HNI CORP Q4 FY2024 earnings call

• Fourth quarter non-GAAP EPS $0.87, better than anticipated despite revenue moderation. Full year non-GAAP EPS $3.06, up 15% from 2023, a new record high. • Workplace Furnishings had softness in SMB transactional and contract business; Residential Building Products saw revenue decline due to housing market weakness. • Anticipate double-digit non-GAAP earnings improvement in 2025; first quarter revenue expected to decline, but second half and full year show growth potential. • Focus on driving revenue growth in both businesses; workplace furnishings see improvement in certain verticals; residential building products believe in long-term fundamentals but near term is dynamic. • Plan to offset tariff impact through surcharges, supplier concessions, and productivity initiatives.

In the fourth quarter, Workplace Furnishings had revenue moderation; contract furniture revenue down slightly vs prior year; Residential Building Products revenue declined 5% y/y. For the full year, Workplace Furnishings non-GAAP operating profit was up 44%, segment non-GAAP operating margin 9.5% (highest since 2007). Residential Building Products revenue was lower due to housing market weakness, but segment operating profit margin expanded to 17.5%.

• First quarter 2025 revenue expected to decline; full year low to mid-single-digit revenue growth in both segments. • Anticipate double-digit non-GAAP EPS growth in 2025 driven by savings from productivity efforts and synergies. • Tariffs expected to have a temporary drag in Q1 but recouped later; ability to offset tariff impact through surcharges and other mitigation plans.

• Macro uncertainty including impact of tariffs and housing market weakness. • Volatility in SMB transactional business and longer selling to order time frames in contract business.

Q: The last couple of years focused on margin, now growth and investments in growth. Dig in on workplace investments and why now?

A: Investing in more selling capabilities, simplifying customer experience, product development, and digital connectivity. See strength in verticals like office, healthcare, education, hospitality.

Q: On residential building products, company-specific drivers for growth target and back half acceleration?

A: Organizing around the consumer, adding selling capacity, driving category awareness, strong product pipeline. Investments to drive growth while bending margins.

Q: Federal government exposure and early indications?

A: Federal is a small part of business, monitoring, staying present, no major changes yet.

Q: SMB part of business, any improvement in demand or stabilization?

A: SMB was flat, suffered hangover from election, but back half of 2024 was strong, anticipate upside in back half of 2025.

Q: Tariffs, why able to offset in quarter basis now?

A: Surcharge approach allows quick adjustment, working with supplier concessions and productivity, quicker mechanism than list price adjustment.

Q: Incremental margins on top-line growth?

A: For core business, 40 plus percent incremental margins, while still investing, margins should remain high.

Q: Near-term residential, delta in orders and Q1 growth?

A: Q1 mid-single-digit growth, new home market stabilizing, remodel retrofit coming off low comp, orders up 8% with growth continuing through year.

Q: Workplace order to sale timeline, shrinking?

A: Some noise in system, temporary pause, but trend of timeline working its way down, hold pattern given current events.

Q: Contract customers on return to office?

A: More momentum building, more conversations and planning, continuing to trend in return to office direction.

Q: Why SMB lagging behind contract?

A: SMB had strong two-year run rate, natural breather; contract has been building, customers moving forward, SMB can flatten or turn negative but turn on quickly.