HNI - Earnings call transcript Q4 2021

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Operator

0:09 Good morning. My names is Chris (ph), and I will be your conference operator today. At this time, I would like to welcome everyone to the HNI Corporation Fourth Quarter and Fiscal Year 2021 Conference Call. All lines have been placed on mute to prevent any background noise After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Mr. you Thank X:XX begin may your you conference. McCall,

Matt McCall

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

Jeffrey Lorenger

XXXX numerous X from positioned segments growth our growth benefit make points pricing cover and secular steps fourth to for battled improve well completion our showed multiple thank and strategies acquisitions. Good X us. I initiatives profitability, about In will supply address joining with actions, chain additional actions, specific create X key These to to the to today. constraints, trends long-term of pressures, strategies inflationary restructuring X:XX Matt. unique simplify and about Thanks, shortages labor quarter, optimistic taking Our are while morning, again ongoing and initiatives. members our differentiated We X:XX our beyond. the you was HNI our HNI. constraints business labor business along including us and to long-term

profitability improve take we actions First, in to workplace to continue furnishings.

in Second, remained performance building residential products strong. our

these are will will on go improve our to cover through points. Marshall deploying comments. I will some I we Third, then general outlook. focused cash conclude with shareholder returns. XXXX

open to up first X:XX questions. key our the will we point. Finally, your Moving call to

workplace actions to improve are profitability and taking furnishings. We

severely Our Furnishings X main factors. were XXXX impacted margins by Workplace

First, due inflation. rapid substantial input and price/cost was negative to cost

labor outbreaks Second, these constraints chain Combined, of XXX revenue negative X:XX segment operating around approximately by and impacts profit segment XXXX reduced supply $XX availability, over capacity COVID basis XXXX. by and points. shifted lowered margin million out

increase as have address to our profitability We action taken issues To implemented price multiple a price cost, result. address we brands. expect to have across and both increases

I'll drive X be shortage. the taken. We X:XX We you expect labor and profit steps the second first to have to significant multiple we of in address quarter price cost our half to more the of significant in taken neutral XXXX. approximately also of actions improvement remind have

full a a half plant opened seating first we year. access third at through up capacity anticipate We This already pool. in facility has Mexico. provides started will in new the this at the new ramp the quarter. of First, and labor being Production facility to

to better XX% to in total, remain by can HNI includes This production automation we a more labor a layout creating changes, furnishings improving In existing operational labor labor Second, through facilities expect we we increase enable production deployed moving to additional dynamics. to be making our third, lines multiple arrangements initiatives Labor where be is it to we And most productive. us our challenge, are will XX% ensure with flow position will are in XXXX. workplace it these effectively. better manage but and will needed. X:XX

This will exit highest brands. our in the profitability. to We and a and Furnishings most to business improve and on our us announced our our quarter made also profit allow fourth strategic brand. simplify important streamline capacity plans We X long-term focus moves small offering to our Workplace

decision to our businesses breadth, reach, exiting multiple X:XX point made of and initiatives channel continued unmatched access also we at price have We investing business. and restructure Workplace eCommerce portion one the in Our businesses, Furnishings driving of the that profitable growth. market aimed low-margin are strategic

have We to office to a ability the serve with fast-growing education, of segments including and small customers. unique home market, midsized

existing us. work increasing office investments, benefit home re-entry, These our remain us along with differentiators they to hybrid large from showing activity. and markets to now are adoption reopen, have urban markets an work of signs of opportunity been X:XX position Our for from well While competitive slower of area

have and Building we of X:XX metro in strong in partnerships areas. and point. participate our offering key I in well technology rebound. key the products, investments move of Residential Products many dealers and us breadth position Importantly, a that the new second competitive now position my and to on leading cover to will The segment

with remains in and multiple both in strong segment opportunities core and for growth, performance business addressable our markets. new this margins Our high in

