Q2 2024 HNI Corp Earnings Call

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: Conference operator today.

Operator: At this time, I would like to welcome everyone to the HNI Corporation's second quarter results conference call. All lines have been placed on mute to prevent any background noise.

Operator: Operator today. At this time, I would like to welcome everyone to the HNI Corporation Second Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, please press star 1. Thank you. Mr. McCall, you may begin your conference.

Operator: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, please press star one. Thank you.

All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question again, please press star 1.

Matt McCall: Mr. McCall, you may begin your conference.

Thank you. Mr. McCall, you may begin your conference.

Matt McCall: Good morning. My name is Matt McCall. I am Vice President and Vessel Relations and Corporate Development for HNI Corporation. Thank you for joining us to discuss our second quarter fiscal 2024 results. With me today are Jeff Lorenger, Chairman, President and CEO, and Marshall Bridges, Senior Vice President and CFO.

Matthew Scott McCall: Good morning. My name is Matt McCall.

Good morning. My name is Matt McCall. I am Vice President, Investor Relations and Corporate Development for HNI Corporation.

Matthew Scott McCall: I'm Vice President of Investor Relations and Corporate Development for HNI Corporation. Thank you for joining us to discuss our second quarter fiscal 2024 results. With me today are Jeff Lorenger, Chairman, President, and CEO, and Marshall Bridges, Senior Vice President and CFO. Copies of our financial news release and non-GAAP reconciliations are posted on our website. Statements made during this call that are not strictly historical facts are forward-looking statements, which are subject to known and unknown risks. The actual results could differ materially. The financial news release posted on our website includes additional factors that could affect actual results. The Corporation assumes no obligation to update any forward-looking statements made during the call.

Thank you for joining us to discuss our second quarter fiscal 2024 results. With me today are Jeff Lorenger, Chairman, President and CEO , and Marshall Bridges, Senior Vice President and CFO .

Matt McCall: Copies of our financial news release and non-GAAP reconciliation are posted on our website. Statements made during this call that are not strictly historical facts or forward-looking statements, which are subject to known and unknown risk. Actual results could differ materially. The financial news release posted on our website includes additional factors that could affect actual results. Corporation assumes no obligation to update any forward-looking statements made during the call.

Copies of our financial news release and non-GAAP reconciliations are posted on our website.

Statements made during this call that are not strictly historical facts are forward-looking statements which are subject to known and unknown risk.

Actual results could differ materially.

The financial news release posted on our website includes additional factors that could affect actual results.

The corporation assumes no obligation to update any forward-looking statements made during the call. I'm now pleased to turn the call over to Jeff Lorenger. Jeff?

Jeff Lorenger: I'm now pleased to turn the call over to Jeff Lorenger.

Matthew Scott McCall: I'm now pleased to turn the call over to Jeff Lorenger. Jeff? Good morning.

Jeffrey D. Lorenger: Good morning, and thank you for joining us. Our members once again demonstrated the organization's ability to deliver strong profit growth in the second quarter. Non-GAAP EPS of $0.79 exceeded our internal expectations and was 44% higher than the prior year period. It was also a record result for the second quarter.

Jeff Lorenger: Good morning, and thank you for joining us. Our members once again demonstrated the organization's ability to deliver strong profit growth in the second quarter. Non-GAAP EPS of 79 sets exceeded our internal expectations and was 44% higher than the prior year period. It was also a record result for the second quarter. In workplace furnishings, the combination of our profit transformation initiatives and the benefits from the Kimball International acquisition continue to deliver strong earnings growth, with segment non-GAAP operating profit growing 67% year over year. In residential building products, we drove profit growth and margin expansion despite ongoing housing market challenges.

Good morning, and thank you for joining us.

Our members once again demonstrated the organization's ability to deliver strong profit growth in the second quarter.

non-GAAP EPS of 79 cents exceeded our internal expectations and was 44% higher than the prior year period.

Jeffrey D. Lorenger: In workplace furnishings, the combination of our profit transformation initiatives and the benefits from the Kimbell International Acquisition continues to deliver strong earnings growth, with segment non-GAAP operating profit growing 67% year over year. In residential building products, we drove profit growth and margin expansion despite ongoing housing market challenges. Non-GAAP operating profit increased 17% year over year, demonstrating the strength of our business. Overall, our strategies, our dedicated member owners, our customer-first mindset, and our proven ability to manage through all parts of the economic cycle helped us drive excellent results in the first half of 2024. Looking forward, we are increasingly optimistic about the future and the opportunities that we see in both segments of the business. On the call today, I will highlight five key points that underpin our positive outlook.

It was also a record result for the second quarter.

In workplace furnishings, the combination of our profit transformation initiatives and the benefits from the Kimbell International Acquisition continue to deliver strong earnings growth with segment non-GAAP operating profit growing 67% year over year.

In residential building products, we drove profit growth and margin expansion despite ongoing housing market challenges.

Jeff Lorenger: Non-GAAP operating profit increased 17% year over year, demonstrating the strength of our business model. Overall, our strategies, our dedicated member owners, our customer-first mindset, and our proven ability to manage through all parts of the economic cycle helped us drive excellent results in the first half of 2024. Looking forward, we are increasingly optimistic about the future and the opportunities that we see in both segments of the business. On the call today, I will highlight five key points that underscore our positive outlook. First, workplace furnishings operating margin reached a multi-decade high for the second quarter, reflecting our continued commitment to improving the profitability in this segment.

non-GAAP operating profit increased 17% year-over-year, demonstrating the strength of our business model.

Overall, our strategies, our dedicated member-owners, our customer-first mindset, and our proven ability to manage through all parts of the economic cycle helped us drive excellent results in the first half of 2024.

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

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

Jeffrey D. Lorenger: First, Workplace Furnishings' Operating Margin reached a multi-decade high for the second quarter, reflecting our continued commitment to improving the profitability in this segment. Second, our combination with Kimball International is generating strong results. Third, the residential building product segment posted profit growth and margin expansion despite ongoing housing-related softness. Fourth, we expect revenue growth in both segments in the second half of the year, and fifth, beyond 2024, we have elevated earnings growth visibility.

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

Jeff Lorenger: Second, our combination with Kimball International is generating strong results. Third, our residential building product segment posted profit growth and margin expansion despite ongoing housing-related softness. Fourth, we expect revenue growth in both segments and the second half of the year. Fifth, beyond 2024, we have elevated earnings growth visibility. Following those highlights, Marshall will review our outlook.

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

Third, a residential building product segment posted profit growth and margin expansion despite ongoing housing-related softness.

Fourth.

We expect revenue growth in both segments in the second half of the year, and fifth, beyond 2024, we have elevated earnings growth visibility.

Jeffrey D. Lorenger: Following those highlights, Marshall will review our outlook, and I will conclude with some general closing comments before we open the call to your questions. Moving to the first point, workplace furnishings operating margin reached a multi-decade high for the second quarter. Workplace Furnishings non-GAAP operating margin expanded 370 basis points year-over-year to 11.9%, a level last seen in the late 1990s.

Jeff Lorenger: I will conclude with some general closing comments before we open the call to your questions. Moving to the first point, workplace furnishings operating margin reached a multi-decade high for the second quarter. Workplace furnishings non-GAAP operating margin expanded 370 basis points year over year to 11.9%. A second quarter level last seen in the late 1990s. This was also the ninth straight quarter of year-over-year operating margin improvement in the segment. The 370 basis points of margin expansion was on top of last year's strong result. Over the last two years, operating profit margin in workplace is up nearly nine percentage points.

Following those highlights, Marshall will review our outlook.

I will conclude with some general closing comments before we open the call to your questions.

Jeffrey D. Lorenger: This is also the ninth straight quarter of year-over-year operating margin improvement in a segment. The 370 basis points of margin expansion were on top of last year's strong results. Over the last two years, operating profit margin in the workplace has been up nearly 9%. This year's second quarter margin improvement was primarily driven by strong productivity gains. Driving productivity is a key part of our workplace furnishings profit transformation. Our operations continue to become more efficient across the board, including significant gains in labor and material efficiency.

Moving to the first point, workplace furnishings operating margin reached a multi-decade high for the second quarter.

Workplace Furnishings non-GAAP operating margin expanded 370 basis points year over year to 11.9 percent.

A second quarter level last seen in the late 1990s.

This was also the ninth straight quarter of year-over-year operating margin improvement in a segment.

The 370 basis points of margin expansion was on top of last year's strong result.

Over the last two years, operating profit margin in the workplace is up nearly 9 percentage points.

Jeff Lorenger: This year's second quarter margin improvement was primarily driven by strong productivity gains. Driving productivity is a key part of our workplace furnishings profit transformation plan. Our operations continue to become more efficient across the board, including significant gains in labor and material efficiency. And there's more to come as we have line of sight to additional margin expansion in the back half of 2024 and beyond. Recall, our profit transformation plan does not require demand improvement, and our recent margin expansion has been achieved without cyclical top-line support. However, as I will discuss later, we believe the market is slowly improving and will add to our future profit growth.

This year's second quarter margin improvement was primarily driven by strong productivity gains.

Driving productivity is a key part of our Workplace Furnishings Profit Transformation Plan.

Our operations continue to become more efficient across the board, including significant gains in labor and material efficiency.

