HNI - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the HNI Corporation Second Quarter Results Conference Call. [Operator Instructions]

Mr. your begin may you conference. McCall,

Matthew McCall

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

Jeffrey Lorenger

Good morning, you and joining us. thank for

half challenges. Non-GAAP of members expansion demonstrating internal drove of year-over-year. In period. despite Our Products, our increased XX% demonstrated ability strength margin year-over-year, profit and profit quarter. business organization's Non-GAAP operating deliver $X.XX profit segment profit growing we XX% to the Building operating non-GAAP ongoing housing market of the growth initiatives Residential dedicated again was member a the growth continue XX% first economic second and our from results the the XXXX. exceeded through the model. Overall, earnings cycle strong and parts all our our strong higher proven our transformation in combination benefits for mindset acquisition us the helped was record our expectations the result of ability in second of year Kimball excellent growth to manage drive strategies, customer-first our owners, It and to than once profit also EPS prior deliver the quarter. In Workplace with Furnishings, the International

optimistic opportunities the Looking future see are the the segments of in forward, increasingly and business. we we about that both

I highlight underscore our that call positive X will key the On today, outlook. points

Furnishings Workplace this second reflecting for commitment to quarter, profitability continued our multi-decade a the the margin high improving First, segment. reached operating in

combination our International results. with strong Kimball Second, generating is

our we Third, Building expect Products growth we in growth softness. and despite And both beyond XXXX, housing-related Residential earnings segments Fourth, year. segment growth expansion second the profit revenue have posted in of elevated ongoing the fifth, visibility. half margin

outlook. call general our will we closing questions. Following open some before those review Marshall conclude with highlights, comments I the will to your

year-over-year second also was margin operating operating to last margin points was year-over-year multi-decade first seen this Workplace XXXXs. This of improvement Moving margin straight quarter in high to a second non-GAAP on the Furnishings of for quarter points of the point. The in segment. expanded XXX late operating the last quarter. expansion ninth strong reached the the Workplace level basis results. margin year's XX.X%, Furnishings XXX top basis

percentage X operating profit Furnishings' quarter our last strong in plan. primarily by year's of points. This Workplace margin transformation key productivity a driven Driving nearly the Workplace gains. is X years, was margin up improvement is Over part profit second productivity

improvement of board, continue and back top in come to including in material recent more support. expansion margin we require the to more demand Our has across achieved XXXX expansion as of our and transformation beyond. Recall, to plan efficient operations and does line sight efficiency. there's our without the margin half become line And been significant labor not additional cyclical profit gains have

add future will is improving later, and discuss profit will growth. believe However, market we slowly as the to our I

Moving point. second to my

revenue second opportunities was We margin the and International second very Kimball be a an in expectations us attractive our profit. quarter to operating added KII's with and while the continues KII EPS providing strong quarter and our complementary $X.XX strengthening non-GAAP our accretive the highly record to market of KII International growth with results. estimated XX.X%. generating by accretion an remain to is we workplace And generating combination major Our surpassed nature encouraged positioning offering. shared you positions. good quarter. Kimball and post-pandemic with of last is contributor

care attractive, within health both well growth. Additionally, positioned KII's are generating segments and and hospitality expanding businesses

cost combination. not May, this later, now will in next over require have couple talk expansion years growth. we demand I more fuel $XX those synergies announced profit of of growth but synergies and, we the to line sight margin continue and As the of to million about do from will again,

Our and and accelerate. benefits financial prove continues confidence out the in to combination of strategic

to my Products margin ongoing Building profit expansion weakness. and point. posted growth housing-related Moving Residential despite third

to year-over-year basis points drive overall expanded actions cost lower This and XXX Our despite to market margin XX.X%. was productivity operating pressures. up housing

business. this growth Looking expect my second of forward, bullish revenue leads the we the to in return topic. And long-term XXXX. That me intermediate to remain to fourth dynamics half we for about

We demand. expect on follow with in I second expected revenue Then comments will half. start I will back with some Building those segments revenue. half growth on in half the second Products detail some both Residential Workplace Furnishings

to is translation continue but longer. take elevated, Workplace activities is improving. We the to signs [indiscernible] slowly see market to orders the continuing Furnishings remain

