HNI CORPORATION HNI Corporation 600 East Second Street, Muscatine, Iowa 52761, Tel 563 272 7400, Fax 563 272 7347, www.hnicorp.com
News Release
HNI CORPORATION REPORTS FIRST QUARTER 2024 RESULTS
Strong earnings growth driven by Workplace Furnishings profit transformation
- EPS of $0.37 increased 825% on a GAAP basis and 185% on a non-GAAP basis YoY.
- Workplace Furnishings operating margin expanded 730 bps GAAP and 720 bps non-GAAP YoY.
- Full-yearand second quarter 2024 non-GAAP EPS expected to strongly increase YoY.
MUSCATINE, Iowa (April 29, 2024) - HNI Corporation (NYSE: HNI) today announced sales for the first quarter ended March 30, 2024 of $588.0 million and net income of $17.7 million.
Highlights
- Excellent earnings growth. First quarter earnings per share of $0.37 was up considerably on both a GAAP and non-GAAP basis versus the prior year despite an 8.1 percent year-over-year organic revenue decline, which was primarily driven by continued housing market softness. GAAP to non-GAAP reconciliations follow the financial statements in this release.
- Profit transformation actions continue to drive improvement in Workplace Furnishings. First quarter non-GAAP operating profit margin for Workplace Furnishings, when excluding impacts from the Kimball International acquisition, expanded 560 basis points year-over-year.
- Solid accretion from Kimball International. Kimball International ("KII") generated an operating profit margin of 9.3 percent and added an estimated $0.10 to non-GAAP EPS.
- Residential Building Products posts solid profit despite a soft housing market. Segment operating profit was $21.4 million with an operating margin of 14.4 percent. Recent cost actions continued to support profitability. Growth and margin expansion are expected to return as the year progresses.
- Strong balance sheet. Gross leverage was 1.9x, as calculated in accordance with the Corporation's debt agreements. That ratio was unchanged from the fourth quarter of 2023 as higher profit offset a modest seasonal increase in debt. The Corporation also accelerated stock repurchase activity in the quarter.
- Projecting strong 2024 earnings growth to be driven by continued profit transformation in Workplace Furnishings and benefits from KII. In 2024, Workplace Furnishings organic revenue is expected to grow at a low single-digit pace, and Residential Building Products revenue is projected to be flat-to-slightly down.
- Expecting solid increase in second quarter earnings. Momentum with Workplace Furnishings profit transformation initiatives and accretion from KII are anticipated to drive solid year-over-yearnon-GAAP EPS growth. Compared to the prior year, organic Workplace Furnishings revenue is expected to be down slightly, while Residential Building Products revenue is projected to decline at a low-single digit rate.
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"Our teams continue to build upon the strong progress we have made over the past two years. We delivered earnings that were nearly triple the prior-year period, with EPS and operating margin reaching first quarter levels not seen since 2007.
"Our strong results continued to be fueled by our Workplace Furnishings profit transformation plan and the inclusion of Kimball International, which combined to deliver the highest first quarter Workplace Furnishings profit margin since 2016.
"In Residential Building Products, our recent cost actions helped support profitability despite ongoing market weakness. Longer-term we remain bullish about the prospects of the housing market, broadly, and our market- leading position, specifically.
"Overall, we started the year on a very strong note. Our results reflect the dedication of our member-owners, the strength of our business model, and our ability to manage through all parts of the economic cycle," stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.