Jeffrey D. Lorenger: And there's more to come as we have line of sight to additional margin expansion in the back half of 2024 and beyond. Recall, our profit transformation plan does not require demand, and recent margin expansion has been achieved without cyclical top-line support.

And there's more to come as we have line of sight to additional margin expansion in the back half of 2024 and beyond.

Recall, our profit transformation plan does not require demand improvement.

And a recent margin expansion has been achieved without cyclical top-line support.

Jeffrey D. Lorenger: However, as I will discuss later, we believe the market is slowly improving and will add to our future profits. Moving to my second point, our combination with Kimbell International is generating strong results. KII continues to be highly accretive and was a major contributor to our record second quarter profit. KII added an estimated $0.15 to our non-GAAP EPS in the second quarter, while generating an operating margin of 13.3%, and revenue and accretion surpassed the expectations we shared with you last. Kimball International is providing us with new growth opportunities and strengthening our market position.

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

Jeff Lorenger: Moving to my second point, our combination with Kimball International is generating strong results. KII continues to be highly accretive and was a major contributor to our record second quarter profit. KII added an estimated 15 cents to our non-GAAP EPS in the second quarter, while generating an operating margin of 13.3%. And revenue and accretions surpass the expectations we shared with you last quarter. Kimball International is providing us new growth opportunities and strengthening our market positions. We remain very encouraged by the complimentary nature and attractive post-pandemic positioning of KII's workplace offering. Additionally, KII's healthcare and hospitality businesses are well positioned within attractive, expanding segments and both generating growth.

Moving to my second point, our combination with Kimbell International is generating strong results.

KII continues to be highly accretive and was a major contributor to our record second quarter profit.

KII added an estimated $0.15 to our non-GAAP EPS in the second quarter, while generating an operating margin of 13.3%.

And revenue and accretion surpassed the expectations we shared with you last quarter.

Kimball International is providing us new growth opportunities and strengthening our market positions.

Jeffrey D. Lorenger: We remain very encouraged by the complementary nature and attractive post-pandemic positioning of KII's workplace offering. Additionally, KII's healthcare and hospitality businesses are well-positioned within attractive, expanding segments, and both are generating growth. As we announced in May, we now have line of sight to $50 million of cost synergies from the combination. I will talk more about this later, but those synergies will continue to fuel profit growth and margin expansion over the next couple of years and, again, do not require demand. Our confidence in the combination of strategic and financial benefits continues to prove out. Moving on to my third point.

We remain very encouraged by the complimentary nature and attractive post-pandemic positioning of KII's workplace offering.

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

Jeff Lorenger: As we announced in May, we now have won a site to $50 million to cost synergies from the combination. I will talk more about this later, but those synergies will continue to fuel profit growth and margin expansion over the next couple of years, and, again, do not require demand growth. Our confidence in the combination strategic and financial benefits continues to prove out and accelerate. Moving to my third point, residential building products posted profit growth and margin expansion despite ongoing housing-related weakness. Our actions to drive productivity at lower cost expanded operating margin to 13.8%. This was up 260 basis points year over year, despite overall housing market pressures.

As we announced in May, we now have line of sight to $50 million of cost synergies from the combination.

I will talk more about this later, but those synergies will continue to fuel profit growth and margin expansion over the next couple of years and, again, do not require demand growth.

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

Jeffrey D. Lorenger: Residential building products posted profit growth and margin expansion despite ongoing housing related actions to drive productivity at lower cost and expanded operating margin to 13.8%. This was up 260 basis points year over year despite overall housing market pressure. Looking forward, we remain bullish about the intermediate to long-term dynamics for this business, and we expect revenue growth to return in the second half of 2024. That leads me to my fourth topic.

Moving to my third point.

Residential building products posted profit growth and margin expansion despite ongoing housing related weakness.

are actions to drive productivity at lower cost.

expanded operating margin to 13.8 percent. This was up 260 basis points year-over-year despite overall housing market pressures.

Jeff Lorenger: Looking forward, we remain bullish about the intermediate long-term dynamics for this business, and we expect revenue growth to return in the second half of 2024. That leads me to my fourth topic. We expect revenue growth in both segments in the second half. I will start with some comments on expected back half workplace furnishings demand. Venom will follow those with some detail on second half residential building products revenue. We continue to see signs the workplace furnishings market is slowly improving. Pre-order activities remain elevated, but the translation that orders is continued to take longer. For the second half of 2024, we expect workplace furnishings revenue to increase at a low single-digit rate year over year.

Looking forward, we remain bullish about the intermediate to long-term dynamics for this business.

And we expect revenue growth to return in the second half of 2024.

Jeffrey D. Lorenger: We expect revenue growth in both segments in the second half. I will start with some comments on expected back-half workplace furnishings demand. Then we'll follow those with some detail on the second half presidential building products review.

That leads me to my fourth topic. We expect revenue growth in both segments in the second half.

I will start with some comments on expected back half workplace furnishings demand. Then we'll follow those with some detail on second half residential building products revenue.

Jeffrey D. Lorenger: We continue to see signs the workplace furnishings market is slowly improving. Pre-order activities remain elevated, but the translation to orders is continuing to take longer. For the second half of 2024, we expect workplace furnishings revenue to increase at a low single-digit rate year-over-year. That outlook is based on supportive data points in SMB, at KII, and with contracts. Our SMB business continues to generate growth. SMB orders grew 2% year over year in the second quarter, on top of a 4% increase in the same period last year. This segment of our business continues to benefit from healthy dynamics, including population shifts to secondary and tertiary geographies and relatively higher office usage in those markets. Kibble International also continues to perform well.

We continue to see signs the workplace furnishings market is slowly improving.

Pre-order activities remain elevated, but the translation to orders is continuing to take longer.

For the second half of 2024, we expect workplace furnishings revenue to increase at a low single-digit rate year-over-year.

Jeff Lorenger: That outlook is based on the supportive data points in SMB at KII and with contract. Our SMB business continues to generate growth. SMB orders through 2% year over year in the second quarter, a top of 4% increase in the same period of 2023. This segment of our business continues to benefit from healthy dynamics, including population shifts to secondary and tertiary geographies, and relatively higher offage usage in those markets. Kibble International continues to perform well. KII orders grew over 3% year over year in the second quarter. As I mentioned earlier, the combination with KII at Strengthened are workplace furnishings business and giving us access to new growth opportunities with strong market fundamentals, including healthcare and hospitality.

That outlook is based on the supportive data points in SMB, at KII, and with contract.

Our SMB business continues to generate growth. SMB orders grew 2% year-over-year in the second quarter, on top of a 4% increase in the same period of 2023.

This segment of our business continues to benefit from healthy dynamics, including population shifts to secondary and tertiary geographies,

and relatively higher office usage in those markets.

Jeffrey D. Lorenger: KNI orders grew over 3% year-over-year in the second quarter. As I mentioned earlier, the combination with KII has strengthened our workplace furnishings business and given us access to new growth opportunities with strong market fundamentals, including healthcare and hospitality. Additionally, KII's product portfolio is well-positioned to support the hybrid work environment. As companies reconfigure their spaces to better support the hybrid workplace, KII will benefit.

Kibble International continues to perform well.

KII orders grew over 3% year-over-year in the second quarter.

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

Jeff Lorenger: Additionally, KII's product portfolio is well positioned to support the hybrid work environment. As companies reconfigure their spaces to better support hybrid, KII will benefit. In our contract business, we see growth on the horizon. Our pre-order metrics remain elevated in indication of future growth. Our year-to-date quoting activity, contract sales funnel, and business during Design Days to our Experience Center in Chicago, all are up double digits year over year. Looking out, we believe we are particularly well positioned to benefit as the workplace furnishings market continues to improve. We have unmatched products and pricing breadth and depth. We have products that work for customers ranging from small businesses to the largest multi-nationals.

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

As companies reconfigure their spaces to better support hybrid, KII will benefit.

Jeffrey D. Lorenger: In our contract business, we see growth on the horizon. Our pre-order metrics remain elevated, an indication of future growth. Our year-to-date quoting activity, contract sales funnel, and visits during design days to our experience center in Chicago are all up double digits year over year. Looking ahead, we believe we are particularly well-positioned to benefit as the workplace furnishings market continues to improve. We have unmasked products and pricing breadth and depth. We have products that work for customers ranging from small businesses to the largest multinationals.

In our contract business, we see growth on the horizon.

Our pre-order metrics remained elevated, an indication of future growth.

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

Looking out, we believe we are particularly well-positioned to benefit as the workplace furnishings market continues to improve.

We have unmasked products and pricing breadth and depth. We have products that work for customers ranging from small businesses to the largest multinationals.

Jeff Lorenger: Our brands are distributed widely across geographies, from tertiary markets to the top MSAs, and we can address the needs of all workplaces, schools, healthcare facilities, and hotels. We have adapted our product offering in anticipation of the new ways people are working and will work. Today, most knowledge worker tasks are supported by six activities: focus, mentorship, innovation, collaboration, socialization, and learning, and each of these tasks calls for unique furnishing applications. At Design Days in June, we introduced the Intentional Office, a philosophical approach to addressing the needs of today's office by designing environments that support each of these six activities.

Jeffrey D. Lorenger: Our brands are distributed widely across geographies, from tertiary markets to the top MSAs, and we can address the needs of all workplaces, schools, health care facilities, and hotels. We have adapted our product offering in anticipation of the new ways people are working. Today, most knowledge worker tasks are supported by six activities.