Furnishings contract. on we For year-over-year. the and rate with a revenue of data expect and KII Workplace supportive single-digit SMB second the in at increase points low is to XXXX, outlook That half based

relatively dynamics, This our grew office over including of business second markets. Kimball continues to segment grew orders KII generate same second geographies continues higher secondary X% in in increase and those the continues year-over-year of SMB International orders SME on year-over-year Our and to quarter the perform to tertiary in top growth. well. business shifts period population X% usage X% the of healthy from quarter. benefit a to XXXX. in

and strong opportunities fundamentals, with growth As I and combination access our KII health has Furnishings with mentioned market care business earlier, the to strengthened us given including new Workplace hospitality.

support environment. work well Additionally, portfolio the hybrid positioned to KII's product is

to benefit. In spaces on their KII hybrid, growth will reconfigure horizon. companies contract support better we our business, see As the

future remained metrics preorder an Our elevated, indication growth. of

to sales and all during business center our double contract year-over-year. days design Chicago, Our year-to-date digits in funnel activity, are up quoting experience

believe Looking Furnishings to benefit out, we Workplace improve. well as the continues market are we positioned particularly to

breadth depth. have and unmatched products and pricing We

work have ranging We that largest businesses for from small products customers to the multinationals.

geographies, facilities Our address care markets to all brands widely workplaces, hotels. we are needs distributed schools, the from can across of MSAs, tertiary top health and and the

activities, anticipation tasks furnishing calls days in We socialization the our At unique knowledge design working applications. of offering will are tasks and X new introduced each these the learning. customer approach adapted mentorship, designing innovation, for approach us X June, work. Today, these to we addressing well worker have This product and intentional the on market, collaboration, from by of in unwavering demand each activities. people positioned ways focus, have And supported of environment. are office, most the an to focus a our needs by our of to improving of the that philosophical benefit support the coverage and environments office market today's

second shift Residential remains Let's Products are choppy, half trends to Building but improving. demand. demand the Overall

order improving expect housing This normalized our the the is versus a This the is to Residential growth with period. excluding quarter order program, of to since Products when our first trends. correction prior early pace quarter implemented X% the half, revenue Building we mid-XXXX For outlook When changes year order grow second year-over-year. mid-single-digit consistent at started. orders second we grew

additional from undersupplied expect growth. forward, for supply-demand Looking market demand while remains we remains up, inventories support demand although here. housing kicked strong, The demographics to have massively the improve housing fundamentals housing recent single-family

new to of margin product addition point, will we fireplaces, That, In to in footprint. Summarizing the unique online expansion market XXXX. average such These EPS innovations as record the electric fourth my expansion and in top homebuyers, improving half we wholly connect to owned Building builders, second invest expecting both with improvement better Residential opportunities. our Workplace in installing the both segments, dynamics, along and include in with Products. Furnishings are drive continue capabilities distributor in and growth line homeowners continued

final to my and Moving fifth point.

profit We growth have through elevated XXXX. visibility

estimate provided to This the We expect closed. million. double when acquisition the we $XX synergies KII is total

$XX Additionally, provide to currently initiatives $XX million total in to approximately to estimated million of contribute is equal million is expected or million This visibility of will to period. incremental Of $XX benefit, Mexico future ramp-up and $XX earnings growth. the XXXX current are to to million to more $XX line. Both bottom the an $XX the to our growth underway strong EPS million consensus facility an XXXX from positively the in estimate. XX% impact $X.XX the than year

XXXX. over As communicated for like enhance turn we the volume only without to discuss growth to Volume due will grow to profit we growth our now call quarters, for initiatives several to outlook Marshall our profitability. I will these. continue have

