HNI - Earnings call transcript Q1 2021

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Operator

Good day and thank you for standing by. Welcome to the HNI Corporation First Quarter Fiscal 2021 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. now today, hand Matt would to conference I speakers your McCall. Instructions] like the to over [Operator Please go ahead.

Matt McCall

are results. includes call Development Thank Thank not materially. you. President which discuss President, differ unknown website. Corporate made earnings Vice that now during Matt Jeff pleased of our our Lorenger. turn McCall. forward-looking HNI Copies Good to morning. known Actual are additional XXXX assumes forward-looking My Jeff? Investor affect risk. name first corporation any historical quarter The Lorenger, statements, are Relations earnings update over this CEO; subject that results. no and to us for presentation today are CFO. joining you website non-GAAP strictly is fiscal to I'm I'm for made to presentation Corporation. to With could President and during our and call. Jeff news statements could and facts release, posted posted Marshall actual me Chairman, Bridges, results are Statements and The reconciliations the Senior on our Vice call this financial obligation on and factors

Jeff Lorenger

and for us. morning joining Good you thank

to demonstrated again market This capability. quarter, quickly is showing HNI. unique dynamics about delivered operational of our members and strong substantial power our changing much ability diversified react our to what of We our the improvement, profit revenue streams,

XXXX the growth. and competitive optimistic of I'm profit to and our look drive positions remainder we to As enhanced beyond, about ability increasingly

initiatives. cycle, numerous the positioned two from differentiated recovery benefit HNI multiple of trends have segments secular well and to We business specific growth a

to first value. deploying savings drive clear and opportunities annual and the I three quarter. have productivity shareholder track call, driving We strong first, capital, and today's cover into Residential hitting of record will expect they effectively the highlights all to in a of moment. On Products cost cylinders, on in in we more segment continue. Building a detail I'll performance are: But our go each is summary,

recovering. Workplace Second, quarter our around Furnishings, model. demand incremental profit with some provide in Marshall while comments. color demonstrate quarter is our those in After conclude of covering first outlook. second of versus margins the I then strength some will our last general And third, year detail the highlights, will down the

Finally, your open we will call up the to questions.

first segment, nearly from year-ago highlight Residential Products The levels. profit in is Building our doubled

the strong including acquisitions. members stronger-than-expected Our responded while in incremental expanded We Operating of of maintaining to XX% revenue points the generated the in high delivered impact service margins this basis XX%, our or quarter demand, levels growth segment year-over-year and profit. first from XXX as year drove grew strong prior-year in of Remodel more we XX% income XX% sales in levels, initiatives our chain drive and leverage market, this which growth capitalize versus growth our supply year-over-year activity continue quarter. than the to operating retrofit strength. on prior

sales value growing buyers strong, strength construction Again, XX% an initiatives to home year-over-year also on basis. were and chain supply propositions, New growth continue with builders. and resonate organic our

activity quarter first accelerated. progressed, the As

we than quarter As in expected. this higher result, segment our first rates were a growth

strengthened orders XX% quarter a quarter first normalized Specifically, progressed. rate grew and as at the in year-over-year the

we lot optimistic forward, a be As look to about. there's

relationships business. model, position, strong this depth for distribution business pricing a competitive differentiation vertically and provide unmatched strong breadth, integrated all product have and We infrastructure, builder our regional

supported and by housing a benefiting long-term supply currently imbalance. demographic historically persisting demand trends strong from are We a cycle, housing

construction in secular both have trends, grow new nesting seeing support tied and the category outstanding we and an also are retrofit. remodel opportunity We to de-urbanization to and

driving To buy with a take all feature of one. and journey. home than projects less estimate the side, the reminder, of remodeling remodel and are or fire we we that As than construction, making homebuyer the a new a of on a but less home a fireplace. XX% two-thirds their as And place retrofit to are buyers in better investments purchase see having home, remodeling of influence connection opportunities, involve X% advantage homeowner these must-have