Our brands are distributed widely across geographies, from tertiary markets to the top MSAs.

And we can address the needs of all workplaces, schools, healthcare facilities, and hotels.

We have adapted our product offering in anticipation of the new ways people are working and will work.

Today, most knowledge worker tasks are supported by six activities.

Jeffrey D. Lorenger: Mentorship, Innovation, Collaboration, Socialization, and Learning. And each of these tasks calls for unique furnishing applications. At Design Days in June, we introduced the Intentional Office, a philosophical approach to addressing the needs of today's office by designing environments that support each of these six activities.

Focus, Mentorship, Innovation, Collaboration, Socialization, and Learning.

And each of these tasks calls for unique furnishing applications.

At Design Days in June , we introduced the Intentional Office.

A philosophical approach to addressing the needs of today's office by designing environments that support each of these six activities.

Jeff Lorenger: This approach to the market, our coverage of the market, and our unwavering focus on the customer have its well positioned to benefit from an improving demand environment. Let's shift to second half residential building products demand. Overall, demand remains choppy, but the trends are improving. For the second half, we expect residential building products revenue to grow at a mid-single-digit pace versus prior to your period. This outlook is consistent with our improving order trends. When excluding changes we implemented to our early order program, normalized second quarter orders grew 4% year over year. This is the first quarter of order growth since mid-2022 when the housing correction started.

Jeffrey D. Lorenger: This approach to the market, our coverage of the market, and our unwavering focus on the customer have us well positioned to benefit from an improving demand environment. Now, let's shift to the second half of residential building products. Overall, demand remains choppy, but the trends are improving. For the second half, we expect residential building products revenue to grow at a mid-single-digit pace versus the prior year period. This outlook is consistent with our improving order trend. When excluding changes we implemented to our early order program, normalized second quarter orders grew 4% year-over-year.

This approach to the market, our coverage of the market, and our unwavering focus on the customer have us well positioned to benefit from an improving demand environment.

Let's shift to second half residential building products demand.

Overall, demand remains choppy, but the trends are improving.

For the second half, we expect residential building products revenue to grow at a mid-single-digit pace versus prior year period.

This outlook is consistent with our improving order trends.

When excluding changes we implemented to our early order program, normalized second quarter orders grew 4% year-over-year.

Jeffrey D. Lorenger: This is the first quarter of order growth since mid-2022, when the housing correction started. Looking forward, we expect demand to improve from here. Supply-demand fundamentals for the housing market remain strong. Although recent housing inventories have ticked up, single-family housing remains massively undersupplied, while demographics support additional demand growth.

This is the first quarter of order growth since mid-2022 when the housing correction started.

Jeff Lorenger: Looking forward, we expect demand to improve from here. The supply demand fundamentals for the housing market remain strong. Although recent housing inventories have ticked up, single-family housing remains massively undersupplied, while demographics support additional demand growth. In addition to the improving market dynamics, we continue to invest in unique growth opportunities. These include new product innovations such as electric fireplaces, efforts to better connect with builders, homeowners, and home buyers, online capabilities, and the expansion of our wholly owned installing distributor footprint. Submarizing my fourth point, we are expecting top line improvement in the second half in both workplace furnishings and residential building products.

Looking forward, we expect demand to improve from here.

The supply-demand fundamentals for the housing market remain strong. Although recent housing inventories have ticked up, single-family housing remains massively undersupplied while demographics support additional demand growth.

Jeffrey D. Lorenger: In addition to the improving market dynamics, we continue to invest in unique growth opportunities. These include new product innovations such as electric fireplaces, efforts to better connect with builders, homeowners, and homebuyers, online capabilities, and the expansion of our wholly owned installation distributor footprint. Summarizing my fourth point, we are expecting top-line improvements in the second half of the year in both workplace furnishings and residential building projects. That, along with continued margin expansion in both segments, will drive record EPS in 2024.

In addition to the improving market dynamics, we continue to invest in unique growth opportunities.

These include new product innovations such as electric fireplaces, efforts to better connect with builders, homeowners, and homebuyers, online capabilities, and the expansion of our wholly owned installing distributor footprint.

Summarizing my fourth point, we are expecting top-line improvement in the second half in both workplace furnishings and residential building products.

Jeff Lorenger: That, along with continued margin expansion in both segments, will drive record EPS in 2024. Moving to my fifth and final point, we have elevated profit growth visibility through 2026. We expect AI synergies to total $50 million. This is double the estimate we provided when the acquisition closed. Additionally, the ramp-up of our facility in Mexico is expected to contribute an incremental $20 to $25 million to the bottom line. Both initiatives are currently underway and provide strong visibility to future earnings growth. Of the $70 to $75 million in total benefit, an estimated $45 to $50 million will positively impact the 2025 to 2026 period.

That, along with continued margin expansion in both segments, will drive record EPS in 2024.

Jeffrey D. Lorenger: Moving to my fifth and final point, we have elevated profit growth visibility through 2026. Additionally, we expect KII synergies to total $50 million. This is double the estimate we provided when the acquisition closed. Additionally, the ramp-up of our facility in Mexico is expected to contribute an incremental $20 to $25 million to the bottom line. Both initiatives are currently underway and provide strong visibility to future earnings of $70 to $75 million in total benefit.

Moving to my fifth and final point, we have elevated profit growth visibility through 2026.

We expect KII Synergies to total $50 million. This is double the estimate we provided when the acquisition closed.

Additionally, the ramp-up of our facility in Mexico is expected to contribute an incremental $20 to $25 million to the bottom line.

Both initiatives are currently underway and provide strong visibility to future earnings growth.

Jeffrey D. Lorenger: An estimated $45 to $50 million will positively impact the 2025 to 2026 period. This is equal to approximately 70 cents of EPF, for more than 20% growth from the current year consensus estimate, as we have communicated for several quarters. We can continue to grow profit without volume growth due to initiatives like these; volume growth will only enhance our profitability. I will now turn the call over to Marshall to discuss our outlook for 2024.

of the $70 to $75 million in total benefit.

An estimated $45-$50 million will positively impact the 2025-2026 period.

Jeff Lorenger: This is equal to approximately 70 cents of EPS, while more than 20 percent growth from the current year consensus estimate. As we have communicated for several quarters, we can seem to grow profit without volume growth due to initiatives like these. Volume growth will only enhance our profitability.

This is equal to approximately 70 cents of EPS, or more than 20% growth from the current year consensus estimate.

As we have communicated for several quarters, we continue to grow profit without volume growth due to initiatives like these. Volume growth will only enhance our profitability.

Marshall Bridges: I will now turn the call of a Marshall Discussor Outlook for 2024.

Marshall H. Bridges: Thanks, Jeff. I'll start by quickly summarizing the outlook for demand and profit that Jeff just covered, beginning with demand. Second half revenue in workplace furnishings is expected to increase at a low single-digit rate year over year. I'll note that our new outlook represents a reduction from what we provided in our April earnings release.

I will now turn the call over to Marshall to discuss our outlook for 2024.

Marshall Bridges: Thanks, Jeff. I'll start by quickly summarizing the outlook for demand and profit that Jeff just covered, beginning with demand. Second half revenue in workplace furnishings is expected to increase at a low single-digit rate year to year.

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

Second-half revenue in workplace furnishings is expected to increase at a low single-digit rate year-over-year.

Marshall Bridges: I'll note that our new Outlook represents a reduction from what we provided in our April earnings release. That release implied workplace furnishings would grow at a mid single-digit rate in a second half. The change primarily reflects timing in the contract space. As Jeff mentioned, we continue to see elevated pre-order metrics in a healthy sales funnel, both of which point to future growth. However, our contract business has a heavy mix of projects. The timing of when those projects ship and the salt can cause variation in our growth rates. This type of variation is not new. We've seen timing impact the contract business in the past, and the bifinal order trends have been volatile this year as well.

I'll note that our new outlook represents a reduction from what we provided in our April earnings release. That release implied workplace furnishings would grow at a mid-single-digit rate in the second half.

Marshall H. Bridges: That release implied workplace furnishings would grow at a mid-single-digit rate in the second half. The change primarily reflects timing in the contract space. As Jeff mentioned, we continue to see elevated pre-order metrics and a healthy sales funnel, both of which point to future growth. However, our contract business has a heavy mix of projects. The timing of when those projects ship and are installed can cause variation in our growth rates. This type of variation is not new.

The change primarily reflects timing in the contract space.

As Jeff mentioned, we continue to see elevated pre-order metrics and a healthy sales funnel, both of which point to future growth. However, our contract business has a heavy mix of projects. The timing of when those projects ship and install can cause...

Marshall H. Bridges: We've seen timing impact the contract business in the past, and the BIFMA order trends have been volatile this year as well. Moving into residential building products. We expect second half revenue to grow at a mid-single-digit pace versus the same period in 2023. I'd also like to note that year-over-year trends in both segments are expected to improve from the third quarter to the fourth, which means that most of the growth that we are expecting in the second half is going to be in the fourth quarter. Now, our profit outlook.

variation in our growth rates. This type of variation is not new. We've seen timing impact the contract business in the past and the BIFMA order trends have been volatile this year as well.

Marshall Bridges: Moving into residential building products, we expect second half revenue to grow at a mid single-digit pace versus the same period in 2020. 3. I'd also like to note that year-over-year trends in both segments are expected to improve from the third quarter to the fourth, which means that most of the growth that we are expecting in the second half is going to be in the fourth quarter.