Marshall Bridges

quickly Jeff by outlook covered. profit just start I'll with Beginning Jeff. Thanks, the and demand demand. for that summarizing

is reflects that space. Furnishings a expected Workplace second April what mid-single-digit increase the low note rate single-digit contract in change outlook we release a reduction our in grow new from in timing implied that revenue earnings represents to Workplace rate our provided at in would release, Furnishings at half a year-over-year. Second I'll the half. The primarily

future both As healthy which to preorder sales growth. point elevated Jeff mentioned, a funnel, we continue of metrics see and to

business seen variation timing new. variation type our past the in rates. However, of order stop of a and timing ship year BIFMA in well. heavy has the of growth and this contract those our when of as projects, been the cause trends contract ] business mix impact volatile not can projects [ the We've This have is

Building Moving Products. to Residential

we the I'd fourth, quarter both second profit to the segments third quarter. Shifting versus to grow pace is period expect of expecting to that in most XXXX. from trends that to in going means like are We be half year-over-year mid-single-digit a to the outlook. the that the are our note at expected in in the second half improve which to revenue fourth growth same also

Furnishings Building expansion Workplace continued margin and in the half. expect in second Products earnings drive both to growth We Residential

outlook XXXX Our provided expectations the we April. have profit compared in with for increased

Specifically, wrap down lower financial first maintained outperformance higher in calculated the the the Gross quarter agreements. quarter due as the modestly in on leverage more our in to is our our debt the we comments our was top of expect offset ratio strong from X.Xx and from X.Xx up a position. Furnishings. I'll with That growth second debt. will sheet. profit half line quarter second with few at lower accordance in impact We balance than that Workplace end

during and quarter, million addition, than strong flow our generation buyback combination for share capacity capital degree with financial our and of cash consistent the sheet of flexibility of balance high we repurchases, the activity more deployment. $XX a In accelerated provides

M&A Jeff. to for over Our in buybacks deployment current funding and the opportunities. I'll call pursuing now cash dividends, back the reinvesting remain business, priorities turn

Jeffrey Lorenger

an had excellent remain revenue We to and record growth in Marshall. earnings to Residential margins XXXX. record XXXX, Products. the committed delivering Thanks, start long-term half anticipate expanding year driving we and EPS in We first for Furnishings full Building Workplace

Beyond market to we and have want drive members Residential and our and visibility, broad this and growth a product Building we in Workplace position are elevated continued positioned Furnishings, free hard ability thank coverage to sheet their success. In flow. I strong results. all year, a in cash continued continued for market-leading work Products of diverse balance dedication deliver earnings to and the these for HNI summary,

We will the call your now questions. open to

Operator

Instructions] [Operator

Tower Your first Budd Bugatch Water line from Research. question of comes the from

Beryl Bugatch

about strong Jeff, on to Marshall, go revenues. like, talk would guidance bit Matt, the performance you the a little I on and team to and well. quarter right in to think, the I as congratulations your

of in that? And relationship you're of little a I what in say think this in cycle driving will. hard other in been economy, a longer -- major talked what expecting what's little certainly segments, of change a each of cars about kind some Talk of of contract. if that look doing. the you seeing maybe weakness the And bit showing the some I the to you the bit areas which from you that's you're color like morning, at automobiles. more bit little overall reports the and a a a if you've

Jeffrey Lorenger

we've been Yes, we see Budd, you about this that before. the talked of through look, cycle, lot that's a activity --

this, mean, we've kind a look, and been has are feel kind seen -- bottom I bouncing of for you've customers itself here. of active. bit around, it on been You've like does the been the space

instance, trying starting at I people to say in a out have is, position what look of what do. And a would figure is looking figure see we I going to to office getting like that a on reconfiguring, So what think position, out strategic what space, are that lot people strategically, it they're -- needs out of studied their their believe interested they to reality yet long haven't but offices lot we sunk companies and we've yes, support, a to just in move in need model. And to hybrid do the post-pandemic this. but we particular on model, companies are now lot and enough, work we reconfigured of is a saying, see for their this --

though of interest what so we're still what there's a customers little so, even ringing lot that's in There's in that's that's bit our of about we're And doing saying. seeing, a how feeling, and to exactly elongating, are it's hand what execute. that

Beryl Bugatch

proposals heard are different funnel calls. a situations the of increased? reflect of translated the far are of RFQs? requests competitive phrase top we've the the And seeing or -- Well, And in has and funnel couple that requests for top so we to bid

