Interface (TILE) Q3 2025 Earnings Call Transcript

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Date

Friday, Oct. 31, 2025 at 8 a.m. ET

Call participants

Chief Executive Officer — Laurel M. Hurd

Chief Financial Officer — Bruce Hausmann

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Takeaways

Net sales -- $364.5 million, representing a 5.9% increase as reported and a 4.2% increase on a currency-neutral basis compared to the prior-year period.

Adjusted gross profit margin -- 39.5%, an increase of 208 basis points, attributed to favorable pricing, improved product mix, and manufacturing efficiencies.

Adjusted operating income -- $54.1 million, reflecting 24.5% growth year over year.

Adjusted EBITDA -- adjusted EBITDA was $66.2 million versus $53.7 million in the prior-year period.

Adjusted EPS -- adjusted earnings per share was $0.61, up 27% compared to $0.48 in the third quarter of 2024.

Operating cash flow -- $76.7 million generated during the quarter, contributing to closing liquidity of $482 million.

Net debt -- $120.4 million at quarter-end, yielding a net leverage ratio of 0.6x on a trailing twelve-month basis.

Americas sales growth -- Currency-neutral net sales increased 4.1% year over year.

EAAA sales growth -- Currency-neutral net sales rose 4.3% year over year.

Healthcare segment growth -- Global healthcare billings increased by 29% with double-digit gains in both the Americas and EAAA.

nora rubber sales -- nora rubber grew 20% in the quarter and is up 19% year to date, supported by the One Interface selling model.

Corporate office segment -- Billings rose 5% in the third quarter.

Education segment -- Billings declined by approximately 2.5% for the quarter but remained at high single-digit growth year to date.

Consolidated orders -- Currency-neutral consolidated orders increased 2.4% year over year; Americas orders up 1.7% following a prior-year 17.1% increase, and EAAA orders up 3.5%.

Backlog -- Backlog increased by 17% year to date, indicating sustained demand.

Capital allocation -- $0.7 million in share repurchases completed during the quarter; ongoing capital prioritization for growth, margin expansion, and innovation investments.

Tariff impact -- Tariffs diluted adjusted gross profit margin by approximately 30 basis points in the third quarter; expected dilution of around 50 basis points for the fourth quarter.

Full-year guidance raised -- New outlook for the full fiscal year 2025 calls for approximate net sales of $1.375-$1.390 billion, an approximate adjusted gross profit margin of 38.5%, approximate adjusted FD&A of $362 million, approximate adjusted interest and other expenses of $25 million, an approximate 26% adjusted effective income tax rate, and approximate $45 million in capital expenditures, based on an approximate fully diluted share count of 59.1 million.

Tax rate special item -- Enacted change in German legislation led to a non-cash pickup of $10.4 million, impacting reported tax rate.

Intangible amortization -- Amortization of intangibles is now complete and will not recur in future quarters.

Manufacturing productivity -- Investments in U.S. automation and robotics drove half the margin expansion, with further similar initiatives underway in Europe and Australia.

New product launches -- Introduction of the Stellar Horizons carpet tile collection and three new resilient products, including two LVT styles and a nora Mint XP Rubber refresh.

Upcoming innovation -- Launch of a new rubber flooring product planned for early 2026 targeting healthcare and additional segments.

Summary

Interface (NASDAQ:TILE) posted broad-based sales and margin gains, supported by strong execution on its One Interface strategy and enhanced operational productivity. The company reported notable geographic diversification of sales and backlog growth while reaffirming its ability to balance pricing, mix, and volume growth with disciplined investments. Management highlighted ongoing success in the healthcare and nora rubber segments, continued expansion into new categories, and tactical responses to elevated tariff costs without sacrificing gross profit dollars. Guidance for fiscal year 2025 was raised, reflecting confidence in current momentum and visibility.

CEO Hurd stated, "Our One Interface strategy is driving these results," directly attributing the current performance to reorganizational efforts.

Backlog growth and positive order momentum signal underlying visibility despite macroeconomic challenges, particularly outside the U.S.

