HNI - Earnings call transcript Q2 2022

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Operator

Good morning. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the HNI Corporation Second Quarter Fiscal 2022 Results Conference Call. [Operator Instructions]. Thank you. Mr. your begin may you conference. McCall,

Matthew McCall

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

Jeffrey Lorenger

Good us. you morning, thank for and joining Matt. Thanks,

top will strong points discuss delivered operational to track right why beyond. and in remain and our line Today, in bottom while key we members Our continue the second invest capabilities. go-to-market the on network cover strengthening performance three I quarter and we and for XXXX

we then to and a better second, these on with through will our continue the our XXXX conclude that efforts forward. third, strategies and I some consistent by focus recent Marsh on on outlook. week, divested updated simplification focus the points comments. thoughts I will organic then environment. solid strategies core increasing we and and maintaining will demand driven general portfolio price allow our will us growth some move go quarter, going returns; we closing announced to on delivered XX% cover discuss cost; previously in Lamex, and long-term with earnings First, volume growth deploy last our positive shareholder our invest capital,

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

In price key quarter, XX% point. Workplace first double-digit price organic Moving Building drove line the the excluding recent cost. increased quarter. restructuring elevated, In Segment We visibility. drove strong Sequentially, the to half revenue impacts our and make consolidated one volume gross improved Residential e-commerce growth in and nearly pricing shipments realization which top Building of last remain improvements organic time XX% Residential higher earnings year. volume the lead growth. businesses, improve backlog revenue Workplace XX% and by and grew generated levels pressure delivered growth Products and our helps quarter. to volume quarter. we recovering Furnishings, the in as in in Furnishings in the the our When benefited from of second our quarter volume segment Products, inflationary year-over-year growth in and growth faced Both positive driven the continued operating margins second we progress

quarter, second nearly the by million. price During cost $X exceeded

in to to expect deliver significant continue price/cost XXXX. improvement We profit

will I what expectation improved second you point. quarter. key to shared price/cost our fact, from move now with In last has on we my

lines deploy a continue which and dynamics we the continue on resilient. to response, more The in focus and production be and In capital, We the take invest in making long and post-COVID productive to $X supply dynamics seating multiple implemented totaled environment, to long-term maintaining opened labor These million second operational us advantage operations locations of chain with investments, term our relocated Mexico, facility our challenging. quarter, more for are positioning over other strategies. by our new changes. better labor

our in end new enhancing advancing users and digital connection with our continue We capabilities, developing our make including investments to products. also go-to-market efforts,

capability and in improved XX% North Inorganic homeowners us homebuilders. Carolina. This unique providing connection add service in installing total, is distributor Building Raleigh, homebuyers, a acquired have past now we competitive Products more integrated Building through to than of in located fast-growing already the strong our hearth an in and unmatched Residential installing Products installing long-term It part years. our And revenue During XX flows we an remain vertically Residential sixth with position three of region. with distributors, own quarter, will will the growth the segment. now products our acquired in model. this segment strategy distributor important We our

business Finally, repurchases, quarters to the four million shareholders strong in $XXX returned over dividends We flow generation than we remains a discuss third returned the million as finish sheet our point. I'll $XX moment, will in shape. great and demonstrating our more more And capabilities through more past in balance my model. than Marshall quarter. now our in with have of detail cash key

occurred business expanding of simplifying Last with each at we Lamex, e-commerce We on Furnishings initiatives Kong-based segment. will furniture These Workplace of better ultimately year, our This core business. sale continue on business. to our week, adjustments. us elimination in focus one allow which a a examples going and forward margins of our of for standard this are post-closing simplifying subject our million, aimed restructuring divestiture, this small Hong all $XX the progress, make to office businesses, these strategies to announced of with focus our China moves and along of broader the the of brand

second to I recent economic X% when of to broader some quarter Before year-over-year. XX% business I increased over XXXX of given dynamics wanted second compared call thoughts quarter the grew to recession. the orders Starting Furnishings, provide Workplace the in and Marshall, risk in on landscape turn the orders

softened Second from the was small- from later order in medium-sized lag and quarter customers. growth lower growth quarter, expected growth order than and to customers contract

was is back response growth In to Furnishings. as declining and the the metrics. customers Our changes when XX% of concerns in our over growing This expect have full pattern quarter smaller which Products very trends, strategic year-on-year. is economy. The our customers It XXXX react year-over-year. quickly group pulling more customers strong second this slowdowns XX% we the accounts Residential negative orders experienced in grew of in largest to confidence business, Building XX% we in targets Workplace a quarter, before emerge. Despite to the continue quarter in second to year segment, increased compared orders a strong recessionary the revenue appears