Marshall Bridges

maybe just step me let But Yes. a take back.

above the performing SMB number. low average, digits then up and in So half performing to below the that's Those by business really contract and and KII. back the we're Workplace are led is business that expecting single Furnishings be

aimed So that preorder very contract seeing prepared increases in business. I his Jeff metrics contract the sort are seeing quoting. in say would the business, We're your mentioned question funnel. double-digit comments, We're of double-digit as at increases the in healthy. is the

Our visits very were design days strong.

and said, Jeff their as people looking reconfigure moves. office that, are some the make indications all So to

elongated, pushed is think you being we and to quarters. that, is revenue subsequent However, said, as it that out

think the longer a to little continue all that encouraged we're I shorter it. businesses what here of cycle do better is the cycle we're than but business, by So seeing

Beryl Bugatch

pressure you comfort that's with growth RVP, a is rates the been very giving about, more and are that's What some in activity that's really recently. you talking there, business mortgage helpful, That's under seeing and housing again, And higher Marshall. segment you're some lower growing. been there? Your

large got market You've a the share side. in hearth

what's from online share initiatives Jeff really like, some really electric the better expectations? of it driving are mentioned or they furnaces, and the the market had, I is perspective So you've think

Marshall Bridges

Yes.

normalized quarter an really look in what was Residential on perspective the at drove that of orders what Products, order basis. you the second If things. happened in Building a we growth from X% in showed side remodel/retrofit And

New construction was roughly flat.

very to back something encouraging So us. that's year, the is well of to for going remodel/retrofit a XXXX. soft That's turn over really been

on a growth period that's we did pretty remodel/retrofit, see seasonally a -- but base. for Now order low low

going half. As we the in look to in remodel/retrofit and forward, we're new see be growth and we mid-single-digit think up back both in that construction rate

Beryl Bugatch

the improvement that have one And of I exciting issues pretty issue and years because for new haven't know that of there's that. a seeing psychographic last is as [indiscernible] on of fireplaces, of number you That's incidents as in but some the homes? the and single-family I Are say, standpoint of the housing pushbacks you any new discussed shown of over fireplaces. the a housing numbers in part fireplaces incidents in from we of

Marshall Bridges

of single-family we've affordability pressures construction see. housing measure But flat, hard of bit is that. to mix construction our being I a homes. And maybe that's we the business what reflects It's would new from I little disconnected what Yes. the say pressures, that in that think new seen that

Jeffrey Lorenger

Yes.

The as educate at think -- homebuilders, got electric remodelers. at kind it's we've a combination are that construction up start space time flattened of to rate. but incident taking bit unlock. homebuyers we've of -- right a the now, bit. not homes investments relative a on lags of are this you same spec affordability, and lot We think a say, a We've meeting pointed to And kind and it's period. it's off all well will combination got got the as that units of out I

in our been bit believe side. some we've And -- That's we'll in the the Marshall And relief both again. the we've but like be up little first gear is turn we there, a to said, been see businesses, very kind so riding as encouraging. lower remodel of interest able we on growth rates, the

really we we add signs growth, got And And so just what -- continue that we've that mean, said the margins in as see to of we without starting I going. growth. some that's expand prepared remarks, our believe we're now can to to

Beryl Bugatch

has forward And the that. balance mean on for upcoming performance the I and and the of this and forward as already look performance congratulated they of I the into the doubt. remarkable, the results you're of and been your come No seeing company years. to superb year team

Operator

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

Gregory Burns

over of When I'm and savings, profit to the want going cost million that of total just we been around for of the understand have look and of realized you XXXX you incremental? think the numbers visibility million incremental? at buckets piece the the realized. if X the have synergies, have some that the and to be is is I I $XX and assuming, the years? you're that's to 'XX, already projecting all the some next $XX Because Or that KII course that

Marshall Bridges

Yes, XXXX. is incremental to million [indiscernible]. $XX million all to to is The $XX $XX all incremental compared million million to $XX relative

Greg, of some $XX have benefit. are X Those of $XX been those that initiatives to and total realized. So million about it's -- you're million from the initiatives in right benefits

we're we've already realized it. of So $XX by a got of -- little that bit million about