direct digital and marketing. in continue We invest to enhanced

We targeted competing visualization overall these drive and homeowners media partner to options. continue to By they space. help ever And differentiated demand. we to with than in social model, and tools to our with continue explore as we influencers develop efforts new this guide combining awareness are unique better

us and optimistic Our quarter reflect future. of and business the in expansion the revenue about margin growth power this the make

for multiple net declined the second basis, These past five lowest sales mid-size and our declined led the order year is segment decline prior period. of over was segment, showing quarter XX%, versus in focused which since highlight this and our improvement rates orders year Workplace were beginning in On of weeks the organic XX% pandemic, Our signs on the an was orders Furnishings improvement. by to The the the customers. above business levels. small are prior of

public the dealers supplies and with in sector, markets. smaller We are momentum national in seeing

growth generated e-commerce XXXX driving international over businesses, the double-digit in are from the to levels. pandemic. in were Orders areas be year. the order our contract those improvement, quarter of market by XX% In impacted contract businesses which first our the in the first to contrast We down quarter growth prior and versus continues

metrics and our easier activity. customers, our and our generally believe signs small remain outlook growth recovery demand remainder contract Workplace of the drive with quarter are As Furnishings dynamic, and the are the improving year. conditions position agility based look businesses, next to in is revenue trends we through competitive turning dealer and initial we on to and In ahead, the expect mid-size our although corner we we That seeing comps. in of preorder combination of

of the activity contract to in other late business. tied slowly recovery to in and timing customers will Most recover more vaccination somewhat than uncertain reopenings. sometime markets. ramp depends customers continue indicate to we However, the from likely believe major and demand contract parts through timing We reentry the office expect larger rates QX. QX of remains That on school

our expect we in accelerate growth result, contract of the year. a in businesses to revenue year-over-year half second the As

in Furnishings business well Workplace to market differentiation the compete positions recovers. Our us model as

reach. breadth, well to point access price These office unmatched and work us market have businesses reentry, from channel trends. position furnishings workplace de-urbanization benefit from differentiators and home Our

As result, to expect outperform market. continue to the we a

Our strong the a incremental margins. company We year-over-year on quarter strong of our a annual third was of incremental reported and highlight for year the was pressures. the residential permanent This margin initiatives total to quarter driven by our products, first productivity last volume in non-GAAP pandemic XX% basis. savings net building performance and leverage actions in cost taken from combat benefit cost operating

our incremental now to outlook. will around demonstrates to quarter first quarter business potential turn our and call provide over I the profitability Our the model. additional Marshall detail some of first Marshall? long-term our

Marshall Bridges

Okay.

segment. quarter building in residential and of Let's start quarter XX% second suggest growth construction year expected our excess from to our tied all quarter. activity Recent for housing trends, outlook the rates initiatives, order prior with second multiple benefits the products growth

We continue strong momentum to new with see both and retrofit construction. remodel

outlook for our to furnishings. shift workplace Let's

the prior For driven activity by mid-size order small expecting quarter, year and a growth, to with improving trends low comparable. customers, we're revenue second public sector

the on second percentage growth quarter a expectation we in includes impact Design which growth the our X.X of revenue rate Public low-teens points approximately the For rate overall, add year-over-year That acquisition, will a the to growth segment. quarter second basis. expect the segment in

inflationary to temporary Overall, those year quarter more the offset non-GAAP return and growth despite be quarter levels headwinds. and up second to expect move productivity let's Higher actions taken net prior second over prior than levels, we EPS in investments year. cost pressures, profitability. Next, of will volume

margins will temporary and in result to these quarter. of mix incremental the actions for our volume half in increases factors nicely as to profit the our operating Workplace Furnishings and margin cost growth price second the However, expect a anniversary prior-year effective. do pressures accelerate we recent become incremental in inflationary implemented response low improves, second We

We our of the $XXX Finally, balance quarter from flow total was some last in last down debt. on million and expectations. comments the from quarter of ended year. and $XXX with unchanged first cash million mostly first That quarter sheet

of $XX the Our which an XXXX. was quarter-ending of balance million, cash increase from first $XX million quarter represents