HNI Corporation - First Quarter Financial Performance
(Dollars in millions, except per share data)
Three Months Ended | |||||
March 30, | April 1, | Change | |||
2024 | 2023 | ||||
GAAP | |||||
Net Sales | $588.0 | $479.1 | 22.7% | ||
Gross Profit % | 39.6% | 36.4% | 320 bps | ||
SG&A % | 34.5% | 35.0% | -50 bps | ||
Operating Income | $29.7 | $6.4 | 362% | ||
Operating Income % | 5.0% | 1.3% | 370 bps | ||
Effective Tax Rate | 19.6% | 58.4% | |||
Net Income % | 3.0% | 0.3% | 270 bps | ||
EPS - diluted | $0.37 | $0.04 | 825% | ||
Non-GAAP | |||||
Gross Profit % | 39.6% | 36.5% | 310 bps | ||
Operating Income | $29.9 | $10.3 | 191% | ||
Operating Income % | 5.1% | 2.1% | 300 bps | ||
Effective Tax Rate | 19.6% | 30.5% | |||
EPS - diluted | $0.37 | $0.13 | 185% |
The following table contains results for (1) the Corporation's legacy business, excluding the impacts of KII ("Legacy HNI") and (2) KII. Please refer to non-GAAP reconciliations, which follow the financial statements in this release, for further information on the adjustments made to calculate non-GAAP performance.
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HNI Corporation - First Quarter Impact of Kimball International Acquisition
(Dollars in millions, except per share data)
Three Months Ended | |||||||||
March 30, | April 1, | ||||||||
2024 | 2023 | ||||||||
GAAP | Legacy | KII | Consolidated | Consolidated | Legacy | Consolidated | |||
HNI | HNI | HNI | Change | Change | |||||
Net Sales | $440.5 | $147.5 | $588.0 | $479.1 | (8.1%) | 22.7% | |||
Gross Profit | $175.8 | $57.0 | $232.8 | $174.3 | 0.9% | 33.6% | |||
Gross Profit % | 39.9% | 38.7% | 39.6% | 36.4% | 350 bps | 320 bps | |||
Operating Income | $16.1 | $13.6 | $29.7 | $6.4 | 150% | 362% | |||
Operating Income % | 3.6% | 9.2% | 5.0% | 1.3% | 230 bps | 370 bps | |||
EPS - diluted | $0.37 | $0.04 | 825% | ||||||
Non-GAAP | |||||||||
Gross Profit | $175.9 | $57.0 | $233.0 | $174.8 | 0.7% | 33.3% | |||
Gross Profit % | 39.9% | 38.7% | 39.6% | 36.5% | 340 bps | 310 bps | |||
Operating Income | $16.2 | $13.7 | $29.9 | $10.3 | 57.7% | 191% | |||
Operating Income % | 3.7% | 9.3% | 5.1% | 2.1% | 160 bps | 300 bps | |||
EPS - diluted | $0.27 | $0.37 | $0.13 | 108% | 185% |
HNI Corporation - First Quarter Summary Comments
- Consolidated net sales increased 22.7 percent from the prior-year quarter to $588.0 million. On an organic basis, sales decreased 8.1 percent year-over-year. The acquisition of KII increased year-over- year net sales by $147.5 million. A reconciliation of organic sales, a non-GAAP measure, follows the financial statements in this release.
- Gross profit margin expanded 320 basis points compared to the prior-year quarter. This increase was driven by favorable price-cost, improved net productivity, and the impact of the KII acquisition, partially offset by lower organic volume.
- Selling and administrative expenses as a percent of sales decreased 50 basis points compared to the prior-year quarter. The decrease was driven by $3.4 million of non-repeating KII acquisition-related fees and expenses incurred in the prior-year quarter, dilution from price realization, lower legacy core SG&A, and KII acquisition-related administrative cost synergies, partially offset by lower organic volume and higher variable compensation.
- GAAP and non-GAAP net income per diluted share was $0.37 compared to $0.04 and $0.13, respectively, in the prior-year quarter. The increase was driven by favorable price-cost, improved net productivity, the net impact of the KII acquisition, lower core SG&A, and a lower effective tax rate, partially offset by lower organic volume and higher variable compensation.