Moving into residential building products.

We expect second-half revenue to grow at a mid-single-digit pace versus the same period in 2023.

I'd also like to note that year-over-year trends in both segments are expected to improve from the third quarter to the fourth, which means that most of the growth that we are expecting in the second half is going to be in the fourth quarter.

Marshall Bridges: Shifting to our profit outlook, we expect margin expansion in both workplace furnishings and residential building products to drive continued earnings growth in the second half. Our expectations for 2024 profit have increased compared to the outlook we provided in April. Specifically, we expect that our outperformance in the second quarter will more than offset the impact from lower second half top line roads and workplace furnishings.

Marshall H. Bridges: We expect margin expansion in both workplace furnishings and residential building products to drive continued earnings growth in the second half. Our expectations for 2024 profits have increased compared to the outlook we provided in April. Specifically, we expect that our outperformance in the second quarter will more than offset the impact of lower second half top line growth in workplace furnishing. I'll wrap up with a few comments on our balance sheet. We maintained our strong financial position.

Shifting to our profit outlook, we expect margin expansion in both workplace furnishings and residential building products to drive continued earnings growth in the second half.

Our expectations for 2024 profit have increased compared to the outlook we provided in April .

Specifically, we expect that our outperformance in the second quarter will more than offset the impact from lower second-half top-line growth in workplace furnishings.

Marshall Bridges: I'll wrap up with a few comments on our balance sheets. We maintained our strong financial position; gross leverage at the end of the quarter was 1.5 times, as calculated in accordance with our debt agreements. That ratio is down from 1.9 times in the first quarter due to higher profit and modestly lowered debt. In addition, during the quarter, we accelerated our share buyback activity with more than $10 million of repurchases. The combination of our strong balance sheet and consistent cash flow generation provides a high degree of financial flexibility and capacity for capital deployment. Our current priorities for cash deployment remain reinvesting in the business, funding dividends, pursuing buybacks, and imminent opportunities.

I'll wrap up with a few comments on our balance sheets.

Marshall H. Bridges: Gross leverage at the end of the quarter was 1.5 times, as calculated in accordance with our debt agreement. That ratio is down from 1.9 times in the first quarter due to higher profit and modestly lower debt. In addition, during the quarter, we accelerated our share buyback activity with more than $10 million of repurchases. The combination of our strong balance sheet and consistent cash flow generation provides a high degree of financial flexibility and capacity for capital deployment. Current priorities for cash deployment remain reinvesting in the business, funding dividends, pursuing buyback, and M&A opportunities. I'll now turn the call back over to Jeff.

We maintained our strong financial position. Gross leverage at the end of the quarter was 1.5 times, as calculated in accordance with our debt agreements. That ratio is down from 1.9 times in the first quarter due to higher profit and modestly lower debt.

In addition, during the quarter, we accelerated our share buyback activity with more than $10 million of repurchases.

The combination of our strong balance sheet and consistent cash flow generation.

provides a high degree of financial flexibility and capacity for capital deployment.

Our current priorities for cash deployment remain reinvesting in the business, funding dividends, pursuing buybacks.

Jeff Lorenger: I'll now turn the call back over to Jeff. Thanks, Marshall. We remain committed to expanding margins in workplace furnishings and driving long-term revenue growth in residential building products. We had an excellent start to 2024, delivering record first half earnings, and we anticipate record EPS for the full year 2024. Beyond this year, we are positioned for continued success.

Jeffrey D. Lorenger: Thanks, Marshall. We remain committed to expanding margins in workplace furnishings and driving long-term revenue growth in residential building products. We had an excellent start to 2024, delivering record first-half earnings, and we anticipate record EPS for the full year 2024. Beyond this year, we are positioned for continued success. In summary, we have elevated earnings growth visibility, broad and diverse product and market coverage in workplace furnishings, a market-leading position in residential building products, and a strong balance sheet and the ability to drive continued free cash. I want to thank all of our HNI members for their continued hard work and dedication to deliver these results. We will now open the call to your questions.

and M&A Opportunities.

I'll now turn the call back over to Jeff.

Thanks, Marshall. We remain committed to expanding margins in workplace furnishings and driving long-term revenue growth in residential building products.

We had an excellent start to 2024, delivering record first half earnings, and we anticipate record EPS for the full year 2024.

Jeff Lorenger: In summary, we have elevated earnings growth visibility, broad and diverse products and market coverage in workplace furnishings, a market leading position in residential building products, and a strong balance sheet and the ability to drive continued free cash flow. I want to thank all of our HNI members for their continued hard work and dedication to deliver these results.

Beyond this year, we are positioned for continued success.

In summary, we have elevated earnings growth visibility.

Broad and diverse product and market coverage in workplace furnishings.

A market-leading position in residential building products.

and a strong balance sheet and the ability to drive continued free cash flow.

I want to thank all of our HNI members for their continued hard work and dedication to deliver these results.

Operator: We will now call to your questions.

Operator: Thank you. At this time, I would like to remind everyone that in order to ask a question, please press star, then the number one on your telephone keypad, and we'll pause for just a moment to compile the Q&A roster.

Operator: Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad, and we'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Budd Bugatch from Water Tower Research.

We will now open the call to your questions.

Thank you. At this time I would like to remind everyone in order to ask a question please press star then the number one on your telephone keypad and we'll pause for just a moment to compile the Q&A roster.

Bud Bugatch: Your first question comes from the line of Bud Bugac from Water Tower Research. Your line is open. Jeff, Marshall, back to congratulations to you and your team on the strong performance in the quarter and on the guidance as well. I would like, I think, to go right to talk a little bit about revenues. I think that's the major change that you're expecting from what you've been doing. Talk a little bit more in color of what you're seeing in each of the segments, if you will. I say you talked a little bit about a longer cycle in contract and what's driving that and the relationship to the overall economy, which, if you look at some of the other reports this morning, maybe showing a little bit of a weakness and certainly some of the hard areas like cars or automobiles.

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

Operator: Your line is open.

Budd Bugatch: Jeff, Marshall, Matt, congratulations to you and your team on the strong performance in the quarter and on the guidance as well. I would like, I think, to go right ahead and talk a little bit about revenues. I think that's the major change that you're expecting from what you've been doing. Talk a little bit more in color about what you're seeing in each of the segments, if you will. I see you talked a little bit about a longer cycle in contracts and what's driving that and the relationship to the overall economy, which, if you look at some of the other reports this morning, may be showing a little bit of a kind of weakness in some of the hard areas like cars and automobiles.

Jeff, Marshall, Matt, congratulations to you and your team on the

strong performance in the quarter and on the guidance as well. I would like, I think, to go right to talk a little bit about revenues. I think that's the major change is that you're expecting from what you've

been doing. Talk a little bit more in color of what you're seeing in each of the segments if you will. I say you talked a little bit about a longer cycle in contract.

and what's driving that, and the relationship to the overall economy, which, if you look at some of the other reports this morning, may be showing a little bit of a kind of a weakness, and certainly some of the hard areas, like cars and automobiles.

Jeff Lorenger: Yeah, but that's, you know, look, we see a lot of activity that you talk about the cycle, and we've been through this before. You've been around, you've seen this, and it does feel like customers are active. I mean, look, we've been kind of the space itself has been kind of bouncing on the bottom for a bit here. So, you know, I think what we see is that people interested in getting, you know, reconfiguring, looking at their office space, trying to figure out what they're going to do. And what I would say is strategically, a lot of people are starting to figure out that they have a, you know, they have a position, a strategic position on what it needs to look like.

Jeffrey D. Lorenger: Yeah, bud, that's, you know, look, we see a lot of activity as you talk about the cycle, and we've been through this before you've been around, and you've seen this, and it does feel like customers are active. I mean, look, we've been, we've been kind of the space itself has been kind of bouncing on the bottom for a bit here.

Yeah, but that's, you know, look, we see a lot of activity that you've talked about the cycle. We've been through this before you've been around, you've seen this and it does feel like customers are active. I mean,

Look, we've been we've been kind of the space itself has been kind of bouncing on the bottom for a bit here. So,

Jeffrey D. Lorenger: So, um, I think what we see is that people are interested in getting, you know, reconfiguring, looking at their office space, trying to figure out what they're going to do. And what I would say is that strategically, a lot of people are starting to figure out that they have a position on what it needs to look like in the post-pandemic work model, but a lot of companies just haven't yet reconfigured their offices to support, for instance, their particular hybrid model.

You know, I think what we see is that people

Interested in getting, you know, reconfiguring, looking at their office space, trying to figure out...

What I would say is strategically, a lot of people are starting to figure out that they have a, you know, they have a position, a strategic position on what it needs to look like in the post pandemic work model, but a lot of companies just haven't figured out what they're going to do.

Jeff Lorenger: I mean, the post-endemic work model, but a lot of companies just haven't yet reconfigured their offices to support, for instance, their particular hybrid model. But we do believe we see reality of sunk in, and a lot of companies are saying, yeah, we've now studied this long enough and we need to, we need to move out on this. And so, even though it's elongating, there's still a little bit of, you know, hand-bringing about exactly how to execute. There's a lot; there's a lot of interest in that in doing so. And that's what we're seeing; that's what we're feeling; that's what our customers are saying.

yet reconfigured their offices to support, for instance, their particular hybrid model.