CFO Hausmann emphasized, "our strong balance sheet provides flexibility and optionality in today's dynamic environment and the ability to continue investing in the business for growth and margin expansion," directly linking financial health to future strategy.

Interface was recognized by design and sustainability organizations, including top rankings in the Fluor Focus Top 250 Design Survey and awards from ED’s Net Zero and Metropolis Planet Positive programs.

Management confirmed planned capital expenditures in 2026 may rise by roughly $10 million as investments in automation and innovation accelerate, with a significant portion directed toward nora rubber capacity and productivity projects.

The unique benefit from a German tax law change affected reported tax results, but did not alter the company's adjusted 26% full-year tax guidance.

Elimination of intangible amortization expense will simplify upcoming financial reporting and reduce add-backs on adjusted results.

Industry glossary

LVT (Luxury Vinyl Tile): A resilient flooring product combining durability and design flexibility, often used in commercial and residential interiors as an alternative to traditional tile or wood.

FD&A expenses: The sum of selling, general, and administrative expenses captured as Functional, Distribution, and Administrative costs in Interface’s reporting.

One Interface strategy: The company’s integrated sales and product approach, bringing together global functions and unified customer experiences across its major product lines.

nora rubber: Interface’s premium rubber flooring product line, known for durability in healthcare, education, and commercial environments.

EAAA: Segment comprising Europe, Africa, Asia, and Australia regions within Interface’s operational structure.

Full Conference Call Transcript

Laurel Hurd, CEO, and Bruce Hausmann, CFO. During today's conference call, any management comments regarding Interface Inc.'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, as supplemented in our First Quarter 10-Q.

The company assumes no responsibility to update forward-looking statements. 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. Lastly, this call is being recorded and broadcast for Interface Inc. It contains copyrighted material and may not be re-recorded or rebroadcast without Interface Inc.'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.

Laurel M. Hurd: Thank you, Christine, and good morning, everyone. Interface delivered another strong quarter, exceeding our expectations, with currency-neutral net sales growth of 4% and significant profitability gains. We saw continued strength in the Americas and increased momentum in EAAA, with broad-based growth across all regions, all product categories, and the majority of our market segments. We are pleased with the quality of our earnings. Net sales increased through a balanced mix of price and volume, and adjusted gross profit margin expanded by 208 basis points, driven by favorable mix and manufacturing efficiencies. This consistent execution underscores the power of our diversified portfolio, the strength of our brand, and ongoing share gains in key markets.

I'm proud of the Interface team and their unwavering commitment to serving our customers. Our One Interface strategy is driving these results. As we've discussed before, this multi-year plan is focused on building strong global functions to support our world-class local selling team, accelerating growth through enhanced commercial productivity, expanding margins through global supply chain management and simplifying operations, and leading in design, performance, and sustainability. Since launching our One Interface sales team structure in the U.S. in January 2024, we've been delivering a single cohesive customer experience across carpet tile, LVT, and nora rubber. This unified approach has exceeded our expectations and continues to drive consistent quarterly growth.

Driven by our combined selling team, nora rubber grew 20% in the third quarter and is up 19% year to date. To build on this momentum, we will accelerate investments in automation, productivity, and innovation to further strengthen the nora product portfolio and drive long-term growth. We're preparing for the launch of a new rubber flooring innovation in early 2026 that we believe will accelerate growth in the healthcare segment, among others. We look forward to sharing more about this on our next call. Additionally, our investments in carpet tile automation and robotics are delivering meaningful productivity gains and margin improvement. These investments are exceeding expectations, improving efficiency, reducing waste, and enhancing service levels.

We're now extending these robotic systems to our facilities in Europe and Australia, and we continue to explore and identify new opportunities for automation across the company. From a product standpoint, we continue to expand our addressable market, delivering high design at compelling price points to create new opportunities for growth. During the quarter, we introduced our Stellar Horizons carpet tile collection, which spans a range of price points and supports segment versatility. The collection offers exceptional durability, acoustics, and cleanability while balancing design and functional performance. We also introduced three new resilient products that expand color, design, and aesthetic options across the category.