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Workplace Furnishings - First Quarter Financial Performance
(Dollars in millions)
Three Months Ended | |||||
March 30, | April 1, | Change | |||
2024 | 2023 | ||||
GAAP | |||||
Net Sales | $439.8 | $299.6 | 46.8% | ||
Operating Income (Loss) | $26.3 | ($4.0) | 759% | ||
Operating Income (Loss) % | 6.0% | (1.3%) | 730 bps | ||
Non-GAAP | |||||
Operating Income (Loss) | $26.5 | ($3.6) | 841% | ||
Operating Income (Loss) % | 6.0% | (1.2%) | 720 bps |
The following table contains results for (1) the Corporation's legacy workplace furnishings business, excluding the impacts of KII ("Legacy Workplace") and (2) KII. Please refer to non-GAAP reconciliations, which follow the financial statements in this release for further information on the adjustments made to calculate non-GAAP performance.
Workplace Furnishings - First Quarter Impact of Kimball International Acquisition
(Dollars in millions) | |||||||||
Three Months Ended | |||||||||
March 30, | April 1, | ||||||||
2024 | 2023 | ||||||||
GAAP | Legacy | KII | Total | Total | Legacy | Total | |||
Workplace | Workplace | Workplace | Change | Change | |||||
Net Sales | $292.3 | $147.5 | $439.8 | $299.6 | (2.5%) | 46.8% | |||
Operating Income (Loss) | $12.7 | $13.6 | $26.3 | ($4.0) | 418% | 759% | |||
Operating Income (Loss) % | 4.3% | 9.2% | 6.0% | (1.3%) | 560 bps | 730 bps | |||
Non-GAAP | |||||||||
Operating Income (Loss) | $12.8 | $13.7 | $26.5 | ($3.6) | 457% | 841% | |||
Operating Income (Loss) % | 4.4% | 9.3% | 6.0% | (1.2%) | 560 bps | 720 bps |
- Workplace Furnishings net sales increased 46.8 percent from the prior-year quarter to $439.8 million. Organic sales decreased 2.5 percent year-over-year. The impact of the KII acquisition increased sales by $147.5 million over the prior-year quarter.
- Workplace Furnishings GAAP operating margin of 6.0 percent improved 730 basis points versus the prior-year quarter, driven by favorable price-cost, improved net productivity, favorable impacts from KII, and lower legacy core SG&A. These factors were partially offset by lower organic volume and higher variable compensation. Excluding the impact of KII, first quarter GAAP operating profit margin for Legacy Workplace was 4.3 percent, an improvement of 560 basis points year-over-year.
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Residential Building Products - First Quarter Financial Performance
(Dollars in millions) | ||||||
Three Months Ended | ||||||
March 30, | April 1, | Change | ||||
2024 | 2023 | |||||
GAAP | ||||||
Net Sales | $148.2 | $179.4 | (17.4%) | |||
Operating Income | $21.4 | $28.1 | (23.9%) | |||
Operating Income % | 14.4% | 15.6% | -120 bps |
- Residential Building Products net sales decreased 17.4 percent from the prior-year quarter to $148.2 million primarily due to housing market weakness, with remodel/retrofit (R&R) sales declining at a higher rate than new construction.
- Residential Building Products operating profit margin of 14.4 percent compressed 120 basis points year-over-year driven by lower volume, partially offset by improved net productivity, favorable price-cost, lower variable compensation, and lower core SG&A.
First Quarter Order Rates
- In the Workplace Furnishings segment, orders increased two percent versus the prior-year period. Orders from both small-to-medium sized customers and contract customers increased at a similar rate to the segment overall.
- Orders in the Residential Building Products segment decreased 12 percent compared to the first quarter of 2023. During the quarter, orders in new construction outperformed R&R. Reduced channel backlogs and shortened lead times resulted in R&R orders returning to normal patterns, which negatively impacted year-over-year growth.
Outlook
- Second quarter non-GAAP earnings per share is expected to increase solidly year-over-year driven by the benefit of KII and continued profit transformation in Legacy Workplace Furnishings despite increasingly difficult year-ago comps. The second quarter of 2023 was the first quarter to show noticeable benefits from profit transformation initiatives in Legacy Workplace Furnishings.