Gregory Burns

And Okay. basis? Like guess doesn't have your on efficiency include an that? initiatives. cost annual Do how that or a just be maybe that number could around ongoing annual much I you

Marshall Bridges

weekly, You're resources that on annual still gains. Certainly, $XX million a focused to but productivity million lot $XX incremental, right. be are we delivering organizational will driving of daily,

But Just productivity the $XX back forward-looking million averaging years a look don't we you guidance historically, you some to were of color, and give that. on annual before we gains. $XX couple million, have if necessarily a pandemic, of

something that that to able deliver be So we'd neighborhood. I'd expect in

Gregory Burns

target we than operate expected. on that basis strong normalized range, then where margins Do guess, to recurring workplace you getting on ongoing an And a Okay. the basis? think can performance a or have you faster I on really segment double-digit that

Jeffrey Lorenger

that the have I about lot. out this quarters, nothing point now and good and I period. also in is that point X talked It's -- XX% that abnormal would operating in our we margin in you back those question, Yes. when will a time last segment look there's out Greg,

you it would Residential low single Products the as reference in point, digits. in I time, how we XXXX, over gives -- a Building think. In kind was So margin operating of how just our philosophically,

in the Now it's consistently high teens.

tell high not know in to would but mix, I be I don't say I with the you, the confidently we're the can teens in XX%. is workplace So satisfied

-- on work that to continue push margin. will we so that and push And the

Operator

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

Reuben Garner

follow-up just funnel workplace referenced, Marshall, line. you I believe and on top think the quoting was the digits. up So a I activity it double being

those I a gauge: just at the kind time you of first of sort close think trying numbers and that Is side? how X to heard we two, one, has seeing directly workplace; guys growth to order growth? actual that Were pretty in any the I'm around referenced that's on contract the the going specifically and put clear transition is acceleration where I've piece this long you quarter? of how and to second those been are it.

Marshall Bridges

a weighted of more maybe time. although this metrics take seen of contract. toward as cycle a continue. are longer been little things Those the other where elevated tell well, some and for Yes. business to mix is you, Reuben, contract parts What I'd they've We've

slightly that I to think we're see starting improve.

outlook are slowly think that I with consistent turning. it's things our

growth signs So but seeing see we're that to we're we going saying got inflection necessarily looking not forward. encouraging big are point a that we're here,

right mentioned we're third look be expecting in in to earlier, in by at side to second And the and driven the seeing horizon contract we're you very the if below single as half. fourth from, quarter expecting now, growth contract. the being excited is digits it's really the by KII, be of the really about growth up low things coming but where on we're driven I and nearly flat. We're the the strength quarter. So That's average in SMB is

Reuben Garner

years. XXX, -- if control your next And right, then I range or X were there particular, somewhere savings basis Okay. those to in question XXX the XXX workplace my sort few that Jeff, this -- What's guess mentioned off on my sort you segment that maybe points in the kind incremental over of you've margin is within maybe of office the to? of -- we're right you're or other of? last the not side, in of you In margin mix-wise you that got quarters, words, the one XX%. the is number the in quarter, anything was at in the adding anything build makes seasonality-wise XX%. Obviously, you at or second else of quarter baseline math

Marshall Bridges

nothing Reuben, Yes, unusual, do seasonality. I but have we think, there's

if $XX $XX at to X mentioned think the I probably Jeff you good XXXX. from. million million a XX%, number So about we've are that's start from that quarters, look But to incremental been we last talking at

a maybe that's think from. move I to So good base

Reuben Garner

beat the the couple me. in but a Okay. are And for We've want of a Building side. the few recent on seeing little horse, dead clarify want bit then earlier last past one Products months don't I things slowdown to the seems I of material Residential have maybe demand expected or to to outlook where was in -- heard some about second any areas are a from largely gives unchanged, you on just maybe what some seen that have because your and kind recognize of going concern comps your you last dynamics in easier headed you customers conversations any But year. half? I that in with change and year months, be

Marshall Bridges

is mostly outlook there. our moving unchanged, though there parts in are Even some

bit remodel.retrofit the more been construction encouraging. I a has new side slower been little think bit has a and little

remodel/retrofits. second in reflected look were down we that really decline offset it digits, some little If by down you to at low Reuben, softness a we new than that than single more expect expected to was the construction quarter, partially be less and that. And

more parts remodel/retrofit And is in there's outlook noisy some consistent be unchanged, ] less but there think reminds you're hearing. that year-over-year. us moving more may for that I what pretty [ aggregate or our is with

to difficult get So it's good trend a on.