Jeffrey D. Lorenger: But we do believe reality has sunk in, and a lot of companies are saying, yeah, we've now studied this long enough, and we need to move on this. And so, even though it's elongating, there's still a little bit of hand-wringing about exactly how to do it. There's a lot of interest in doing so, and that's what we're seeing, that's what we're feeling, that's what our customers are saying.

Buh-bye, buh-bye.

But we do believe

We've seen...

reality has sunk in and a lot of companies are saying, yeah, we've now studied this long enough.

And we need to move out on this. And so, even though it's elongating, there's still a little bit of a, you know, hand-wringing about exactly how to execute. There's a lot of interest in that, in doing so. And that's what we're seeing. That's what we're feeling. That's what our customers are saying.

Budd Bugatch: Well, we've heard the phrase top of the funnel on a couple of different calls, and has the top of the funnel translated so far into request for proposals or RFQs, and are we seeing competitive bid situations that are increasing?

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

Speaker Change: Well, we've heard the phrase top of the funnel in a couple of different calls, and has the top of the funnel translated so far into request for proposals or RFQs, and are we seeing competitive bid situations that are increased?

Marshall Bridges: Yeah, but let me just need to take a step back. So we're expecting workplace furnishings to be up low single digits in the back half. You know, that's really led by the SMB business and KII. Those are performing above average, and then the contract business is performing below that number. So your question sort of aimed at the contract business. I would say that the contract business, as Jeff mentioned in his prepared comments, the pre-order metrics are very healthy. We're seeing double-digit increases in the funnel. We're seeing double-digit increases in quoting. Our design day's visits were very strong.

Marshall H. Bridges: Yeah, but let me maybe take a step back. So, we're expecting workplace furnishings to be up low single digits in the back half. You know, and that's really led by the SMB business and KII. Those are performing above average, and then the contract business is performing below that number. So, your question is sort of aimed at the contract business.

Speaker Change: Yeah, but let me let me just maybe take a step back. So we're expecting workplace furnishings to be up low single digits in the back half You know that that's really led by the SMB business and KII Those are performing above average and then the contract business is performing below that number

Marshall H. Bridges: I would say that the contract business, as Jeff mentioned in his prepared comments, the pre-order metrics are very healthy, and we're seeing double-digit increases in the funnel. We're seeing double-digit increases in quoting, and our design days visits were very strong. So, all indications that, you know, as Jeff said, that people are looking to reconfigure their offices and make some moves. However, it is being elongated, as you said, and we think that that revenue is pushed out in subsequent quarters. So, I think what we're seeing here is that the shorter cycle businesses continue to do a little better than the longer cycle businesses, but we're encouraged by all.

Speaker Change: So your question is sort of aimed at the contract business. I would say that the contract business

Speaker Change: As Jeff mentioned in his prepared comments...

Speaker Change: The pre-order metrics are very healthy. We're seeing double-digit increases in the funnel. We're seeing double-digit increases in quoting. Our design day's visits were very strong. So all indications that, as Jeff said, that people are looking to reconfigure their office and make some moves.

Marshall Bridges: So all indications that, you know, as Jeff said, that people are looking to reconfigure their office and mix and move. However, it is being elongated, as you said, and we think that revenue is pushed out subsequent quarters. So I think what we're seeing here is that the shorter cycle businesses continue to do a little better than the longer cycle business, but we're encouraged by all of it.

Speaker Change: However, it is being elongated, as you said, and we think that revenue is pushed out subsequent quarters. So I think what we're seeing here is that the shorter cycle businesses continue to do a little better than the longer cycle business, but we're encouraged by all of it.

Bud Bugatch: That's really very helpful more. So thank you. And in the RVP, you're talking about again, some growth there. And that's been a segment that's been under some pressure with higher mortgage rates and lower housing activity more recently. What are you seeing that's giving you the comfort there? Your business is strong. You got a large market share in the hard side. So is it really from the market share perspective, or some of the initiatives you've had? Like, I think Jeff mentioned online in an electric furnaces or they really would striving the better expectation. In the second quarter, from the order perspective in residential building products, we showed 4% growth in order on a normalized basis, and what really drove that was the remodel retrofit side of things.

Budd Bugatch: And in the RVP, you're talking about, again, some growth there, and that's been a segment that's been under some pressure with higher mortgage rates and lower housing activity more recently. What are you seeing that's giving you the comfort there?

Speaker Change: That's really very helpful, Marshall. Thank you. And in the RVP, you're talking about, again, some growth there. And that's been a segment that's been under some pressure with higher mortgage rates and lower housing activity.

Marshall H. Bridges: Your business is strong. You've got a large market share in the hearth, so is it really from the market share perspective or some of the initiatives you've had? I think Jeff mentioned online and electric furnaces.

Speaker Change: more recently. What are you seeing that's giving you the comfort there? Your business is strong. You've got a large market share in the hearth side.

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

Budd Bugatch: Are they really what's driving the higher expectations?

Marshall H. Bridges: Yeah, if you look at what happened in the second quarter from the order perspective in residential building products, we showed 4% growth in orders on a normalized basis. And, you know, what really drove that was the remodel retrofit side of things. New construction was roughly flat. So, the turn of the remodel retrofit is very encouraging to us. That's something that's been soft for, you know, well over a year, really going back to 2022.

Speaker Change: Yeah, if you look at what happened in the second quarter from the order perspective in residential building products,

Speaker Change: We showed 4% growth in orders in a normalized basis.

Marshall Bridges: The new construction was roughly flat, so the turn of remodel retrofit is very encouraging to us. That's something that's been soft for well over a year, really going back to 2022. Now, that's a pretty seasonally low order period for remodel retrofit, but we did see growth on a low base. As we look forward, we think we're going to see growth in both new construction and remodel retrofit and be up in that mid-single digit rate in the back half.

Speaker Change: And, you know, what really drove that was the remodel retrofit side of things. New construction was roughly flat, so the turn of remodel retrofit is very encouraging to us. That's something that's been soft for, you know, well over a year, really going back to 2022.

Marshall H. Bridges: Now, that's a pretty seasonalally low order period for remodel retrofit, but we did see growth on a low base. As we look forward, we think we're going to see growth in both new construction and remodel retrofit and be up in that mid-single-digit rate in the back half.

Speaker Change: Now...

Speaker Change: That's a pretty seasonally low order period for remodeled retrofit, but we did see growth on a low base. As we look forward we think we're going to see growth in both new construction and remodeled retrofit and be up in that mid single digit rate in the back half.

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

Bud Bugatch: That's pretty exciting, because, as you say, one of the issues and pushbacks that you and I discussed over the last number of years is the issue of incidents in new housing for fireplaces, and I know that there's a psychographic want of fireplaces. But some of the numbers having shown that, are we seeing any improvement in incidents in single-family housing from a standpoint of fireplaces? Is part of the new homes? It's hard to measure that, but what I would say is that our new construction business being flat. That's maybe a little bit disconnected from what we've seen in new construction of single-family homes, and I think that reflects the affordability pressures, the mix of housing pressures that we see.

Speaker Change: That's pretty exciting because as you say, one of the issues and pushbacks that you and I have discussed over

Speaker Change: The last number of years is the issue of incidents in new housing for fireplaces, and I know that there's a psychographic want of fireplaces, but some of the numbers, having shown that, are we seeing any improvement in incidents in single-family housing from a standpoint of fireplaces?

Marshall H. Bridges: It's hard to measure that, but what I would say is that our new construction business being flat, you know, it's maybe a little bit disconnected from what we've seen in new construction of single-family homes, and I think that reflects the affordability pressures, the mix of housing pressures that we see.

Speaker Change: as part of the new homes.

Speaker Change: It's hard to measure that, but what I would say is that our new construction business, being flat,

Speaker Change: You know, it's maybe a little bit disconnected from what we've seen in new construction of single-family homes, and I think that reflects the affordability pressures, the mix of housing pressures that we see.

Jeffrey D. Lorenger: Yeah, I think we've got a combination right now, but it's not, it's kind of, it's flattened out a bit on the incident rate. We've got a combination of affordability, spec homes, and construction lags that are kind of all meeting up at the same time. We think that'll start to unlock, and as you say, we've got a lot of investments pointed at this space as well, relative to educated home buyers and home builders, and remodelers. The electric units are taking off a bit.

Jeff Lorenger: Yeah, I think we've got a combination right now, but it's flat. Now to bit on the incident rate. We've got a combination of affordability, spec homes, and construction lags that are all meeting up at the same time period. We think that will start to unlock, and as you say, we've got a lot of investments pointed at this space as well, relative to educate home buyers and home builders, remodelers. The electric units are taking off a bit, and so as interest rates, we see some relief there. We believe we'll be able to peer up the growth again.

Speaker Change: Yeah, I think we've got a combination right now, but it's not...

Speaker Change: It's kind of...

Speaker Change: It's flattened out a bit on the incident rate. We've got a combination of affordability, spec homes, and construction lags that are kind of all meeting up at the same time period. We think that'll start to unlock, and as you say, we've got a lot of investments pointed at this space as well.

Speaker Change: relative to educate homebuyers and homebuilders.