- Demand environment. In the second quarter of 2024, the Corporation expects Workplace Furnishings organic segment revenue to be down slightly compared to the same quarter of 2023. In Residential Building Products, the Corporation expects year-over-year declines to moderate with second quarter revenue down at a low-single digit rate versus the year-ago period.
- Impact of Kimball International. For the second quarter of 2024, the Corporation expects KII to be accretive to non-GAAP EPS, generally in line with first quarter results. KII is expected to add $75 to $80 million of incremental revenue to second quarter results. The Corporation continues to expect annual cost synergies resulting from the combination with KII to total $35 million when mature.
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- 2024 outlook commentary. Full-year earnings are expected to increase strongly from 2023 levels driven by continued margin expansion in Workplace Furnishings and the full-year benefit of accretion from KII. The Corporation continues to expect Workplace Furnishings organic revenue to increase at a low-single digit rate. Residential Building Products segment revenue trends are expected to improve as the year progresses, with year-over-year growth returning in the second half. Residential Building Products full- year revenue is expected to be flat-to-slightly down versus 2023 levels. This is a modest reduction from the outlook provided on the previous earnings call and is reflective of softer conditions in the R&R space and a slower start in new construction.
Concluding Remarks
"We had an excellent start to 2024 as our strategies continue to deliver outstanding earnings growth. In Workplace Furnishings, our profit transformation initiatives maintained their momentum, pushing margins to multi-year highs. We expect modest revenue growth to translate into continued solid year-over-year profit and margin improvement in the segment during 2024.
"The integration of Kimball International continues to build momentum. KII is strengthening our business-both strategically and financially. KII better positions us to lead in the evolving workplace market and provides new opportunities for growth.
"In Residential Building Products, we remain bullish despite recent housing-driven weakness. We have adjusted our cost structure while continuing to invest in our growth strategies, leading brands, and operating platforms. Recent housing data and improving internal metrics support our increasing optimism about demand trends in the back half of 2024, and we remain uniquely positioned to drive high-margin growth as housing stabilizes.
"Our core strategies are unchanged. We are committed to continuing to expand margins in Workplace Furnishings and driving long-term revenue growth in Residential Building Products," concluded Mr. Lorenger.
Conference Call
HNI Corporation will host a conference call on Monday, April 29, 2024 at 10:00 a.m. (Central) to discuss first quarter fiscal year 2024 results. To participate, call 1-855-761-5600 - conference ID number 7175411. A live webcast of the call will be available on HNI Corporation's website at https://investors.hnicorp.com/events-and-presentations. A replay of the webcast and call will be made available from Monday, April 29, 2024 at 1:00 p.m. (Central) through Monday, May 6, 2024, 10:59 p.m. (Central). To replay the webcast, go to the link above. To replay the call, dial 1-800-770-2030 - Conference ID: 7175411.
About HNI Corporation
HNI Corporation (NYSE: HNI) is a manufacturer of workplace furnishings and residential building products, operating under two segments. The Workplace Furnishings segment is a leading global designer and provider of commercial furnishings, going to market under multiple unique brands. The Residential Building Products segment is the nation's leading manufacturer and marketer of hearth products, which include a full array of gas, electric, wood, and pellet-burning fireplaces, inserts, stoves, facings, and accessories. More information can be found on the Corporation's website at www.hnicorp.com.