This includes two new LVT styles, In the Mix and Raw Materials, and a refresh of our nora Mint XP Rubber offering. These new and updated styles give customers more ways to specify Interface products across a range of spaces and budgets. We continue to differentiate our portfolio through exceptional design, superior performance, and an unwavering commitment to sustainability. Now, let's turn to our third quarter results. We delivered a 4% increase in currency-neutral net sales, reflecting strong execution and continued share gains. In the Americas, currency-neutral net sales increased 4% as our combined selling teams drove growth across key market segments. In EAAA, currency-neutral net sales were also up 4% through broad-based growth in all our regions.

Turning to market segments, our diversification strategy continues to fuel our growth. Global healthcare billings were up 29%, with double-digit gains across both the Americas and EAAA. Our broad and differentiated product portfolio continues to capture opportunities as the global healthcare sector evolves, driven by aging populations, technological innovation, and a growing focus on preventative care. In the U.S., our combined Interface and nora selling teams are working together seamlessly, enabling us to compete more effectively and win new opportunities as we meet the complex and changing needs of modern healthcare environments. Corporate office billings were up 5% in the third quarter, and they are also up year to date as expected.

We continue to see share gains in this segment as companies move to Class A space, where our brand strength, design leadership, and broad product portfolio position us to win. Our solutions are well aligned with workplace trends as companies invest in refreshes and adapt environments to meet the evolving needs of a hybrid workforce. By expanding our product offerings across a wider range of price points, we are capturing new opportunities and broadening our reach. Education billings declined slightly in the third quarter but remain at high single digits year to date.

We view this slight quarterly decline as timing-related, as we are well positioned in both K through 12 and higher education, underpinned by our design leadership and low-carbon, high-performing products. Strong macro drivers, modernization initiatives, and regional migration continue to create meaningful growth opportunities in this segment. Turning to orders, consolidated currency-neutral orders increased 2.4% year over year. Americas was up 1.7% on top of prior-year order growth of 17.1%. EAAA was up 3.5%, driven by strength in EMEA and Australia. We ended the third quarter with our backlog up 17% year to date, reflecting solid underlying demand. Our strong results this quarter reflect how well our teams are delivering for our customers.

That is evident in the recognition we received from the design community. Interface Inc. earned multiple number-one rankings in the Fluor Focus Top 250 Design Survey, where designers named us an industry leader in service, quality, design, and performance. On the sustainability front, we were named Manufacturer of the Year in ED’s Net Zero Awards and recognized by Metropolis in their Planet Positive Awards for our all-in strategy. These awards acknowledge the bold steps we are taking to be carbon negative by 2040 without offsets, and they are a testament to the hard work and dedication of our entire team. Looking ahead, we remain confident in our strategy and disciplined execution.

Continued investments in innovation, automation, and commercial excellence are strengthening our foundation for sustainable growth. With a talented global team, a powerful brand, and a proven strategy, Interface Inc. is well positioned to deliver differentiated design, strong financial performance, and long-term value for our shareholders. With that, I'll turn it over to Bruce.

Bruce Hausmann: Thank you, Laurel, and good morning, everyone. Third quarter net sales were $364.5 million, up 5.9% as reported and 4.2% on a currency-neutral basis versus the third quarter of 2024, both ahead of our expectations. Third quarter currency-neutral net sales were up 4.1% in the Americas and 4.3% in EAAA year over year. Adjusted gross profit margin was 39.5%, up 208 basis points versus the third quarter of 2024, driven by favorable pricing and product mix combined with manufacturing efficiencies, partially offset by higher raw material and tariff-related costs.

Adjusted FD&A expenses were $90 million in the third quarter, compared to $85.5 million in the third quarter of 2024, primarily due to higher sales commissions and variable compensation on increased sales and profits, inflation, and foreign currency exchange variances. Adjusted operating income was $54.1 million, up 24.5% year over year. Third quarter adjusted EBITDA was $66.2 million versus $53.7 million in the third quarter of 2024. Third quarter adjusted earnings per share was $0.61, a 27% increase versus $0.48 in the third quarter of 2024. We generated $76.7 million of operating cash flow during the third quarter and ended the period with $482 million of liquidity.