Speaker Change: remodelers, the electric units are taking off a bit and so you know as interest rates we see some relief there we believe we'll be able to you know

Jeffrey D. Lorenger: And so, you know, as interest rates go down, we see some relief there, and we believe we'll be able to, you know, gear up the growth again. And like Marshall said, the turn and remodel is very encouraging. That's the first, you know, in both our businesses, but, you know, we've kind of been writing a little bit on the lower side. And so, as we said in the prepared remarks, I mean, you know, we believe we can continue to expand our margins without growth. And now that we're starting to see some signs of growth, that really just adds to, you know, what we've got going.

Jeff Lorenger: And like Marshall said, the turn in remodel is very encouraging. That's the first. In both our businesses, but we've been writing a little bit on the lower side. And so, as you said in the prepare remarks, we believe we can continue to expand our margins without growth. And now that we're starting to see some signs of growth, that's just add to what we've got going. No doubt.

Marshall: Here up the growth again, and like Marshall said the turn and remodel is very encouraging That's the first you know in both our businesses, but you know we've been we've kind of been riding a little bit

Marshall: you know, on the on the lower side. And so, as we said in the prepared remarks, I mean.

Speaker Change: We believe we can continue to expand our margins without growth, and now that we're starting to see some signs of growth, that really adds to what we've got going.

Budd Bugatch: No doubt. The performance of the company and the performance of your team has been superb and remarkable, and you're all to be congratulated on that. And I look forward to seeing the results as they come forward for the balance of this year and into the coming years. Thank you.

Bud Bugatch: I mean, the performance of the company and the performance of your team has been superb and remarkable, and you're already congratulating on that. And other forward to seeing the results as they come forward for the bounce of this year and into the upcoming years. Thank you. Great. Thanks, bud.

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

Greg Burns: Your next question comes from the line of Greg Burns from Cedodian Company. Your line is open. Good morning. When we look at the profit visibility and some of the numbers e around cost savings, the 45 to 50 that you're projecting for 20, 25 and 26, is that incremental because I think some of the KI synergies I'm assuming have been been realized. I just want to understand the buckets and if that's all incremental or have you already realized the piece of that and the total is going to be that over the course of the next two years.

Operator: Your next question comes from the line of Greg Burns from Sidoti and Company. Your line is open.

Bud: Great. Thanks, Bud.

Speaker Change: Your next question comes from the line of Greg Burns from Sudotian Company. Your line is open.

Gregory Burns: Morning. When we look at the profit visibility and some of the numbers you gave around cost savings, the 45 to 50 that you're projecting for 2025 and 2026. Is that incremental? Because I think some of the KII synergies, I'm assuming, have already been realized. I just want to understand the buckets and if that's all incremental, or have you already realized a piece of that, and the total is going to be that over the course of the next two years.

Gregory Burns: Morning. When we look at the

Speaker Change: The profit visibility and some of the numbers you gave around cost savings, the 45 to 50 that you're projecting for

Gregory Burns: 2025 and 26. Is that incremental? Because I think some of the KI synergies, I'm assuming, have been realized. I just want to understand the buckets and if that's all incremental or have you already realized the piece of that and the total is going to be that over the course of the next two years?

Jeffrey D. Lorenger: You know, the $45 to $50 million is all incremental compared to... $40 to $45.

Marshall Bridges: You know, the 45 to 50 million dollars is all incremental compared to 25. Yeah, 45 to 50 million is all incremental relative to 2024. So, Greg, it's your right in that some of the benefits from those initiatives have been realized. Those two initiatives in total are about 70 to 75 million dollars of benefit. So we're, you know, we've got a little bit of that already realized by about 25 million of it.

Gregory Burns: You know, the $45 to $50 million is all incremental compared to... $40 to $45 million.

Marshall H. Bridges: Forty-five to fifty million is all incremental relative to 2024. So, Greg, you're you're right in that some of the benefits from those initiatives have been realized. Those two initiatives in total are about seventy to seventy five million dollars of benefit. So we've got a little bit of that already realized, but about twenty-five million.

Speaker Change: $45 to $50 million is all incremental relative to 2024.

Speaker Change: So Greg, you're right in that some of the benefits from those initiatives have been realized. Those two initiatives in total are about 70 to $75 million of benefit. So we've got a little bit of that already realized, but.

Marshall Bridges: Okay. And I guess it doesn't include your just ongoing annual, maybe efficiency or cost initiatives. Do you have a number around that? Like how much that could be on an annual basis? You're right. Certainly, a lot of organizational resources are focused on delivering that 45 to 50 million incremental, but we will still be driving daily, weekly, you know, annual productivity gains just to give you some color. We don't necessarily have a forward-looking guidance on that. But if you look back historically. In, you know, a couple of years before the pandemic, we were averaging $10, $11 million of annual productivity gains.

Gregory Burns: Okay, and I guess it doesn't include your just ongoing, annual maybe efficiency or cost initiatives. Do you have a number around that, like how much it could be on an annual basis?

Speaker Change: About 25 million of it.

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

Marshall H. Bridges: You're right. Certainly, a lot of organizational resources are focused on delivering that $45 to $50 million in incremental revenue, but we will still be driving daily, weekly, and annual productivity gains. Just to give you some color, we don't necessarily have forward-looking guidance on that, but if you look back historically, a couple of years before the pandemic, we were averaging $10, $11 million of annual productivity gains. So, I'd expect that we'd be able to deliver something in that neighborhood. Okay.

Speaker Change: You're right. Certainly, a lot of organizational resources are focused on delivering that $45 to $50 million incremental, but we will still be driving daily, weekly, annual productivity gains. Just to give you some color, we don't necessarily have a forward-looking

Speaker Change: guidance on that, but if you look back historically in, you know, a couple of years before the pandemic, we were averaging $10, $11 million of annual productivity gain. So I'd expect that we'd be able to deliver something in that neighborhood.

Marshall Bridges: So I'd expect that we build a liver or something in that neighborhood.

Gregory Burns: Okay. And really strong performance on the workplace margins, you know, getting to that double-digit range, I think, is faster than we expected. Do you have a target on where you think that that segment can operate on a recurring basis or an ongoing normalized basis? Yeah, it's a good question, Greg, and we have talked about

Greg Burns: Okay. And really strong performance on the workplace margins, you know, getting to that double digit range as fast as we expected. Do you have a target on, you know, where, where you think that that segment can operate on the. On the recurring cases or, you know, an ongoing normalized basis? Yes. Good question, Greg. And we have talked about that a lot. I will point out that our operating margin in this segment is. Now 10%. You know, when you look back the last four quarters, and I would also point out there's nothing abnormal in those in that time period.

Speaker Change: Okay, and really strong performance on the workplace margins, you know, getting to that double digit range, I think it's faster than we expected. Do you have a target on, you know, where, where you think that?

Speaker Change: that

Speaker Change: segment can operate on the recurring basis or you know an ongoing normalized basis.

Jeffrey D. Lorenger: Yeah, it's a good question Greg, and we have talked about that a lot. I will point out that our operating margin in this segment is now 10% when you look back at the last four quarters. And I would also point out that there's nothing abnormal in that time period. So over time, as a reference point, just kind of how it gives you, philosophically how we think, in 2009, our operating margin in residential building products was in the low single digits.

Speaker Change: Yeah, it's a good question, Greg, and we have talked about that a lot. I will point out that our operating margin in this segment is...

Gregory Burns: Now 10%, you know, when you look back the last four quarters.

Gregory Burns: And I would also point out, there's nothing abnormal in those, in that time period. So over time, as a reference point, just kind of how it gives you, philosophically how we think, you know, in 2009, our operating margin in residence building products was in the low single digits.

Greg Burns: So, over time, as a reference point, it would just kind of how it gives you feel. So how we think, you know, in 2009, our operating margin in residents of building products was in the low single digits. Now it's consistently in the high teens. So I would tell you, I don't know the workplace being the high teens, you know, is in the mix, but I can confidently say we're not satisfied with 10%. And so we will continue to, you know, work on that and push that push the margin.

Jeffrey D. Lorenger: Now it's consistently in the high teens. So I would tell you, I don't know, the workplace being in the high teens is in the mix, but I can confidently say we're not satisfied with 10%. And so we will continue to work on that and push that, and push the margin.

Gregory Burns: Now it's consistently in the high teens. So I would tell you, I don't know, the workplace being the high teens, you know, is in the mix, but I can confidently say we're not satisfied with 10%. And so we will continue to, you know, work on that and push that, push the margin.

Greg Burns: All right. Great. Thank you. Yep. Thanks.

Speaker Change: All right, great. Thank you.

Reuben Garner: Your next question comes from the line of Rubin Garner from the Benchmark Company. Your line is open. I asked him, Morning, everybody. So just a follow up on the workplace top line, Marshall, I think you referenced, I believe it was quoting activity and the funnel being up double digits. I think that's the first time I've heard you guys sort of reference those two and put any numbers around it. Is that a pretty clear acceleration?

Operator: Your next question comes from the line of Reuben Garner from the Benchmark Company. Your line is open.

Speaker Change: Yep, thanks.

Speaker Change: Your next question comes from the line of Reuben Garner from the Benchmark Company. Your line is open.

Reuben Garner: Thanks. Good morning, everybody.

Reuben Garner: So, just to follow up on the workplace top line, Marshall, I think you referenced quoting activity and the funnel being up double digits. I think that's the first time I've heard you guys reference those two and put any numbers around them. Is that a pretty clear acceleration? In the second quarter, were you seeing growth? I'm just trying to gauge, one, is that directed specifically at the contract piece of workplace? And two, how long has this been going on, and how close are we to where those kinds of transition to the actual order growth side?