X.X ratio last leverage improved was quarter slightly gross last from of Our year. and

free opportunistic dividend ample growth will turn continue to expect activity. now over I'll to which this continued provide year, and buyback for back investment, strong Jeff. flow and We call to cash M&A the payments be capacity

Jeff Lorenger

questions, our XXXX Before discussed I quarter, our highlight our CSR your want to published we take report. ESG report we Last recently goals. and initial Corporate Responsibility Social

related to to material Our goals ethical new recyclable by XXXX. report conduct waste requirements greenhouse XX% sustainable others, announced XXXX. and compliance achieve all by packaging landfill multiple to new XX% reduce of targets, achieve emission zero from and to by XXX% and including, use our X HNI's intensity XXXX, of reduce XXXX per includes ton This goods code by XXX% facilities to sourcing, with gas among for a our baseline XXXX supplier energy Scope to

addition, and continue to our initiatives impressed the to world. desire to embrace donate by operate. to footprint. in we our life And I'm improve In our pre-tax X% the communities the which will enthusiastically profit our our we we global the of across XXX% of electricity for quality source annually, in will renewable communities of of organization, members continue the these betterment

by as and optimistic stating accelerated that look progress year. expect wrap me up throughout we growth Let increasingly the we as are profit we forward,

and initiatives. the business cycle, recovery each growth differentiated segments, of well positioned benefit two have to We from trends a secular HNI-specific

and to effectively would well the proud cash are and grow members. We expand for deploy grateful conclude over like of generate of the stating all margins HNI to I and by positioned I'm extremely long-term. revenue, efforts

questions. We for will now call your the up open

Operator

Burns [Operator Instructions] Greg Company. Your with first line and question the of Sidoti from comes

line open. Your is

Greg Burns

Good morning.

that for characterize products would is On you've or expansion the the or of from quarters? category segment, share coming from primarily gains been the – couple last larger building from thinking market gains growth products the for you about building

Jeff Lorenger

remodel me, we by here. QX. and in expected retrofit I'll about in two give I all, that. of factors; think comment you one, the traction range quarter. the to really I'll accelerated mid-XX% up say to was were of growth and really consistent first And quarter, our kind Greg, mid-quarter as with Yes, driven XX% couple growth just that said, let first would year-over-year continue on and gain I It's initiatives examples a our the orders had

year-to-date. And housing year-to-date. and visits purchase up year-to-date. over been we've are Our more awareness each And that markets to is The working XX% are the up are initiative remodel strong. consideration a sales XXX% traffic are category on. over up specific than electric And tied inventories our insert growth then Website low. sales XX% are

got As mortgage you hanging They equity, Home people the rates it. have savings. are well know, there. in

vertical connecting marketplace. our We've with commented. I of got and is taking growth. kept the have And maintained we're we've able We've – supply think better with And we customers. products. integration, model, the I driving throughout and great levels combined advantage of strength. the that, And on got And as service strong top our a so, homebuyers that all chain service really homeowners really our been pandemic. to what's We've

Greg Burns

And that in [Technical Difficulty] of – terms then to the there great. can quantify revenue way Okay, how [Technical what expansion? from grow market. potential of how move if two-thirds Difficulty] new is the each much you category much or the bigger any maybe Like in percentage maybe equals to two-thirds market construction maybe from XX% point

Jeff Lorenger

for to move would Greg, points as feature, or XX% the new is like we if this must-have XX% industry that mean, growth a construction in I XX XX% of fire be were XX, in homeowners place us. of worth from over as putting less well to able a the than long-term, that

So, some to time going get to there, though. very meaningful. it's take It's

Greg Burns

confidence the do Okay. kind out kind forward on coming a and following moving see the contract then SMB what see then recession, coming of workplace typically of to is this you All is go gives – where the see it projects contracts you this you through? great. Thanks. supplies, those larger right, And piece of through, pattern following the you side, that

Jeff Lorenger

with business shorter-cycle market take that. do yes, let going recession little and You in comment but longer on though. a some is The sell is contract different. little it it the projects is the do similar I'm out of unique, the more we may of see know it's complex. And asterix. This that a them to cycle because a and pandemic Greg, answer me Typically, some be longer. some that's an Typically, with are of comes more They first this.

smaller So, markets it, of but the come there's some less open it's and and smaller just also I starting out think that where some to sooner. transit are businesses is of are mass

with probably but it's it pandemic. to this in operate but fashion, bit coming maybe a So either a similar out for little even different sooner, we expect reason,

Greg Burns

Okay, great. Thank you.