growth to increased provide For of products nesting continue retrofit by XXXX operating year X:XX optimism To driven and cost positive for outlook and X:XX opportunities, take growth chain business to a building residential elevated labor another our supply segment. living our both constraints, full home results. entering profit secular and addressing homebuilders for negatively of the levels and in million. activity, fourth We grew impacted construction and for XX% XXXX this around price new trends advantage outdoor and $XXX de-urbanization, XX% support our we full over which and these expect quarter initiatives, are which remodel XXXX, surrounding revenue strong backlog HNI-specific year for

also in nesting, living spaces. ability our premium of take a creating pits. market. appliance approximately hearth around we enhances GreatRoom through provides acquisitions. Outdoor during us also It acquired are advantage tables products and December, interest In the fire acquired outdoor we driving marketer in We outdoor The Home & growth, to our business XXXX, which In organic trends a fast-growing manufacturer revenue $XX expanding flexible outdoor installing increasing X:XX million acquisition, Dallas, residential primarily Trinity addition distributor. Hearth leading and products and The to Company, fire a platform generated living large living de-urbanization in building of

in – As – competitive last we the the great rapidly growing call, Home HNI journey. southwest retrofit remodel We residential control southwest and the and our have region. both outdoor excited Hearth the to as rapidly construction the strong the distribution content and welcome grow throughout family. serve to new hub will customer addition positions Trinity teams room trading us to in competitive our better a act experience We're & network markets. X:XX our to bolsters discussed fireside advantage, allowing This to

differentiation Our this and unique distribution business. strong builder pricing model, relationships unmatched vertically business integrated regional all product provide and infrastructure, depth for breadth,

scale Our grow to us benefit our to the category. from positions efforts

awareness, to and have my able engage point. digital their initiatives their category We difficult initiatives multiple are improving third that capabilities to and and journeys. electric online, include experience the homeowners shift and addition, are growing will to ways deliver customers underway key to driving for purchase now remodeling to in and In category. the tools during match. These competitors we fireplace I influence assist our reimagining homebuyers X:XX

improve $XX dividends. to cash million deploying returns. we shareholder in on focused are In We XXXX, paid

continuously paid a the have (ph) dividend XX We years. last for now

year We more Taking outstanding. repurchasing of $XX the worth our than our the $XX the up repurchases shares million million. buyback also quarter ramped for share total in nearly fourth activity

We million $XXX we Outdoor And authorization have $XX approximately repurchase million GreatRoom the mentioned, Trinity. X:XX as acquisitions, have remaining. of previously primarily invested in and

Marshall to discuss support to will XXXX continue forward, our outlook. sheet and balance look elevated the we expect XX:XX flow deployment. cash we As over turn Now, to I'll call cash our

Marshall Bridges

multiple drive XX:XX workplace pricing revenue Okay, backlog and furnishings, added we year point and expect expect an pricing of in million benefits rates pricing acquisitions, approximately benefits, teens segment normalization Segment backlog XXXX, XXXX. fuel are to XX:XX the high to end rates the on drive the the profit solid from also top low that capacity XXXX In out XXXX from expected like started growth, as in with of in growth for I levels. initiatives revenue revenue In the improvement this normal for will residential organic teens. support at XX% during That's assumed growth. generated growth elevated we growth actions high and progresses. backlog the to improvements to in furnishings market we year. would organic benefits products, XXs building was and workplace strong growth $XXX above that

Okay, let's look consolidated margins. at

and price expansion We half expect cost the margin second operating the of volume growth year. improving to drive in

year. ones XXXX of second of We profit cost expect historically the the Some seasonality, much price approximately XX% of we thoughts during half in the generate year our on XX:XX full recapture year. gap to

the in out pressures half, over prior first year prior in COVID driven be reasonably We and more was point we XXXX we'll weighted would comparing expect highest results from levels XX price of the first generated to pandemic the XXXX (ph). year, timing additions be to cost XX:XX Despite half surpassed the of the also impacts. years, among last by improvement, by strong the the capacity second profit quarter against that XXXX non-GAAP in first only half. EPS I