New rates activity. remodel construction order retrofit outperformed

and are we rates well-documented deteriorating Recent aimed XXXX, the revenue negative strong have growth by affordability. single-family driven trends order primarily initiatives by moderated, expanding pricing consistent inorganic For housing, category. in still revenue growth driven expecting benefits, at our with

help and second half the single-family XXXX. impact will builder However, on elevated backlogs soften in the a construction longer of cycle housing

preparing slowdown, We in optimistic remain dynamics are but this for segment. a we long-term about the

will single-family undersupplied to to continue opportunities We with believe the intermediate demographic benefit trends over and term. business our associated long the an market

Our distribution unique regional vertically infrastructure business service. with integrated the offers unmatched unparalleled model customer has and channel that product reach

the turn to discuss call I'll Now over our outlook. to Marshall

Marshall Bridges

Okay.

impact Jeff half we seeing As signs that will indicated, our are concerns second macroeconomic recession demand. negatively and

still little of restructuring Even continued be X improved growth lowering revenue be now revenue our result, we our the a than and XXXX, outlook. price to strong for divestiture factors than prior Compared to half reduced for of XXXX. rates XXXX seasonality XXs half. Products, second in for cost the initiatives our X approximately in half expect few less revenue sale half a expected the expenses. due low and the the to the note about reduction, with now teens Lamex. due partially driving Compared lower a Building volume would outlook, of growth when segment actions we XXXX. a compared the Residential expect XXXX from the expected XX like third multiple reported teens be of growth As to prior expectation high the for lower growth rate the are expected our rate would offset quarter expecting to to more to growth These streamline percentage to profit Lamex previous and points are second The in by of e-commerce little half comments rates reductions, view. in will profit the from percentage also excluding we pricing are previously Lamex. on acquisitions segment and growth these Furnishings, now I growth Workplace is the slower points outlook, prior that expected is Slower in volume our business we second to year. and In are is to by in than lower growth softer to portfolio. and XXXX. low benefits growth sale fuel that announced In A benefits, segment is

favorable by levels to quarter teens. quarter EPS to price second above are third rates -- benefits high year prior from Pricing non-GAAP digits growth XXXX single primarily improve expect drive to in results, low driven to We sequentially and the the cost. third revenue expected quarter be

seasonality. earnings Regarding

we maintain of and balance financial to to strong half recent reminder, back half. generate due years. historically to outlook differs a to XX% second than to profit in less the In in we This our half be profit now are As slightly expecting XXXX, from the prior our our expect second second debt and of end half a expect performance lower first EBITDA X.X moderating Debt in approximately weighted a position. strong levels the was sheet the second at quarter, the perspective, we half. From to we total outlook.

for capacity cash capital flow provide will continued free continued and leverage deployment. low and ample generation flexibility Our

some detail Lamex additional Finally, on divestiture. the

proceeds repay will the to debt. strengthen transaction our balance We plan use to First, sheet. the

additional accretive focus. sale importantly, in we be will on the resulting a benefit -- believe basis will year there the from be more increase Second, margin full

earnings will estimate revenue benefit earnings. with by $X.XX including half, in second half the will profit approximately However, negatively costs. second reduced the seasonality given We and almost second the of XXXX coming when the half impact EPS Lamex's the of all revenue sale transaction reduce interest majority and

results second Third, impacts quarter our non-GAAP will be the positively from have been Those GAAP impact our and third results. excluded will and a transaction basis. on

to that approximately EPS sale million generate I'll by call now over expect the second of in gain of gain expectation that benefits our quarter The in a the the quarter. the Jeff. tax to second back $X.XX. turn We created approximately third increased quarter pretax $XX GAAP

Jeffrey Lorenger

our model. We our Products the and Thanks, remain focused delivering business top two by growth Furnishings driving Residential in on our margin expansion; segment Marshall. differentiated Building Workplace objectives: improving profitability leveraging by long-term primary line strong of

on is we focused the becoming remain competitive Although more positions. our long-term environment improving challenging,

growth open XXXX, have a And to environment prepared while strong that call strong the to strategic balance We'll We increasingly objectives. economic difficult team an an now is confront long-term expect experienced while questions. maintaining sheet. your we our earnings in maintaining

Operator

Company. Garner Your comes line Instructions] today with Benchmark Reuben the from first [Operator of question