Operator

Your Benchmark next The of question comes from Reuben Garner the with line Company.

Your line open. is

Reuben Garner

morning, Good Thanks. everybody.

Jeff Lorenger

Good Morning.

Reuben Garner

do you kind have the or back to of reasons where building is building have your that guys to clearly they're the getting efficient to categories is on competition? growing maybe know feel I the their that to – attribute share fact the expect a any but in factories several same the of least the to and faster like the you you growth competition you and from other you just hate pick horse, other going that I of been able your some products follow-up than chains continue to forward some dead or last run beat categories it point piece, So do over the And in have much execute are and guys quarters. products you space. do able enough product to up How to of available their versus to think supply participate you at

Jeff Lorenger

Well, that's question. good Ruben, a

model they're market operational I really there. I and chains cycle, continue to our so feel can't competition figure as model. share tell we how the of It's forward, ability to their kind capture little think perform continue much share supply goes well. speak in gains why is gain, can their good at this to that do believe I to operational our model. and our to tough out definitely going where just there's really we're optimistic. their you, is given a about But we That's to

Reuben Garner

in and movers? you're growth mentioned, seeing growing the you well? the like as a initiatives advantage first an electric, do guys are areas in is follow-up, Is of products that – are faster? some you inserts better and of do growth those you Or that's whole maybe category spaces? Or like those have substantial kind you why And your those think

Marshall Bridges

mature us, unique our Well, to I of And Obviously, little is doing we're rates initiatives, unique other ones. up momentum growth to sales, think insert than a growth think most category, that that's a there. and Ruben. the driving absolutely us, probably efforts we're definitely lot Electric website is but better of more early there. of emerging one earlier, Jeff year-to-date. this the is XXX% traffic our than I seeing we're definitely some The awareness, with fireplace an consideration probably mentioned

right activity. note and to entirely really not are more all be think categories the as very move growth now, that important grow They're they're try but that forward I we penetrate large can it's these important remodeling initiatives. to large categories to category the of

Reuben Garner

also the side, markets it faster, like are are you Got Fortune from to you in in it. office benefiting up businesses the open just small versus contract may Or LA are office – opened on workplace – geographies, up big small of kind And businesses that to quickly? markets York – in then where words, the New you returning guys your seeing same the that your easier and move in trends geographical a stronger other in is be where because a each it's the to is smaller get some are XXX have markets faster? than also it for company the of

Jeff Lorenger

I think a it's – question. Yes, that good

I think with lead – I locations. would probably geographic

mid-size. to is a up unique, locked York major little even on still the metro New but with transit mass kind smaller of is any

at. bit So, is this based we on probably geographic-driven what more a little look

Reuben Garner

to workplace? going out you any helpful. – how and And the investments the quantify a release you much workplace, of period, relative in, or you're I'm very it that the Perfect, already things sort investing of year-ago to about reason it's maybe one in to if what as making what more in press investment called sneak building much in versus of are How talked there? products some is you in there? way

Matt McCall

are of continuation the side, for Yes. continuing add products efforts is About category that couple pretty Reuben, broad. years. up. ramp are this same, our half we've making which of half analytics. and the We're the them the are investments furnishings. that residential It's the categories to been product to investments and it's into to building data digital, going The grow other on hard the new workplace last

to incremental probably of For we're the million million investments. looking $XX year, like $XX

Operator

Your Group. Thompson the with Thompson comes next Kathryn Research question of from line

open. Your line is

Kathryn Thompson

thank today. my Hi, you questions taking for

options? First, living? With outdoor the your the standard and orders way any those focusing harsh. on so the with or of of have kind other indoor on business focus living how is living, your residential focus any side And color you outdoor opportunity of Thank more on frame-up products outdoor much in on spaces? you give orders could trended placement can the you. Really for versus

Jeff Lorenger

right, You're residential Kathryn? in

Kathryn Thompson

Yes. Correct.