Net debt, defined as total debt minus cash on hand, was $120.4 million, and our net leverage ratio was 0.6 times, calculated as net debt divided by the last 12 months of adjusted EBITDA. As part of our balanced capital allocation strategy, we repurchased $0.7 million of Interface common stock during the quarter. Overall, our strong balance sheet provides flexibility and optionality in today's dynamic environment and the ability to continue investing in the business for growth and margin expansion. Turning to tariffs, you may recall our exposure is limited and primarily tied to imports of nora rubber from Germany and LVT from South Korea into the U.S. We continue to offset tariff-related costs through pricing and productivity initiatives.

When tariff costs are successfully offset on a dollar-for-dollar basis, we are able to protect our gross profit dollars, but there is a dilutive impact to our gross profit percentage. In the third quarter, tariffs diluted our adjusted gross profit percentage by approximately 30 basis points, and we anticipate a similar dilution of 50 basis points to fourth quarter's adjusted gross profit percentage. In sum, we are successfully managing tariff-related costs, and our plan is to continue doing so. With that backdrop in mind and on the strength of our year-to-date results, we are raising our full-year guidance.

For the full fiscal year of 2025, we now anticipate net sales of $1.375 to $1.390 billion, adjusted gross profit margin of 38.5% of net sales, adjusted FD&A expenses of $362 million, adjusted interest and other expenses of $25 million, an adjusted effective income tax rate of 26%, capital expenditures of $45 million, and fully diluted weighted average share count of 59.1 million shares. To note, all figures are approximate. With that, I'll turn the call back to Laurel.

Laurel M. Hurd: Thank you, Bruce. Interface delivered another strong quarter with growth in all product categories, growth in all regions, and growth in the majority of our market segments while driving meaningful gross profit margin expansion. We are encouraged by the quality of these earnings and the strong execution in a challenging and uncertain macro environment. I want to thank the entire Interface team for their relentless focus on winning business and serving our customers. With that, we will open up the call for questions.

Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. To withdraw your question, simply press Star 1 again. Your first question today comes from the line of Brian Biros from Thompson Research Group. Your line is open.

Brian Biros: Hey, good morning, everyone. Thank you for taking my questions today. Frank, sales were above the guidance range. Second quarter sales rose slightly above the guidance range, so clearly something's working over there. Last quarter, you cited strong momentum in education, outperformed a tough comp. It sounds like this quarter, maybe it's healthcare that's the outperformer. Just curious to hear what the surprise was that drove the sales outperformance relative to your expectations three months ago.

Laurel M. Hurd: Yeah, thanks, Brian. It is healthcare. We noted healthcare was up 29% for the quarter, which is above our expectations. We've been really focused on the healthcare segment. Our top three priority segments are really corporate office, education, and healthcare. We've been working to expand our product portfolio in healthcare. Obviously, the One Interface selling teams continue to exceed our expectations, and we grew in healthcare outside the U.S. as well. Really, really strong quarter that exceeded our expectations.

Brian Biros: It's definitely working for you guys. On the nora rubber, I guess for their investments, you mentioned the prepared marks. I know you're going to provide some more color, I guess, next call. Any more commentary you can add on the investments you might make there, if that's across expanding capacity or just more automation in the nora facility, would be interesting to hear.

Laurel M. Hurd: Yeah, we've been making investments all along in nora rubber, and we will continue to amplify that as our sales growth continues to exceed expectations. We're doing a few things. One, we're investing in making sure we can support the capacity. Secondly, we are investing in additional productivity initiatives to increase our throughput and also to really help drive efficiencies. We're also investing in innovation. That's what we'll share more about on our next call, but we're excited about continued opportunities to grow the nora rubber business.

Bruce Hausmann: Brian, I would just add, if we think about CapEx in 2026, it may be slightly up, potentially around $10 million or so compared to 2025 levels as we invest in these productivity initiatives and innovation initiatives. Again, it's all about growth, it's all about innovation, and all about projects that generate margin expansion.

Brian Biros: Last question for me on margins. Current guide for the year looks like it's 38.5%. It's been a nice step up throughout the year to get there. I believe maybe the 38.5% level is also kind of a near-term margin level you might have cited in the past that you want to get to that kind of balances price with volume and cash generation. If you're going to be at that level this year, how do we think about margins from here with all the positive things you still have between mix, efficiencies? Do we see further margin expansions from here, or do you kind of keep it at this level to accelerate volumes even more?

