[Management View]
Interface reported a strong quarter with net sales of $364.5 million, a 5.9% increase, driven by the One Interface strategy and operational productivity. Key metrics include a 39.5% adjusted gross profit margin and a 24.5% growth in adjusted operating income. Strategic priorities focus on expanding the healthcare and nora rubber segments, enhancing automation, and maintaining a balanced mix of pricing and volume growth.

[Outlook]
The company raised its full-year guidance, anticipating net sales between $1.375-$1.390 billion and an adjusted gross profit margin of 38.5%. Future plans include launching a new rubber flooring product in early 2026 and increasing capital expenditures by $10 million to support automation and innovation.

[Financial Performance]
Interface's financial performance exceeded expectations with a 4.2% currency-neutral net sales increase YoY. Adjusted EBITDA rose to $66.2 million from $53.7 million in the prior year. The company generated $76.7 million in operating cash flow, ending the quarter with $482 million in liquidity.

[Q&A Highlights]
Question 1: What drove the sales outperformance relative to expectations three months ago?
Answer: Healthcare was the key driver, with billings up 29% for the quarter. The One Interface strategy and expanded product portfolio in healthcare exceeded expectations, contributing to growth outside the U.S.

Question 2: Can you provide more details on investments in nora rubber?
Answer: Investments focus on supporting capacity, increasing productivity, and driving innovation. CapEx in 2026 may rise by $10 million to support these initiatives, aiming for growth and margin expansion.

Question 3: How do you view margins going forward?
Answer: The ambition is to reach a 38.5% margin, balancing share growth and business expansion. Future margin expansion will depend on mix, productivity, and volume leverage.

Question 4: Can you elaborate on the unusual tax rate in Q3?
Answer: A change in German tax legislation led to a non-cash pickup of $10.4 million, affecting reported tax results but not altering the adjusted 26% full-year tax guidance.

Question 5: What is the impact of automation on productivity?
Answer: Automation in the U.S. has reduced waste and improved efficiency. Similar initiatives in Europe and Australia are expected to yield comparable benefits.

Question 6: How is the global product category management affecting sales?
Answer: The strategy aims to sell a full suite of products to global customers, enhancing margin through expanded scope and innovation.

Question 7: What are the priorities for capital allocation?
Answer: Capital allocation focuses on growth, margin expansion, and innovation, with opportunistic stock repurchases to return capital to shareholders.

[Sentiment Analysis]
Analysts expressed positive sentiment, noting strong execution and strategic focus. Management maintained a confident tone, emphasizing growth opportunities and operational improvements.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 |
|--------|---------|---------|
| Net Sales | $364.5M | $344.1M |
| Adjusted Gross Profit Margin | 39.5% | 37.4% |
| Adjusted Operating Income | $54.1M | $43.4M |
| Adjusted EBITDA | $66.2M | $53.7M |
| Adjusted EPS | $0.61 | $0.48 |

[Risks and Concerns]
Risks include macroeconomic challenges outside the U.S., tariff impacts, and maintaining competitive pricing. The company is managing these through strategic investments and operational efficiencies.

[Final Takeaway]
Interface's Q3 2025 performance highlights the success of its One Interface strategy, particularly in the healthcare segment. The company's focus on automation and innovation positions it well for future growth, with raised guidance reflecting confidence in continued momentum. Despite external challenges, Interface's strategic execution and strong financial health provide a solid foundation for long-term shareholder value.