Reuben Garner: Good morning, everybody.

Speaker Change: So just to follow up on the workplace top line, Marshall, I think you referenced, I believe it was quoting activity and the funnel being up double digits. I think that's the first time I've heard you guys

Reuben Garner: Sort of reference those two and put any numbers around it is is is that a pretty clear acceleration? In the second quarter were you seeing growth? I'm just trying to gauge

Marshall Bridges: In the second quarter, where you've seen growth, I'm just trying to engage one is that directly specifically specifically contract piece of workplace into how long has this been going on and how closer we to where those kind of transition to to the actual order order growth side. Yeah, those metrics are a mix of contract and other parts of the business as well, though it may be a little more weighted toward contract. What I tell you, Reuben, they've been elevated for some time. We've seen this cycle where things take longer to continue. I think we're starting to see that slightly improved.

Speaker Change: One, is that directed specifically at the contract piece of workplace? And two, how long has this been going on and how close are we to where those kind of transition to the actual order growth side?

Marshall H. Bridges: Yeah, those metrics are a mix of contract and other parts of the business as well, although maybe a little more weighted toward contract. What I can tell you, Reuben, is they've been elevated for some time. We've seen this cycle where things take longer to continue. I think we're starting to see that slightly improve. I think it's consistent with our outlook that things are slowly turning. So we're not necessarily saying that we've got a big inflection point here, but we are seeing encouraging signs that we're going to see growth looking forward.

Speaker Change: Yeah, those metrics are a mix of contract and other parts of the business as well, although maybe a little more weighted toward contract.

Ruben: What I tell you Reuben is they've been elevated for some time. We've seen this this cycle where things take longer to you know to continue. I think we're starting to see that slightly improve. I think it's consistent with our outlook that things are slowly turning.

Marshall Bridges: I think it's consistent with our outlook that things are slowly turning. So we're not necessarily saying that we've got a big inflection point here, but we are seeing encouraging signs that we're going to see growth looking forward. So, if you look at where the growth is coming from, as I mentioned earlier, we're expecting to be up in the low single digits in the second half. That's really driven by the fourth quarter, expecting the third quarter to be nearly flat. And it's really being driven by strength in SMB and KII, and the contract side of things is below average right now, but we're very excited about the growth we're seeing on the horizon in contract.

Ruben: So we're not necessarily saying that we've got a big inflection point here, but we are seeing...

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

Ruben: encouraging signs that we're going to see growth looking forward so

Ruben: If you look at where the growth is coming from, as I mentioned earlier, we're expecting to be up in the low single digits in the second half. That's really driven by the fourth quarter. We're expecting the third quarter to be nearly flat.

Ruben: and it's really being driven by strength in SMB and KII and you know the contract side of things is below average right now but we're very excited about the growth we're seeing on the horizon in contract.

Greg Burns: Okay, and then on the margin side, if my math is right, you've got somewhere in the range of 350, maybe 400, maybe 400 basis points of margin, sort of within your control in the office or workplace segment over the next few years. I guess my question is, Jeff, you mentioned the last four quarters; you're at 10%. Obviously, this quarter in particular, you were at 12. What's kind of the baseline that we're sort of adding those incremental savings to? In other words, was there anything seasonality-wise or mixed-wise or anything else in the second quarter that makes that number not the right one to build off of?

Reuben Garner: OK, and then on the margin side, if my math is right, you've got, you know, somewhere in the range of 350, maybe 400 basis points of margin sort of within your control in the office or workplace segment over the next few years. I guess my question is, Jeff, you mentioned the last four quarters that you're at 10%. Obviously, this quarter in particular, you were at 12. What's the baseline that we're sort of adding those to? Incremental Savings, too. In other words, was there anything seasonality-wise or mix-wise or anything else in the second quarter that makes that number not the right one to build off of?

Speaker Change: Okay, and then on the margin...

Speaker Change: If my math is right, you've got, you know, somewhere in the range of

Speaker Change: 350 maybe 400 maybe 400 basis points of margin sort of within your control in the office or workplace segment over the next

Speaker Change: I guess my question is, Jeff, you mentioned the last four quarters you're at 10%. Obviously, this quarter in particular, you were at 12%. What's kind of the baseline that we're sort of adding those...

Speaker Change: incremental savings too. In other words, was there anything seasonality-wise or mix-wise or anything else in the second quarter that, you know, makes that number not the right one to build off of?

Jeff Lorenger: Yeah, I think there's nothing unusual, but we do have seasonality. So I think if you look at the last four quarters, Jeff mentioned that we've been at 10%. That's probably a good number to start from, but we are talking about $45 to $50 million incremental from 2024, so I think that's maybe a good, a good baseline to move from.

Marshall H. Bridges: I think, Reuben, there's nothing unusual, but we do have seasonality. So I think if you look at the last four quarters, Jeff mentioned that we've been at 10%. That's probably a good number to start from, but we are talking about 45 to 50 million dollars incremental from 2024, so I think that's maybe a good baseline to move from.

Speaker Change: I think, Reuben, there's nothing unusual, but we do have seasonality. So I think if you look at the last four quarters, Jeff mentioned that we've been at 10%. That's probably a good number to start from, but we are talking about 45 to $50 million incremental from 2024. So I think.

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

Speaker Change: That's maybe a good baseline to move from.

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

Speaker Change: Okay, and then last one for me. I don't want to beat a dead horse, but I just want to clarify on the residential building product side.

Speaker Change: You know

Speaker Change: We've heard recent months, the past couple few months, some areas are seeing a little bit of a slowdown from maybe what was expected earlier in the year and Your outlook seems to be largely unchanged and I recognize that you have maybe easier comps

Speaker Change: because of some dynamics going on last year. But have you seen any material change in demand or conversations with your customers that gives you any kind of concern about where things are headed in the second half?

Marshall Bridges: Yeah, even though our outlooks mostly unchanged, there's some moving parts in there. I think the new construction side's been a little bit slower, and remote retrofits been a little bit more encouraging. If you look at the second quarter Rubin, we expected to be down a low single digits, and we were down a little more than that. And that really reflected some softness and new construction that was partially offset by less decline and expected remote retrofits. I think our outlook in aggregates more or less unchanged, but there's some moving parts there that may be more consistent with what you're here.

Marshall H. Bridges: You know, even though our outlook's mostly unchanged, there are some moving parts in there. I think the new construction side's been a little bit slower, and the remodeled retrofit's been a little bit more encouraging. If you look at the second quarter, Reuben, we expected to be down to the low single digits, and we were down a little more than that. And that really reflected some softness in new construction that was partially offset by a less decline than expected in remodeled retrofits.

Reuben Garner: You know, even though our outlook's mostly unchanged, there's some moving parts in there. I think the new construction side's been a little bit slower, and our model retrofit's been a little bit more encouraging. If you look at the second quarter, Reuben, we expect it to be...

Reuben Garner: down to low single digits, and we were down a little more than that. And that really reflected some softness in new construction that was partially offset by less decline in expected amount of retrofits. I think our outlook in aggregate is more or less unchanged, but there's some moving parts there that may be more consistent with what you're hearing.

Marshall H. Bridges: I think our outlook, in aggregate, is more or less unchanged, but there are some moving parts there that may be more consistent with what you're hearing. That reminds me, the Grimaud retrofit for us is... Pretty noisy year over year, so it's difficult to get a good trend on it. But I think we're finally starting to get there.

Reuben Garner: Ray. I'm in for my retrofit for us is pretty noisy year-to-year, so it's difficult to get a good trend on it. I think we're finally starting to get there.

Reuben Garner: Remodel retrofit for us is pretty noisy year over year so it's difficult to get a good trend on. I think we're finally starting to get there.

Reuben Garner: Okay, and I'm going to sneak one more in. How much multi-family exposure do you have within the heart business? Because that's been another concern from investors as we work through this record backlog of units under construction. It kind of leads like an air bubble at some point, maybe going into 25 with that risk for you, or is that a relatively small business? No, it's relatively small, Reuben. It's relatively small. We don't be as a risk.

Reuben Garner: Okay, and I'm going to sneak one more in on how much multifamily exposure do you have within the hearth business, and because that's been another concern from investors as we work through this record backlog of units under construction, it kind of leaves an air bubble at some point, maybe going into 25. Is that a risk for you? Or is that a relatively small business?

Speaker Change: Okay, I'm going to sneak one more in. How much multifamily exposure do you have within

Speaker Change: the hearth business and because that's been another concern from investors as we work through this record backlog of units under construction it kind of leaves like an air bubble at some point maybe going into 25. Is that a risk for you or is that a relatively small business?

Marshall H. Bridges: No, it's relatively small, Reuben. It's relatively small. We don't view that as a risk.

Speaker Change: No, it's relatively small, Reuben. It's relatively small. We don't view that as a risk.

Reuben Garner: Guys, thanks, guys. Congrats on the strong results, and good luck. Yep, thanks.

Reuben Garner: Got it. Thanks, guys. Congratulations on the strong results and good luck.

Reuben Garner: Got it. Thanks guys. Congrats on the strong results and good luck.