specifically, of XXXX, below offset pressure expected fourth comps profit the reduced first than be are XXXX, first to levels less to we quarter quarter more The second quarter price For expect X comparing benefits first are drivers. main in challenging. be quarter from XX:XX generated half by the sequentially the cost to

chain supply the labor worsened the part quarter and variant in on of surged. COVID availability from impacts as First early Omicron

as furnishings typical Second, experiencing their first fourth businesses the strong third, XXXX. the we're softness international from require slower actions the will results they expect half. taking prior typically availability our first labor EPS the first in seasonal historically As And quarter E-commerce address of are result, quarter quarter. in workplace to to below the levels first near quarter a investment the we move be XX:XX

start the back to I'll anticipate the do Jeff. XXXX. slowly, now year profit for turn to expect we over full Although, growth strong we call

Jeffrey Lorenger

Marshall. Thanks XX:XX

HNI our family to and along leading enter will members environment. respectfully. corporate – into focusing Company would highlight became we milestone like launch as company and a War company In industries, Before our important idea with These HNI our our your an brands for customers to as grow everyone we veterans our next a have be XXXX, relentlessly to as where the idea an will XX:XX Corporation. industries. an manufacturing our global enterprise and focus As good supportive customers which for year, Americans allowed in shared employ start across we of a would Han to desire HMI from then founded of Began equally II. are to This questions, returning on Humanized be a XX our World That to communities remain founding take our X years, of our on celebrating anniversary. belief principles the XXth HNI. citizen, was I treated later

the We challenges would communities the planet. are with allow to to To will your growth, increase founded continue was your company our long-term XX:XX for members, our questions. our positively I to contribute drive commitment actions, now day and and to of on like us XX value, big in our which Take manner operating members, profit We'll in open to same addressing the shareholder express dedication up ongoing impact front team core sincere believes a to to ago. success. my call gratitude and aggressive consistent our each us with years the our

Operator

question [Operator Company, Benchmark line XX:XX from is with your first Our Garner open. Thank you. is Instructions] Reuben

Reuben Garner

you. Thank everybody. Good morning, XX:XX

Marshall Bridges

morning. Good XX:XX

Jeffrey Lorenger

XX:XX morning. Good

Reuben Garner

in last about Omicron and let's call. the had in if XX:XX of and – the difficulties the order you the prepared so? maybe Let's can start cases remarks, your workplace more fading that's or with I sorry, this I at the But some of maybe the beginning rates in we if month recently quarter away you the said guess trend looked through over light talk how could,

Jeffrey Lorenger

increasing and the we We is indicator. to growing. actions year that -- took though we which would year, I we're the funnel see XX:XX or all, some We contract. had a year-over-year. that preorder orders tell Again, ahead. got passed design American Actually had pulled some optimistic. of Omicron I you, slowed forward-looking The Yes, starting dealer activity we What We've the created quarter But the I our by requests backlog led year. entered fourth kind a first some that's lot an pull of XX% stuff e-com, tell yeah, Ruben, customers. first we're exited have think, trend kind at -- in secondarily, elevated yes, monitor ahead and Quarter-to-date, that if are in price the the January, year. exclude in Then hit and XXXX time encouraging, of XX:XX softness some North slowest some exited of as as well, would and it's typically of SMB quarter that is recovery. in, is we you are we down. you the up the levels. orders

of So seeing we a are then positive. double-digit saw a kind what forward-looking of that's dip lot We of and now kind that saw. indicators we're

Reuben Garner

XX:XX the Okay, in And Workplace. again, great. then price the cost,

And So, to maybe see actions? can a through part still realizing are move then of you're and understand Marshall, neutral cost a becomes drift we price comments remains I in continue of the year, the year-over-year year? lower what on the especially much that tailwind how the pricing kind steel basis, if as we maybe as pressure your think us help first you sequential of

Marshall Bridges

of in neutral as gap majority XXXX. of to half had Reuben, the quarter Yes, cost year, the in we well. the for be second In that million quarter first and roughly negative price cost back we're in XX:XX expecting the $XX price expect the recover the corporation we to

million So million evenly of $XX benefit spread maybe $XX pretty across third XXXX. fourth of to quarter and the

