: Great. Thanks very much.

David MacGregor: Great. Thanks very much.

Speaker #6: Great. Thanks, David.

Laurel Hurd: Great. Thanks, David.

Bruce Hausmann: Thanks, David.

Speaker #1: There are no further questions at this time. I will now turn the call back to Laurel Hurd, President and Chief Executive Officer, for closing remarks.

Operator 2: There are no further questions at this time. I will now turn the call back to Laurel Hurd, President and Chief Executive Officer, for closing remarks.

Operator: There are no further questions at this time. I will now turn the call back to Laurel Hurd, President and Chief Executive Officer, for closing remarks.

Speaker #6: Well, thank you all for joining us today. Thanks again to the INTERFACE team for everything you do. We look forward to speaking to you again next quarter.

Laurel Hurd: Well, thank you all for joining us today. Thanks again to the Interface team for everything you do, and we look forward to speaking to you again next quarter.

Operator 2: This concludes today's call. Thank you for attending. You may now disconnect.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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