Just curious how you're thinking about margins at this level and going forward.

Laurel M. Hurd: Brian, thank you for noticing. As we've mentioned previously, our ambition is to get to 38.5%, and we've got a good shot at hitting that number this year. To be fair, we have to deliver a strong Q4, which we intend to do. It's a challenging dynamic environment, and it's a balancing act between taking share, winning for our customers, and also making sure that we can hit that nice sweet spot between taking share and growing the business.

Operator: Thank you.

Operator: Your next question comes from a line of Alex Paris from Barrington Research. Your line is open.

Alexander Peter Paris: Hi guys, thanks for taking my call, and I just wanted to say congratulations on the beat and raise.

Laurel M. Hurd: Thanks, Alex.

Alexander Peter Paris: I have a few questions. I'll start with a question about the shape of your Q3 outperformance in terms of momentum. How did it? I think on the last call, you said July was strong from an order standpoint and broad-based. How about August and September? Maybe to get a similar comment about the fourth quarter, how did October go?

Laurel M. Hurd: Yeah, I would say, Alex, it's pretty steady and consistent. The quarter played out pretty consistently, and October, I would say, continues in that same bent. The Americas especially continues to look good, and outside the U.S. is a little bit, those macros are more challenging, certainly in Europe. We're watching that order momentum as well, but we feel really good about where our guidance is for Q4.

Bruce Hausmann: I agree. Outside demand is solid, our backlog is strong, and we just need to continue executing strongly.

Alexander Peter Paris: Great. Thanks for that color. The market segment discussion, healthcare up 29% in global billings, corporate office up 5%, great performance. You said education declined slightly. Can we put some numbers on that? I mean, was it down 3% or was it down 8%?

Laurel M. Hurd: Down less than 3%, just down just 2.5% or so.

Bruce Hausmann: Alex, that's just timing. Things come in lumpy phases. It's up high single digits for the year. We've got a great education business, great product, and great momentum. It's just timing in the quarter.

Laurel M. Hurd: Q3 was not a big quarter for education as well. Q2 is really education season for us, so it's not something we're concerned about.

Alexander Peter Paris: Okay, great. On the gross margin expansion, you kind of listed the things that influenced that. It was similar to last quarter, favorable price and volume, as well as manufacturing efficiencies. I think you said last quarter that 80% of the gain was manufacturing efficiencies. Is it sort of a similar thing going on this quarter?

Bruce Hausmann: About half and half. Our manufacturing efficiencies have been working very, very well. That drove about half of the margin expansion, and the rest was a combination of price and mix.

Alexander Peter Paris: Great. You had a very unusual tax rate in the quarter, 4.8%. How about a little color? Your guidance for the full year, I know it's on an adjusted basis, is unchanged at 26%. What special items were in the Q3?

Bruce Hausmann: Yeah. Thanks for noticing. We put a comment on that in our press release. What happened was in July of 2025, Germany enacted tax legislation to reduce the German corporate income tax rate by 1% annually from 2028 to 2032. Of course, as you know, Alex, that required us to go back and remeasure our deferred tax assets and liabilities. It resulted in a non-cash pickup on our interest expense line of $10.4 million. This is just an accounting requirement due to the change in legislation in Germany to remeasure those assets and liabilities.

Alexander Peter Paris: Okay, that makes sense. You give guidance at 26% on an adjusted tax basis. You're adding a $10.4 million bet to the tax expense on a nine-month basis to get to that, because otherwise, it's like 18% for the full year.

Bruce Hausmann: Yeah, two different numbers. There's the GAAP number, and then there's the adjusted number. The 26% is our adjusted effective income tax rate that excludes that pickup related to the German tax legislation.

Alexander Peter Paris: Great.

Bruce Hausmann: Does that make sense?

Alexander Peter Paris: Yeah, makes perfect sense.

Bruce Hausmann: Yeah, cool.