I think we're there. finally get to starting

Reuben Garner

work business as the from like do this because backlog another is you concern record Is going sneak to The for how business? much risk more an within kind one leads going of through hearth that's we multifamily small some investors 'XX? I'm bubble of have it exposure in. relatively Okay. been a construction, at air a units point into that that under maybe you? Or --

Jeffrey Lorenger

small. Reuben. -- No, view small, relatively It's don't not it's That's as risk. relatively that a we

Operator

from line And the Group. Steven Research Ramsey of your last question Thompson comes from

Steven Ramsey

I'm about curious better bit balance mix and further SMB that with through workplace customer have looks impact the is on a so those the out kind currently that So outperforming KII come the of than little and back, margin negative Do there? contracts to margins looking year. of like groups when contract story does a

Marshall Bridges

Steven, between an on there's not incremental much margins difference the basis.

So I on. probably time something lot don't that spend not big terminus we it's know a of a or a headwind tailwind,

Jeffrey Lorenger

Yes. of would has kind back, that way the types the in I can think and as placed -- comes Plus, talk to products say of Steven, table. about, KII are the offices put to our brought contract products the there as I benefit relative as even we just of contract the configured, types we

that don't to the as we've comes we even as really downside. about, It's we will the revenue, think expanding those want we -- as margins of back mean to lean kind a I talked So margins continue into up. about contract view and just really

Steven Ramsey

you. Got

segment, do next margin volumes place the little coming bit structure grow thinking in do And new that does mean, to more if the think X grow? time incremental over over us I -- or the Okay. as change years, would then new margins help just in about the frame? months -- structure XXXX that and a into workplace cost about you what XXXX cost volumes X with if get change margins that does could

Marshall Bridges

in change our good efficiency kind the a in to those margins. is benefit in typically run would incremental I of the mean, going Clearly, That's mid-XXs. our question. Yes. workplace,

bit turning little So come probably we're right when a we now. above that back

points margin, a lot a be mid-XXs equally into that. But we'd on so number, made. that it as variables as the average, good that recent that are there's above incremental can number, go big historically we've progress a few was which probably of Now

Steven Ramsey

Okay. And things Helpful. been a is to pipeline pipeline XXXX? getting many over you is where there The the this And resi. resi has second Can of for year then a or switching done potential past now? that M&A part the early years. describe real half of story

Jeffrey Lorenger

taking come say, -- we we've hurry. to We kind the game Steven. in that in Like us. always We're But we're of in we're said it's not question, market let said to look of also a kind there. great always suffice a And space. out the any

I don't but So stay least at anything imminent strategic have we means, a by at any active level. will

Steven Ramsey

And other then thing resi. one on

distribution the of On things. side

You distribution is for the and building at sell-through or this changing and to if and as building I presenting third-party upside other you guess, distributors owned I'm clearly it's have landscape that some then, strategically distributors challenges adapt product how consolidated. product curious you look any distribution landscape?

Marshall Bridges

sell primarily we Steven, through specialty dealers distributors. installing and

less we other do that so of us, maybe own. but of the categories. we than course, do flows that, About XX% -- impact of overall -- own. we some saying doesn't what not a distribution little through So trend about And

helps also So us. that

Operator

back no over further questions, to And with I'll the floor Mr. turn Lorenger.

Jeffrey Lorenger

good and joining today, for us a time, taking Thanks the Great. day. have

Operator

conference today's does This call. you. conclude Thank

now may great You day. Have a disconnect.

HNI (HNI) 25 Jul 242024 Q2 Earnings call transcript