Jeff Lorenger

it's but Yes. that our looking and the emerging, orders in. area business, a that's small piece It's expand another good, of to are we're

Kathryn Thompson

opportunity you sized that could be? up Have what

Jeff Lorenger

not there's because focus right of now. mean really, Not dynamic it's totally so I a lot there.

keep that So, of we're of with don't we be still the do advantage we I target we play a can But is have kind up business a just on the longer-term there's trying we're yet. in to piece take – definitely the space just think what But outdoor have. – opportunity market of. the

Kathryn Thompson

post-COVID one, purchases did improving better it's bit And how in workplace is of couple just lagging, and world? shift more off think of sales to And are size to Public e-commerce help of I I how your general, e-commerce contract little any of Group, of e-commerce. a want the fundamental how the kind the seeing opportunity legacy, the should going trends e-commerce? changes into contract in we Okay. quarter? sequentially quarters. but specifically you know dig in In your given the a segment acquisition through And see that or last good much Design I relative of mean,

Jeff Lorenger

million the expecting year. to added revenue million Design to simple the quarter. the $X full Kathryn, answer $XX million first approximately we to $XX of to add Public, Well, for We're

seeing we're contract. somewhat opportunity a complementary substitute. excited I to very lots it's don't We're and integration. So, about of that it's the know

I we're in large yes, when complexity but complementary little additive. the of definitely to a think do and of office, still that's to kind it lot be the is there's – alluding XXX% you're doing e-commerce, can a just, through a challenging mix

Kathryn Thompson

how pure of And guess of just really that Marshall, very contract, and kind sense forward splitting change bigger you better the are world, is helpful. sense. was consistently we designers of traditional to the see of complementary trends you growth a are getting that versus that's melding I I the any orders more sort think going – your if seeing with it that makes to a from speaks that about going e-commerce modeling change and it seeing guess who how the e-commerce because we And trajectory? up melding

Marshall Bridges

know I think, you at, haven't really yet. we I that what Yes, Kathryn, getting seen

haven't I the but early down – a seen possibility think we right it's that's rational now, days. road,

the relates kind two far of most combined. is the think I home, but the as stand-alone going the you product, as home processing as work we've to into seen from kind of know of e-com contract it maybe

still get of down first things would later then after time whether middle trying and come and main the play opportunity think that or to figure people are heads office or back running. theory of back to innings probably up the I really kind are to XX% it's they and office, out time come kind the into rolling XX% how want and

Kathryn Thompson

focus the Okay. and in of industry and And Texas quarter. on which been construction freeze is question also the final general ripple has impact a the the chain, in supply

impact you being the has – seats categories you. these raw to give you or on see come been the hearing how If be steel with for to of even color tough are and forward. also it you delays, able chain impact the basic you any impacted we're could being just that are because you feel materials with supply out flush but now by, going and Thank foam

Jeff Lorenger

absolutely say, would I Yes, you're right.

and for tight. categories is in a lot the of are supply I think manufacturers chains most

most pricing the to inflation maintain categories is think the been of I the foam but well, we've or able pretty cost, unique.

recovering, slight and allocations bit in this a in on but – have supply to the other point we seen maintain been chain The in has specifically we've freight. now, do on so the foam been, through well able as for lead soft correct far, bumps foam are challenge worked we were You category, a and ocean area. some at seating right But see general than it's have tight. been logistics it the times been constrained teams the that

Kathryn Thompson

Thanks Okay, very great. much.

Jeff Lorenger

Thank you.

Operator

I to time. There are the turn no for Lorenger further Mr. call remarks. questions closing will at this now back

Jeff Lorenger

and everybody day. Well, for today. for us great Great. HNI a your joining in thanks thanks Have interest

Operator

today’s conference call. concludes This

may You disconnect. now

HNI (HNI) 1 May 212021 Q1 Earnings call transcript