Alexander Peter Paris: Lastly, I noticed these are just cats and dogs, but the amortization of intangibles fell. It must be running off. How should we think about that going forward? I think it was $1.4 million last quarter, and this quarter it was about $0.5 million.

Bruce Hausmann: I appreciate your attention to detail. Actually, now we're all done with that amortization. It's done now. You'll no longer see it on the P&L.

Alexander Peter Paris: Okay.

Bruce Hausmann: It dropped. It didn't run its course.

Alexander Peter Paris: Gotcha. That is a typical add-back to gross income to get to adjusted gross income. There won't be any add-back in Q4 and going forward.

Bruce Hausmann: That's right. Of course, there's always a wash because there was the expense and net income. We won't see the expense and net income, and hence we won't see the add-back.

Alexander Peter Paris: Okay, perfect. Thanks. That answers all my questions. Again, congrats, guys.

Laurel M. Hurd: Thanks, Alex.

Operator: Your next question comes from the line of David MacGregor from Longbow Research. Your line is open.

David Sutherland MacGregor: Yes, good morning, everyone. Congratulations on the results. Got a great trajectory going here.

Laurel M. Hurd: Thanks, David.

David Sutherland MacGregor: I wanted to, I guess I wanted to, I had a few questions here on a few different things. Let me go back to the gross margins and 38.5%. I guess if you adjust for tariffs, it's even 30 bps better than that. When we talk about kind of the upside from this level, is that upside at this point driven by just volume leverage and just growing your units as you go forward? Is there more sort of a mixed benefit that maybe emphasizing healthcare and nora rubber that drives that?

I'm just trying to get a sense of, as opposed to just asking you what the upside is, just trying to get a sense of what the drivers are to further upside from here.

Laurel M. Hurd: Yeah, thanks, David. As Bruce mentioned earlier, we had stated 38.5% as our ambition to get there. I'd say we got there earlier than we expected, to be honest. That's because of really three things. One is mix, so both country mix, the U.S. doing really well, as well as, as you mentioned, the nora rubber sales growth in the U.S. Our productivity initiatives are paying off better than we anticipated, the investments that we're making. Then there's volume leverage as well. As we look forward, I think we've got more room to go on productivity. We'll continue to drive mix and volume leverage.

At the same time, as Bruce said, really look at how we drive share growth and make sure that it's a competitive market out there, and we don't want to, there is a sweet spot that we'll need to navigate.

David Sutherland MacGregor: If I could just sort of pick up on a couple of these things here. I don't know if, operator, are there any other questions behind me in the queue?

Operator: No, there are not.

David Sutherland MacGregor: Okay, thank you. I have a few here for you, if you don't mind. I guess when you automate the front end of the manufacturing lines, it's obviously created a lot of productivity benefit. Now you're going to take those learnings and you're going to go to Europe and to Australia. If we isolate that, what could that represent in terms of gross margin upside?

Bruce Hausmann: David, obviously the U.S. is a bigger number. These are all meaningful numbers. We're investing in this machinery, investing in this robotics. The benefit that we originally scoped out was a benefit because we had very difficult jobs to fill. We're also seeing benefit around less waste. We have less waste in our manufacturing facilities, which is helping us with our inventory and helping us with our cost of sales. It's helping us. There are a lot of little things, like we're just using fewer cones, for example. There's a whole bunch of things that are helping us in the U.S., and that will also help us similarly in Australia and in Europe.

Clearly, though, to be fair, those are smaller businesses than the U.S.

David Sutherland MacGregor: Great. They are. It sounds like when you talk about the three buckets, mix, productivity, and volume leverage, a big part of that productivity bucket is this migration of what you've learned at LaGrange. Okay, good. On the volume leverage, we're talking about sort of incremental margins right now. I realize they're a little bit different from nora rubber versus LVT versus carpet tile. Within carpet tile, you have various price points where you could get some variance in your operating leverage. How should we be thinking about incremental margins and the potential upside from here on incremental margins?

Bruce Hausmann: I think the situation that we're in, David, is we are going to continue to be laser-focused on driving efficiencies in our manufacturing environments. It's just so important that we do that to maintain our competitiveness. In a really challenging market, make sure that we have the right price points to meet our customers where they are so that we can continue driving volume and we can continue driving share.