Reuben Garner

then concern least -- relative in in visibility do Workplace to in XX:XX because that hearth Okay. have of your unprecedented some of history, about rates on lead guess, at slowdown side, you've Perfect. are being There's going got rising visibility starts. backlog to lot I at but a levels, to you And hearth? a of the what what kind the

top that of do on at a guys you kind very going on strong have you What was those lot levels You XXXX? of a what grow can internally. have strong comfort

Marshall Bridges

our I orders positive up position in XX%. Yes, question, our elevated are we're look, a we backlog Reuben. our housing still year mean, mixed, have year-to-date in great the Clearly, XX:XX in would say, for that I of an but segment it's indicators and earning are and efforts. business

to for about continue the there. -- HNI-specific some those talking confidence. give efforts. growth see bit us a we'll initiatives awareness Our We've now category been continue to starting We're traction

awareness, our website on instance, visits year-to-date. consideration our and up purchase For XX% are

had that initiative gas has I now. program XX insert Our dealers out been rolled last year. on

dealers XX%. We year-to-date quite now, in the category up on bit. and we're and year XX% have pushing And it XXX it's last it electric was up a

business, Although it's a a it's up was small the rate. growing last at XX% piece of year. nice It

that the well. outdoor look, and area, expansion we new talk so we're And bullish then on about the into as

portion growth an still in it's our that's -- of So our business. We're think view. of -- we this segment exciting time that in for

Reuben Garner

then can. Great, if gonna one XX:XX and sneak I'm in more I

business maybe So on that fireplace yourself you outdoor outside see the living outdoor organically? note, very interesting via of acquisition. Can components? a guys in moving forward you talk this related where or you living of fire runway getting lot acquisition Could about there Hearth in sort see Is going? of business could those

Jeffrey Lorenger

platform, fragmented see in and we market interesting you mean, that's an business, Yeah, pretty some as outdoor we obviously as core of Reuben. that's their tell. XX:XX categories know, a that whether it's we it we can growth But of use -- looks we other product question, living leads bring all, early first I think to in and capability a it's to to too it for closer core, the that headroom evaluate the them. business lot whether we space, to a always expertise opportunities those and we'll get –

Reuben Garner

again. to Perfect, this ’XX luck XX:XX good close year on the and congrats

Jeffrey Lorenger

Reuben. Thanks, XX:XX

Operator

is from Research, question Water is next Our with XX:XX your Budd Tower line open. Bugatch

Budd Bugatch

my to to its HNI And congratulations as and for morning. its good history Yes, for XX:XX well. for on future you

Jeffrey Lorenger

XX:XX Thanks, Budd.

Budd Bugatch

– the the Omicron? SMB are I you about welcome. little the where channel, confused going of geographies? You how Make understand various how and ended a versus workplace going the Jeff. with a on are And what's versus where got year your kind now I furnishing on comments with bit it's XX:XX in Question, sure contract with

Jeffrey Lorenger

stronger I in about XX:XX has market the you with did Yes, if on the, SMB been work say – area, those overall we're I little of the in that's but areas. to and business that's SMB sooner those question, a would what we're – think our being distribution smaller great went positioned a combine probably we’re network is the kind they've back workplace they've, our well, strongly been business business,

our a I business been in year, we prior build contract markets, we're was on piece say saying call business I that's the Omicron positive that's you still the rates business. for funnel the I urban would call up activity, that's instance, as is pretty some So strength of piece well. that's when know, still that over was XX% it you down up, half that the for that business – this But in or it and the hit pre-order would so the of of are piece phase. the the what it's of back the where been bullish is really quoting But

the So small the contract building. and stronger that's and is pieces. kind SMB now two business of with education is markets right

Budd Bugatch

plastics it? helpful. other for XX:XX in of we I'm throw other review versus some understand Could and we and or us factors composition you to is labor cost labor? or overall that are, on We by get price price way into steel wood raw hand can by in Okay. where does cost how numbers, maybe what That's Marshall, of segment fabric composition fit what's and trying a but and the give materials the