Reuben Garner

you a going any Do start of here? I said coal to medium-sized mine past. to in wondering, softness you've with in small- differences see that economies, two see stories in the tell Is this contract? Specifically, we contract differences in you businesses? the and this I'm the in there Could seen you're seeing kind guess, we're in canary regard? to two is the Or the

Jeffrey Lorenger

a business that's going goes we SMB when mean I that's to happen refer the have or -- seen not. I on into just a cycle. the historically, past, don't we great I contract the This can't based Reuben, I question. before selling to time, whether when mean the slowdown predict

it we're it's operate like uncertainty think the our But in world coal looks the not see for in has larger mine. typically in doing. But just past. going the economy now. just given plans their continue past. what to pause that it take continue business, I'm that -- just a say necessarily work -- prepared not But saying like. they've business, recession a And through we're the there, in longer I'm is prepare I operating still But we're really slowdown. canary scenarios contracts a is is the assessing to the little SMB out helping a in that to It us. as work here not I'm we looking it's Again, at may that may shorter-cycle won't to customers to it customers whole sort post-pandemic through like right the kind multiple to economic than of the clearly claim be that been way. We're

Reuben Garner

Right.

be regional And little recovery the differences? that seeing -- small markets that kind you might mentioned this your business than of the you largest customers the of of in strength major smaller doing some so accounts some markets? Is of in a different well. Are

Jeffrey Lorenger

Yes. it's No, I say wouldn't Reuben. based, regionally

a some -- their again, longer just think cycle. some customers underway. of have it's post-pandemic -- on larger been they've And it's that. got I been hybrid think of this plans, emerging, model they've those out the and And studying moving plans I

And at of really but point. us, It's up the so very those things have this been based well across board. not kind holding for regionally it's

Reuben Garner

to residential then switching business. gears Okay. the And

give can repair seeing in break still breakdown the you And color versus versus and you're you for repair growth remodel? Is can any new So between on us the then volume down remodel price construction growing? and us?

Marshall Bridges

Yes. Sure, Reuben.

order quarter new there than saw their fall to that the encourage is we're the remodel what's now than people in opposite. our retrofit given But for to earlier of was in it order market. On in is from basis, surprise construction. grew So an is what in new the programs some the right noise we happened year what retrofit seeing construction, faster remodel demand. some sales no There's the stronger

acquisitions. teens. from full That in expecting about for Products the the percentage we're year X growth Residential Building points So includes high is what in

the includes growth XX% price would in which about teens, realization. organic be So low

growth digits. low in non-price the would So year single organic the for be

Reuben Garner

Perfect.

about was misread I or the comment. misinterpreted I I construction. I thinking release. just orders that. sorry read I new guess the guess And

do So strength feel forward, and is remodel been in going hold? you I there's slowdowns going mean that clear DIY. in some to repair the

forward? contractor-driven, is feel guys backlog. fireplace going an and that about portion do the industry of the think element more you probably of I How there's business

Marshall Bridges

think the I we're business both slow to expecting sides of down.

large We to particularly retrofit that's the soften pretty that going bit. backlog, a a have remodel in

single-digit in in than you we're of the half. said, new segment back expecting mean, I That the for to So back remodel expecting growth price, unit if be half. we're construction still softer low retrofit exclude Reuben, the sort

this not fall -- a more gradual is off easing. It's of it's So where to going rapidly. a

Operator

Your Greg Sidoti. line of the question next from comes Burns with

Gregory Burns

these forward of of does that part strategy that you? distributors, Could of the business? talk terms installing just you going about in behind the plans integration, vertical benefit what how are acquisition And the the growing your

Jeffrey Lorenger

we our customers, homeowners, construction. years question. to -- set a What's homebuyers in what's whether couple to first in what R&R, it's new a really of mean all. Greg, out great -- I to Yes, we've ago of closer to get be it important important

And so part go-to-market, But of market it part service. part research. is of that is digital, is of effort the it is other part

installing business can network anyway we and decided just could the really to had combination. we're in to closer And and more the can model. what more even -- the control It's we its customer. about leveraging, network, and distributor we It's model levels a BXB it's we a But provide directly it's getting get so as that's we strong customer to face, and insights this we better typical service we about insights the on that consumers service -- about. more homeowners get leverage and now homebuyers -- the the great

add -- Service really that's that we're it. business, a it's so And it's to now piece profitable going capability to and is about. what

Gregory Burns

move into conflicts potential any kind there of you Is distributors Okay. markets? with other as

Jeffrey Lorenger

cases, another plan of retire. we've to to an wants Typically, of these that And about have that. some no. plan a we're We've out get become who doesn't and about -- owner we're the business collaborative that, careful in and succession

forms, the And model the we've network -- so as it but takes we we got love strongest dealers, all that in great marketplace, and are independent well.

been it's so six we have we've very That's really complementary, done And years collaborative few we're and last all way. last the that do when this.