Laurel M. Hurd: The other thing, David, that we've been doing is we've talked about expanding our addressable market by pushing a bit more to accessible price points, particularly in carpet tile. We've done that through design for manufacturing, making sure we maintain our efficiencies while we're doing that. That's helping us drive growth. We'll continue to do more of that as well and, again, sort of manage that sweet spot.

David Sutherland MacGregor: Okay. On the one hand, you get a little more nora rubber coming in here. You're making the capacity investments. We would presume that becomes a stronger part of the mix. On the other hand, you've got more medium price point product rolling out.

Laurel M. Hurd: Right.

David Sutherland MacGregor: Should we just be thinking incremental margins kind of remaining in line with where they are right now? I guess I'm just looking for a little bit of help there.

Bruce Hausmann: We want to deliver this year. We got a great year, great nine months behind us. We got to deliver another three great months, and we'll have a solid year. If we do hit our ambition, and I think, to be fair, David, I appreciate your question. I appreciate your probing. I think maybe when we release our year-end results and we see how this all shakes out, we would be in a stronger position to talk about perhaps what is our next ambition around gross profit. For right now, we just want to hit the current ambition.

David Sutherland MacGregor: Got it. Okay. That's fair. Thank you for that. You had talked a while back now about adding kind of global product category management. I think you might have actually staffed somebody in that seat.

Laurel M. Hurd: Yep.

David Sutherland MacGregor: I guess this is all part of the One Interface strategy. Can you just talk about the percentage of revenues and how that might be changing from jobs that are across multiple categories and across multiple America and Europe? Just that expanded scope of an order as opposed to selling carpet tile to a guy in Cincinnati. We're getting more projects where we're selling all three products to companies spanning both American and European markets. I'm obviously making this stuff up, but just trying to get a sense of how that's changing. I presume that's a margin driver for you. I'm just trying to get a sense of proportion at this point.

Laurel M. Hurd: Yeah. A couple of things in that. First of all, we did add global product category management. We're really looking, and that will help us drive our innovation funnel for the future. We're going to see some new innovation come next year, which I think will be really exciting. Those are global innovations, global launches. We're looking at those on a real macro level that we think can really help us to further accelerate what you're talking about, which is the opportunity to sell our full portfolio of products to our customers. Rather than just selling nora rubber to healthcare and just selling carpet tile to corporate office, we're really selling that full suite.

As you're saying, we have great global customers, and we're now offering the full suite of products to those global customers. That's honestly still in early days. We're still continuing to build that out, and we'll continue to do that further as we go forward.

David Sutherland MacGregor: Okay. That's helpful. Bruce, you mentioned capital allocation up about $10 million next year in CapEx versus where you're going to be this year. Is that full $10 million associated with nora rubber, or are there other programs?

Bruce Hausmann: A portion of it is nora.

David Sutherland MacGregor: Thank you.

Bruce Hausmann: A large portion of it is nora rubber, but there is innovation happening outside of nora rubber. There is some automation investments happening outside of nora rubber as well.

David Sutherland MacGregor: Okay. That capital allocation as well, you're buying back stock, which is a real milestone, I guess, for Interface. How do you think about sort of that program going forward? Is this kind of a residual, we don't have any other immediate use for the cash, so we buy back stock, or are you sort of employing targets in mind with respect to what you want to accomplish on a repurchase level?

Bruce Hausmann: Yeah. I mean, it's opportunistic. However, we always keep in mind our number one priority, which is to invest in the business around growth, margin expansion, and making sure that and innovation. While also making sure and being good stewards of the corporation and to our capital allocation priorities. When there's opportunity, we are making sure that we return capital back to our shareholders.

David Sutherland MacGregor: Got it. Congratulations on all the progress. Great to see. Thank you.

Laurel M. Hurd: Thanks, David. Appreciate it.

Operator: That concludes our question and answer session. I will now turn the call back over to Laurel Hurd for closing remarks.

Laurel M. Hurd: Great. Thanks to everyone for joining the call today. Thanks to the entire Interface team for another great quarter.

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

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