Marshall Bridges

XX:XX the all includes gave right. number Yeah, but that, so costs, that of price earlier I Reuben

from year. like as that get About of is in ramping steel biggest we're $XXX – costs be plus four The last look speaking, in range. input percent things that carryover to expecting basically that to XXXX, roughly sold. XXX into So steel, be up we cost to it million the XX up XX%, would

a of seeing and that which very up. we're and So XX:XX freight but outside individually, from seeing set broad costs going collectively, in We well are, just carryover are inflation of also then wages, none also as wages, cogs large commodities have as there's inflation, just ocean freight impactful. we're

gets costs $XXX So for which XXXX. we expect above that to offset price price with that million positive $XX $XX million to you collectively range, drive in that order million, $XXX million

Budd Bugatch

And of $XXX XX:XX kind realization? then is so price million to in the that somewhere number is price the $XXX

Marshall Bridges

XX:XX Yeah.

gets million, right. million $XXX it’s you think $XXX think I I to there,

Budd Bugatch

Yep. Okay. XX:XX

that be our about ever right, Okay. think All increase the when wages, that in first – wages talked I'll I And that'll go down. back language, I in that in remember, if quarter, then investment labor, is right. you investment sticky for your

investment investment? continuing – that So

Marshall Bridges

XX:XX facility Yeah, the the are half $X rest some lines of wages, things this sort time labor increased that extra seeing I facilities have, of investment we're we're with that. online. dynamics, think an moving capacity the and get to two of certainly our there first that there. half, of and in But the production thereof, one Jeff a cost hit adding to of million right, the which not walked Mexico in We first through, the unlike has capacity, world, some year also at what explaining temporary we're the New of a looking on cost other the so bit better that kind approximately

Budd Bugatch

– very that's So really that are those fact – understand XX:XX one well? and of time like kind My -- does additional costs that. the that issues are training those cause does

Marshall Bridges

but It's yes. starting them? it's you idea. Yes, the so and inefficiency Yeah, XX:XX much training, those not up the – of get moving

Budd Bugatch

I it. got okay. Sure. Yes, XX:XX

Okay. And backlog. the

Delta, elevated I did an workplace, that? backlog about mean, Hearth? get was the $XXX get in workplace, talk Did and I number there in in you million I You residential think

Marshall Bridges

an year. that elevated. the do there XX:XX of this $XX backlog, support growth is We believe extra didn't, will million We

you million there. come So $XX normalize we have that to we of know, backlog if demand, work in, can

Budd Bugatch

that's And right? about not… great an that's organic, room, – the outside not XX:XX I That's mean, that's outdoor,

Marshall Bridges

Correct. yeah. XX:XX That’s a,

Jeffrey Lorenger

business. core XX:XX A

Marshall Bridges

XX:XX Yeah.

Budd Bugatch

Correct. XX:XX Core business.

Okay, very and Congratulations, of XXXX luck thank best on you much. again and beyond.

Jeffrey Lorenger

Budd. Thanks, XX:XX

Operator

question Burns next with The is XX:XX from Company. Sidoti & Greg

Your line is open.

Greg Burgs

-- XX:XX – you take the the those PPG Was on of impetus didn't that was at that Was restructuring Morning, channels underperforming with the Why what were OFM a business? with or the what? there? channel. the and restructuring look or side online

Jeffrey Lorenger

come OFM about where is part and attractive on acceding point was that our business That business, no Yes, the the the an profit sold longer you many price think XX:XX is last Greg. there that couple it's and entrants for new of side retailers, our pool, into of opening judgment have over business, really the through years. if a

nice to gonna space. to we're business of a that pivot get macro I continue our gaming wanted get for we so be in behind that. have focus efforts and in so behind we our – on, is gaming And portion put environment believe the the gonna

Greg Burns

I – XX:XX the mentioned, then over guess you you couple think getting how headwinds. years some, profitability margins at the you operating -- of that, million the look and see business much of workplace to do side the $XX expect these in where profit the do of and you XXXX? on that that expect operating to business, of of to I it see, on Do back some the we do issues you lost you next was of get Okay get where to do

Jeffrey Lorenger

we XX:XX that and get about In of that $XX will The $XX back negative fully to all that I we back, back pressure talked price in million talked XXXX, Greg, that and was getting million about anticipate million million, the XXXX. $XX over not getting it $XX we costs. Yeah, time.