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Forward-Looking Statements
This release contains "forward-looking" statements based on current expectations regarding future plans, events, outlook, objectives, financial performance, expectations for sales growth, and earnings per diluted share (GAAP and non-GAAP), including statements regarding future levels of demand, anticipated macroeconomic conditions, expected differences in seasonality and its results on the Corporation's results of operations, the anticipated benefits and cost synergies of the acquisition of Kimball International, and future levels of productivity. Forward-looking statements can be identified by words including "expect," "believe," "anticipate," "estimate," "may," "will," "would," "could," "confident", or other similar words, phrases, or expressions. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation's actual future results and performance to differ materially from expected results. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results due to the risks and uncertainties described elsewhere in this release, including but not limited to: the Corporation's ultimate realization of the anticipated benefits of the acquisition of Kimball International; disruptions in the global supply chain; the effects of prolonged periods of inflation and rising interest rates; labor shortages; the levels of office furniture needs and housing starts; overall demand for the Corporation's products; general economic and market conditions in the United States and internationally; industry and competitive conditions; the consolidation and concentration of the Corporation's customers; the Corporation's reliance on its network of independent dealers; change in trade policy; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation's new products; changing legal, regulatory, environmental, and healthcare conditions; the risks associated with international operations; the potential impact of product defects; the various restrictions on the Corporation's financing activities; an inability to protect the Corporation's intellectual property; cybersecurity threats, including those posed by potential ransomware attacks; impacts of tax legislation; and force majeure events outside the Corporation's control, including those that may result from the effects of climate change. A description of these risks and additional risks can be found in the Corporation's annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. The Corporation assumes no obligation to update, amend, or clarify forward-looking statements, except as required by applicable law.
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HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(In millions, except per share data)
(Unaudited)
Three Months Ended | |||||
March 30, | April 1, | ||||
2024 | 2023 | ||||
Net sales | $ | 588.0 | $ | 479.1 | |
Cost of sales | 355.1 | 304.8 | |||
Gross profit | 232.8 | 174.3 | |||
Selling and administrative expenses | 203.1 | 167.9 | |||
Restructuring charges | 0.1 | - | |||
Operating income | 29.7 | 6.4 | |||
Interest expense, net | 7.6 | 2.7 | |||
Income before income taxes | 22.0 | 3.8 | |||
Income taxes | 4.3 | 2.2 | |||
Net income | 17.7 | 1.6 | |||
Less: Net income (loss) attributable to non-controlling interest | 0.0 | (0.0) | |||
Net income attributable to HNI Corporation | $ | 17.7 | $ | 1.6 | |
Average number of common shares outstanding - basic | 47.1 | 41.5 | |||
Net income attributable to HNI Corporation per common share - basic | $ | 0.38 | $ | 0.04 | |
Average number of common shares outstanding - diluted | |||||
48.1 | 42.1 | ||||
Net income attributable to HNI Corporation per common share - diluted | $ | 0.37 | $ | 0.04 | |
Foreign currency translation adjustments | $ | 0.0 | $ | 0.1 | |
Change in unrealized gains (losses) on marketable securities, net of tax | (0.0) | 0.2 | |||
Change in derivative financial instruments, net of tax | 1.4 | (0.1) | |||
Other comprehensive income (loss), net of tax | 1.4 | 0.1 | |||
Comprehensive income | 19.0 | 1.7 | |||
Less: Comprehensive income (loss) attributable to non-controlling interest | 0.0 | (0.0) | |||
Comprehensive income attributable to HNI Corporation | $ | 19.0 | $ | 1.7 | |
Amounts may not sum due to rounding.