Gregory Burns

Or What slowdown. Are case does is just in currently? something worse, planning couple mentioned -- things being just there a plans see that Okay. actual you you're it in place putting there anything that And times for is preparing an for? is a of get you're you mean? implemented you

Jeffrey Lorenger

We're of always it's kind have think been we're I being way. Greg, we Look, -- that prudent. just Yes.

Mexico. we'll keep the altitude a shelf, took just some the and the can of system -- cost powder. bunch we facility When also take a we'll instance, dry now will built have actions. you couldn't to out some see took we of pandemic in for on We bit, out. pricing plans the hit, it hit, enough, take When we they’ve around, I we mean, flipped fast inflation but

fairly just have being of being history agile able we -- we that to on quickly front. So pretty a and move

I when mean preparing. I what say that's so And

Gregory Burns

it sounds just just terms expecting impact going of that quarters for market get seeing then view like a housing. housing, I assume you've -- on it you're seeing the behind general going a of I now more Do necessarily in And I Products a you don't macroeconomically, lastly, doesn't I slowdown cliff feel fall the to to off couple -- of comps is given Building you in slowdown. we're you're strongly. get I had Great. to moderate contraction? like you business It like the seems slowdown don't your that a just a business Okay. more of wanted mean, the sounds there's know is there what -- are strong that. for the here. see like in how -- a so in side and potential feel

Marshall Bridges

would agree gives we in and it's you, believe, No, now, think sit backlog single-digit the The the described of third us fourth with Greg, timing. low as quarter. growth we as in what a right question just motion stuff to I we visibility and we

I little backlogs do like I to that's us. fourth some going bit remains unknown flow said, us. through think there. we But quarter the to big to eventually, have a But

Jeffrey Lorenger

hit we if probably probably in Greg. anything, would think Yes, more 'XX, that

Operator

of Your Water Rex Henderson Research. next question comes line from the with Tower

Rex Henderson

in Bud just wanted good through haven't and of kind locations? couple through in I congratulations a times get your last wanted growth you flows you have vertical, of now. confusing -- years. you Can of some sales those of have props and really some on on over did XX really how the give the me to much some you bit doing margins the rest the navigating bit I'm locations to a -- job Budd. conflict that in RBP Sorry, couldn't -- I of for through terms of here a to first a the done all, now little business filling and be while. a little I for And give that this And had color XX today. on segment of business? RBP those or what advantages relative I focus

Jeffrey Lorenger

said low about -- the flows remarks, business the XX% our revenue segment prepared that Yes, through of it's segment it's as Rex, owned distributors. I overall in

the of further a earlier, it customers, As get earlier we as said the kind we elaborate a marketing was, at of control the that, think content I one to on use question incubator. local level, as big I closer I'll benefits also can of we little as an the

So that and group. on run and own the we that learn then connectivity test it to our customer group We we take it marketing through independents. base, to

So we then implemented it rest customers, to and I as of prove nice on it them -- quickly and a improve service, things the get mechanism them the side. independent in we said, give them put really really network system resonate provides can them that try then which, That's like out the to out, with benefit with to a the and of well. big

Rex Henderson

segment end be? vision or that that you through how -- can any that you're any Do Do have be? going goal to can it for you for what greenfield have grow continued segment Okay. whether acquisitions? big vertical And continue to can either

Jeffrey Lorenger

really end earlier, case-by-case, an Rex, of Well, I market-by-market it's Like situation. kind goal. not said a

it's distributor -- calls us. a Sometimes

them. call we Sometimes

built-in with that advantages how basically, we and do know and a lot know customers of what the business to service in model. is so gives it And run us we

have build And end an necessarily. don't opportunistically really out. options But point I game so in or to network looking of we're always for time kind a the

Rex Henderson

case? your you're A year, that in is of still a right that? had positions this down? happening you last lot on hiring said open? or plans of force slowed your and slowdown positions. Okay. Is What's preparation Are the still year expectations labor open late or potential holding you a the early the for later for so now you lot shelf. you Or on said year, putting year, some And next

Jeffrey Lorenger

Yes.