Steven Ramsey: And your last question comes from the line of Steven Ramsey from Thompson Research Group. Your line is open. Hi, good morning. I'm curious about on workplace with S&B and KII outperforming currently and kind of looks like through the balance of the year. Do those customer groups have better margins than contracts so that looking out a little bit further when contract does come back, is that a negative mix impact to the margin story there? Yeah, Steven, there's not much difference between the margins on an incremental basis. So I don't know that it's a terminus headwind or a big tailwind, and probably not something we spend a lot of time on.

Operator: And your last question comes from the line of Steven Ramsey from Thompson Research Group. Your line is open.

Reuben Garner: Yup, thanks.

Reuben Garner: And your last question comes from the line of Steven Ramsey from Thompson Research Group. Your line is open.

Steven Ramsey: Hi, good morning. Something I'm curious about in workplace with S&B and KII outperforming currently and kind of looks like through the balance of the year, do those customer groups have better margins than contracts so that looking out a little bit further when the contract does come back, is that a negative mix impact on the margin story there?

Steven Ramsey: Hi, good morning. Something I'm curious about on workplace with S&B and KII outperforming

Steven Ramsey: currently and kind of looks like through the balance of the year, do those customer groups have better margins than contracts so that

Speaker Change: Looking out a little bit further, when contract does come back, is that a negative impact to the margin story there?

Marshall H. Bridges: Steven, there's not much difference between the margins on an incremental basis, so I don't know that it's a tremendous headwind or a big tailwind. Probably not something we'd spend a lot of time on. Yeah, of course.

Steven Ramsey: Steven, there's not much difference between the margins on an incremental basis, so I don't know that it's a tremendous headwind or a big tailwind, probably not something we'd spend a lot of time on.

Jeffrey D. Lorenger: Yeah, plus even I would just say as contract as we talked about as contract comes back, the way the offices are configured, I think plays to our benefit relative to the types of products we can put in there and even the types of products that KI brings to the table. So, I mean, maybe, you know. We don't really view that as a downside, you know, it's really just about the revenue, and we think the margins will... As we've talked about, we want to continue to lean into expanding those margins, even as the contract comes back up.

Jeff Lorenger: Yeah, plus, plus, Steven, I would just say, as contract, as we talk about, as contract comes back, kind of the way the offices are configured. You know, I think placed our benefit relative to the types of products we can put in there and even the types of products that KII has brought to the table. So, I mean, make, you know, we don't really view that as a downside. You know, it's really just about the revenue. You know, and we think we the margins will kind of, as we've talked about, where we want to take lead in to expanding those margins, even as contract comes back up.

Steven Ramsey: Yeah, plus, Steven, I would just say as contract, as we talk about as contract comes back, kind of the way the offices are configured.

Speaker Change: You know, I think plates are a benefit relative to the types of products we can put in there and even the types of products that KI has brought to the table. So, I mean, maybe, you know,

Speaker Change: We don't really view that as a downside, you know, it's really just about the revenue, and we think the margins will kind of, as we've talked about, we want to continue to lean into expanding those margins, even as contract comes back up.

Steven Ramsey: Got you. Okay. And then thinking about workplace margin a little bit more, with the new cost structure coming into place over the next six months to two years, if volumes do grow in 2025 and 2026 in that segment, does that change, does the new cost structure change the incremental margins you would get over that time frame? I mean, just help us think about what margins could do as or if volumes grow.

Steven Ramsey: Got you. Okay.

Steven Ramsey: And then thinking about workplace margin, a little bit more with the new cost structure coming into place over the next six months to two years. If volumes do grow in 2025 and 2026 in that segment, does that change? Does the new cost structure change the incremental margins you would get over that timeframe? I mean, just help us think about what margins could do as or if volumes grow. Yeah, that's that's a good question. Clearly, the change in our efficiency is going to benefit our incremental margins. I mean, in the workplace, those have typically run kind of in the mid 30s.

Speaker Change: Got you. Okay. And then thinking about workplace margin a little bit more, with the new cost structure coming into place over the next six months to two years,

Speaker Change: If volumes do grow in 2025 and 2026,

Speaker Change: in that segment, does that change, does the new cost structure change the incremental margins you would get over that time frame? I mean, just help us think about what margins could do as or if volumes grow.

Marshall H. Bridges: Yeah, that's a good question. Clearly, the change in our efficiency is going to benefit our incremental margins. I mean, in the workplace, those typically run kind of the mid-30s. So we're probably turning a little bit above that when we come back right now. Now, there's a lot of [inaudible].

Speaker Change: Yeah, that's a good question. Clearly the change in our efficiency is going to benefit our incremental margins. I mean in workplace those that typically run kind of the mid-30s so we're probably turning a little bit above that when we come back right now. Now there's a lot of

Jeff Lorenger: So we're probably turning a little bit above that when we come back right now. Now, there's a lot of variables that can go into that incremental margin, which probably are equally as big as the recent progress we've made. By the average of that mid 30s numbers, it was historically a good number. So it would be a few points above. that. Okay, helpful.

Speaker Change: variables can go into that incremental margin which probably are equally as big as it is the the recent progress we've made but on average that mid 30s numbers it was historically a good number so we'd be a few points above that

Steven Ramsey: Okay, helpful. And then switching to RESI, the M&A pipeline's been a part of the story over the past many years. Can you describe where that RESI pipeline is now, and is there real potential for things getting done in the second half of this year or early 2025?

Steven Ramsey: And then switching to Rezi, the M&A pipeline has been a part of the story over the past many years. Can you describe where that Rezi pipeline is now, and is there real potential for things getting done? Checking half of this year or early 2025? You know, like we said, it's a great question, Steven. We're always, you know, kind of taking a look out there. And we've also said, we're not in any hurry. We kind of, kind of let the game come to us, but, you know, suffice to say, we're always in the market, you know, in that space.

Speaker Change: Okay, helpful. And then switching to RESI, the M&A pipeline has been a part of the story over the past many years. Can you describe where that RESI pipeline is now and is there real potential for things getting done second half of this year or early 2025?

Jeffrey D. Lorenger: You know, like we said, it's a great question, Steven. We're always, you know, kind of taking a look out there. And we've also said we're not in any hurry, we kind of let the game come to us, but you know, fight to say we're always in the market, you know, in that space. I don't have anything eminent by any means, but we will, we will stay, we will stay active at least at a strategic level.

Speaker Change: You know, like we said, it's a great question, Steven. We're always, you know, kind of taking a look out there. And we've also said we're not in any hurry. We kind of let the game come to us.

Speaker Change: Suffice to say, we're always in the market.

Jeff Lorenger: So I don't have anything, you know, M&F binding means, but we will, we will stay active, at least at a strategic level. Okay.

Speaker Change: in that space. So I don't have anything eminent by any means, but we will stay active at least at a strategic level.

Steven Ramsey: Okay, and then one other thing on RESI. On the distribution side of things, you clearly have some owned distribution and then, I guess, sell through other third-party distributors. And the building product landscape for distributors is consolidating. I'm curious how you look at that strategically and if it's presenting any upside or challenges as you adapt to this changing building product distribution landscape. You know, Steven, we primarily sell to

Steven Ramsey: And then one other thing on Rezi, on the distribution side of things, you clearly have some owned distribution and then I guess sell through. Other third party distributors and the building product landscape for distributors is consolidating. I'm curious how you look at that strategically. And if it's presenting any upside or challenges as you, as you adapt to this changing building product distribution landscape. Steven, we primarily sell through specially dealers and install distributors, so not saying that that overall trend doesn't impact us, but maybe a little less so than some of the other categories. And of course, you know, we do own about 25% About what we do flows through distribution we own.

Speaker Change: Okay, and then one other thing on RESI, on the distribution side.

Speaker Change: of things. You clearly have some owned distribution and then, I guess, sell through other third-party distributors. And the building product landscape

Speaker Change: for distributors is consolidating. I'm curious how you look at that strategically and if it's presenting any upside or challenges as you as you adapt to this changing building product distribution landscape.

Jeffrey D. Lorenger: You know, Steven, we primarily sell through specialty dealers and installation distributors, so I'm not saying that that overall trend doesn't impact us, but maybe a little less so than some of the other categories. And, of course, you know, we do own about 25% of what we do flows through distribution we own, so that also helps.

Speaker Change: You know, Steven, we primarily sell to specialty dealers and installing distributors, so I'm not saying that that overall trend doesn't impact us, but maybe a little less so than some of the other categories. And, of course, you know, we do own about 25% of what we do flows through distribution we own, so that also helps us.

Steven Ramsey: So that also helps us. That's great. Thank you. Thanks. Thank you.

Steven Ramsey: That's great. Thank you.

Jeffrey D. Lorenger: Thank you. And with no further questions, I'll turn the floor back over to Mr. Lorenger.

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

Speaker Change: Thanks.

Speaker Change: Thank you and with no further questions I'll turn the floor back over to Mr. Lorenger.

Jeffrey D. Lorenger: Great, thanks for joining us today, taking the time, and have a good day.

Operator: Thanks for joining us today, taking the time, and have a good day. Thank you.

Jeffrey D. Lorenger: Great, thanks for joining us today, taking the time, and have a good day.

Operator: Thank you. This does conclude today's conference call. You may now disconnect. Have a great day.

Operator: This does conclude today's conference call. You may now disconnect. Have a great day. Thank you.

Speaker Change: Thank you. This does conclude today's conference call. You may now disconnect. Have a great day.