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HNI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions) (Unaudited)
March 30, | December 30, | ||||
2024 | 2023 | ||||
Assets | |||||
Current Assets: | $ | 27.0 | $ | 28.9 | |
Cash and cash equivalents | |||||
Short-term investments | 5.5 | 5.6 | |||
Receivables | 231.9 | 247.1 | |||
Allowance for doubtful accounts | (2.8) | (3.5) | |||
Inventories, net | 212.1 | 196.6 | |||
Prepaid expenses and other current assets | 53.5 | 61.3 | |||
Total Current Assets | 527.2 | 535.9 | |||
Property, Plant, and Equipment: | 59.0 | 58.9 | |||
Land and land improvements | |||||
Buildings | 409.6 | 406.8 | |||
Machinery and equipment | 714.5 | 705.8 | |||
Construction in progress | 21.8 | 22.2 | |||
1,204.8 | 1,193.7 | ||||
Less accumulated depreciation | (652.6) | (638.5) | |||
Net Property, Plant, and Equipment | 552.2 | 555.2 | |||
Right-of-use Finance Leases | 11.7 | 12.2 | |||
Right-of-use Operating Leases | 113.8 | 115.2 | |||
Goodwill and Other Intangible Assets, net | 645.9 | 651.9 | |||
Other Assets | 61.8 | 58.4 | |||
Total Assets | $ | 1,912.6 | $ | 1,928.8 | |
Liabilities and Equity | |||||
Current Liabilities: | $ | 363.7 | $ | 418.7 | |
Accounts payable and accrued expenses | |||||
Current maturities of debt | 12.8 | 7.5 | |||
Current maturities of other long-term obligations | 2.0 | 7.3 | |||
Current lease obligations - Finance | 4.4 | 4.4 | |||
Current lease obligations - Operating | 24.9 | 25.9 | |||
Total Current Liabilities | 407.7 | 463.7 | |||
Long-Term Debt | 460.2 | 428.3 | |||
Long-Term Lease Obligations - Finance | 7.3 | 7.9 | |||
Long-Term Lease Obligations - Operating | 103.7 | 104.0 | |||
Other Long-Term Liabilities | 78.8 | 78.0 | |||
Deferred Income Taxes | 83.0 | 85.1 | |||
Total Liabilities | 1,140.8 | 1,167.0 | |||
Equity: | |||||
HNI Corporation shareholders' equity | 771.5 | 761.4 | |||
Non-controlling interest | 0.3 | 0.3 | |||
Total Equity | 771.8 | 761.8 | |||
Total Liabilities and Equity | $ | 1,912.6 | $ | 1,928.8 | |
Amounts may not sum due to rounding.
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HNI Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions) (Unaudited)
Three Months Ended | |||||
March 30, | April 1, | ||||
2024 | 2023 | ||||
Net Cash Flows From (To) Operating Activities: | |||||
Net income | $ | 17.7 | $ | 1.6 | |
Non-cash items included in net income: | |||||
Depreciation and amortization | 26.4 | 20.1 | |||
Other post-retirement and post-employment benefits | 0.3 | 0.3 | |||
Stock-based compensation | 7.7 | 4.5 | |||
Deferred income taxes | (2.1) | (0.6) | |||
Other - net | 0.6 | 0.6 | |||
Net decrease in cash from operating assets and liabilities | (47.6) | (10.5) | |||
Increase (decrease) in other liabilities | (7.2) | 1.4 | |||
Net cash flows from (to) operating activities | (4.3) | 17.3 | |||
Net Cash Flows From (To) Investing Activities: | |||||
Capital expenditures | (10.7) | (19.9) | |||
Capitalized software | (0.5) | (0.2) | |||
Purchase of investments | (0.6) | (1.6) | |||
Sales or maturities of investments | 1.2 | 1.5 | |||
Other - net | 0.1 | 0.1 | |||
Net cash flows from (to) investing activities | (10.6) | (20.0) | |||
Net Cash Flows From (To) Financing Activities: | |||||
Payments of debt | (81.5) | (77.8) | |||
Proceeds from debt | 118.6 | 97.1 | |||
Dividends paid | (16.6) | (13.7) | |||
Purchase of HNI Corporation common stock | (2.6) | - | |||
Proceeds from sales of HNI Corporation common stock | 0.6 | 0.6 | |||
Other - net | (5.6) | (4.0) | |||
Net cash flows from (to) financing activities | 12.9 | 2.1 | |||
Net decrease in cash and cash equivalents | (2.0) | (0.6) | |||
Cash and cash equivalents at beginning of period | 28.9 | 17.4 | |||
Cash and cash equivalents at end of period | $ | 27.0 | $ | 16.8 | |
Amounts may not sum due to rounding.
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Disclaimer
HNI Corporation published this content on 29 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 April 2024 15:09:55 UTC.