Likewise, workplace during So XXXX. backlog would not that. normalized may we we our and completely furnishings get

the that our there's years around after indicative then be few taking to the action two to we volume the of to margins businesses forward. one of examples e-commerce of going are next So gave restructuring smaller growth that and drive and the we're sort of type we're go over of exiting

that. after So in there'll more to we expect recover certainly to margin XXXX. But be some come

Greg Burns

you. Thank Okay. XX:XX Great.

Operator

is XX:XX Group. Research with Ramsay Steven The Thomson next from question

open. is line Your

Steven Ramsey

morning. topic Hi, continue second. to backlog wanted with I XX:XX the a Good for

much year, of what the initiatives segment? this orders depends depends how company-specific probably on incoming residential year? and workplace how of about much not this on said this the throughout And but labor You capacity on normalized and

Marshall Bridges

we of orders think if both the Steven, backlog. normalize completely segments, it, to are way not will strong is XX:XX the in I that think

we Building significant And to normalizing strong year. expect expect normalize right mentioned, we As but expecting a in from segment. now, to back pretty tailwind of we as year, the backlog the Workplace in Jeff the we Furnishings, of in backlog Products then amount sit the Residential the half have are a

that depends our not to on how And so much backlog orders we visibility add the are. yet. of the lower equation to we capacity sure and of can what have either those I'm ability And incoming complete

Steven Ramsey

about workplace factor of Very the Okay. the then the of fair. key way in you XX:XX these the guidance And that elements workplace to of low to from rank thinking to the what moves And the the side or pointed the you there guidance? various few out sales a high a Is release. side? is maybe the drivers contribution

Marshall Bridges

XX:XX Yes.

we to revenue teens the had high an to just growth Furnishings, given XXs. outlook low Workplace For for recap, in

So that the a driving price remember lot to we're price that, thing cost of going close that realization. is to

nonprice we the capacity growth. building to could are of the points that realization. well has how come we as to percentage about from then the of really think I orders so points on strong this organic X depends how percentage much is price from net it, incoming that activity And as XX XX X outlook add. rest talked maybe And that So or

Steven Ramsey

builders bigger pace issues? working slower seems opportunity for strong the do other on last you hoped given guys. you maybe on Or from be potential this make a the still for one of you're are penetration through Helpful. to this but had side hearth about so benefit operational push penetration to like year? the construction new thinking a And me feel than new able at happening for business, many the Is Okay. then the starts, side you XX:XX wave

Jeffrey Lorenger

is all bit. this we the are there said, acceptable this we Steven, we a still multiple model, that a I still rate is Jeff. just Yes, and timing Marshall penetration system categories, for -- has comes benefits. penetrate the like stuff at delays up we're those investment -- can operational we we but and No, foggy bit look, -- timing, dealing think little in all is our a constraints mean, awareness But of can given level. penetrate. And our gummed we forms the clearly, the little XX:XX building feel a with, is and see

Steven Ramsey

Thank Helpful. Okay. you. XX:XX

Operator

have closing no the at call further XX:XX We remarks. questions over Lorenger to any Mr. time. this turn I'll for

Jeffrey Lorenger

XX:XX in today HNI your a Great. and for day. the call. on us you thank you Thanks joining interest much. great Thank so Have for

Operator

gentlemen, concludes and call. this Ladies conference XX:XX today's

You may now disconnect. you. Thank

HNI (HNI) 28 Feb 222021 Q4 Earnings call transcript