catch Mexico on it stable, it pretty to has able the quarter. on force bit. ramped fourth Rex, side. continues and been think to labor now kind labor and ramp, And the we're we come up of will -- We've fully a online, also direct be right here I by

pressure had off we so And taken planned. as that's

kind a So where of standpoint. to we're basically, be labor front need on we

Rex Henderson

a of have at So positions you really point to looking don't open that you're lot this anymore. fill

all the got you you've filled jobs pretty are much? filled, like to feel need have You

Jeffrey Lorenger

and But Yes. there's mean, some it's craziness. look, always -- in that some here to we're there, some things stuff engineers not always more not back we're normal for. I times, and market the

Rex Henderson

Okay. the spec on was a segment, the that what's Very made good. buyers? And differences getting Budd the homebuyers? of and still homes, spec. of and And the things from of new to Or in side one lot that new are -- one spec finally, the building Is the builder happening comments there goes between home RBP you orders case?

Marshall Bridges

builders, follow Rex, mix. their we national very we are strong with and the

levels. So the I spec low look And like on wouldn't necessarily lot say homes. that we're we're a to over inventory going coming really off just recall, larger We're indexed builders.

So lot I'm to a there's there, probably them than out ask not but rather buildings us. of sure that speculative question a that's

Operator

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

Steven Ramsey

costs. half? now think the And to in that had why what the A plays through you How than out, Maybe that's thought? the better you price of questions going couple price can second first be you trajectory of you half? previously walk on through think cost

Marshall Bridges

Yes. Yes.

$XX we quarter. million is to reason going And are realization get been each ramping price was it's more In So and is the expecting to quarter, up. first sequentially, about $XX the be million so price third was favorable. One million it to fourth $X million In quarter, the favorable. about the $X cost in quarter second the during twofold. for that quarter we're favorable

year recognized going ramped anniversarying up. half. $XX in inflation, the quarter. going quarter, the an year where back last That $XX it's In start million the in incremental million we the as Steven, in inflation to had versus in to the example, went period first price and about we're go Just to prior second higher

is inflation great. versus not as year the So last incremental

gets a price look the a at we're year. in realization year, and where inflation less of place basically million that favorable million price you what favorable more lost be the cost. combination to So recover more to range. $XX puts incremental $XX we price When cost at much last the us now we've And us expecting

last years, you we're price if cost. two on roughly the neutral over look So

Steven Ramsey

about gains? Okay. allow segment Very the down you're about very thinking for you a I you investments that mid-teens keeping investments the helpful, things go kind take I'm with pedal what to making advantage on think would helpful. when then down of for profitability the segment And at, volumes residential about and on to of if in keep or maintaining lower maybe And growth? how long-term do the guess think combined investments long-term the getting slow margins long-term for time opportunity? you to How to

Marshall Bridges

Steven, to highly And pressure on volumes as certainly, that business is profitable. put decline, it. it's going some

the We in term. long that business for are

We as that investing. And this category. decelerate to In back going half year, into to a we're growing going we coming, see that invest the may we're example, keep very in Building do of interested Products. corporation, million to a invest the We're that expecting continuing business. half, and an are in Residential roughly We though $X to $X for is million investments slowdown bit. even the

Jeffrey Lorenger

think I a question. great Steven, Yes, it's

grow we think, the revenue said, grow there. we talk as want want you But to that about again, We I look, that. category. to

some continue the to the cliff, kind will quite it, in we that lean years do quite to continue So there into about here take We and -- of smart to business order need we'll business. -- don't we in two last But been pandemic but investing some profitability. we've nice whole maintain at we that so. through short can to term and be a

Steven Ramsey

sense. Makes Right.

Okay. And then last quick one for me.

is e-commerce is on more Or the benefits share taking? restructuring actions to second you're more in something maybe this the something this And the helpful is Workplace. half that On XXXX? that you Can earnings?

Marshall Bridges

that we is product exited in categories Yes, there some Steven, what we business. low-profit e-commerce did

situation some sales so we're big benefit there a a a impact. growth. think is of but a P&L, pretty to it's in -- I putting again, It benefit. of our chaotic of not now, a But on volatile yes, So the much large is or profit kind kind headwind not it's right

got think I more year. it's next benefit

Jeffrey Lorenger

More benefit agree. year. I next

Operator

questions the are at call this Jeff I further time. over you. back to There no Lorenger, turn

Jeffrey Lorenger

Have for Thank you. today And your great day. Corporation. thanks interest joining a us and to HNI everybody in

Operator

This you attending. conference concludes for call. Thank today's

disconnect. may You now

HNI (HNI) 30 Jul 222022 Q2 Earnings call transcript