Q4 2025 HNI Corp Earnings Call

February 25, 2026

Speaker #2: And FYE 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Speaker #2: If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad. To withdraw your question, press turn the conference over to Matt McCall.

Speaker #2: You may begin. Good morning. My name is Matt McCall. I'm Vice President Investor Relations and Corporate Development for HNI Corp. Thank you for joining us to discuss our fourth quarter and fiscal year 2025 results.

Matt McCall: Good morning. My name is Matt McCall. I am Vice President, Investor Relations and Corporate Development for HNI Corporation. Thank you for joining us to discuss our Q4 and fiscal year 2025 results. With me today are Jeff Lorenger, Chairman, President, and CEO, and VP Berger, Executive 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. 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 will now please turn the call over to Jeff Lorenger. Jeff?

Speaker #2: With me today are Jeff Lorenger, Chairman, President, and CEO, and VP Berger. Executive Vice President and CFO. Copies of our financial news release and non-GAAP reconciliations are posted on our website.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: I'm now pleased to turn the call over to Jeff Lorenger. Jeff?

Speaker #3: Good morning, and thank you for joining us. 2025 was a seminal year for HNI Corp. Our members delivered excellent results, as we reported a fourth straight year of double-digit non-GAAP EPS growth despite persistent, soft, and uncertain macro conditions.

Jeff Lorenger: Good morning, and thank you for joining us. 2025 was a seminal year for HNI Corporation. Our members delivered excellent results as we reported a fourth straight year of double-digit non-GAAP EPS growth, despite persistent, soft, and uncertain macro conditions. The positive momentum of our strategies, the benefits of our diversified revenue streams, our ongoing focus on items within our control, and the merits of our customer-first business model continued to deliver strong shareholder value. Late in the year, we completed the acquisition of Steelcase. This combination will not only transform our company, but also the workplace furnishings industry. On today's call, we will review our Q4 and full year 2025 results and provide some commentary around our expectations for 2026 and beyond, including the benefits of the Steelcase acquisition.

Speaker #3: The positive momentum of our strategies, the benefits of our diversified revenue streams, our ongoing focus on items within our control, and the merits of our customer-first business model continue to deliver strong shareholder value.

Speaker #3: And late in the year, we completed the acquisition of Steelcase. This combination will not only transform our company but also the workplace furnishings industry.

Speaker #3: On today's call, we will review our fourth quarter and full year 2025 results, and provide some commentary around our expectations for 2026 and beyond, including the benefits of the Steelcase acquisition.

Speaker #3: Before I discuss our recent performance, I want to reflect on the fundamental improvements we have driven at HNI. Our transformation has taken multiple steps in years.

Jeff Lorenger: Before I discuss our recent performance, I want to reflect on the fundamental improvements we have driven at HNI. Our transformation has taken multiple steps and years. I will begin with workplace furnishings, where margins have been reset. Three years ago, our legacy workplace furnishings business launched a profitability improvement initiative that was instrumental in expanding operating margin nearly 1,000 basis points. In 2023, price cost recovery following the period of elevated inflation, drove the first phase of expansion. Since then, multiple portfolio management moves, ongoing network optimization efforts, KII synergies, and the benefits of ramping our Mexico facility have supported consistent profitability improvement. Based on the initiatives already underway, including the recently announced plans to close our Wayland, New York, manufacturing facility, we have lined a site to continued operating margin expansion in the coming years.

Speaker #3: I will begin with workplace furnishings where margins have been reset. Three years ago, our legacy workplace furnishings business launched a profitability improvement initiative that was instrumental in expanding operating margin nearly $1,000 basis points.

Speaker #3: In 2023, price-cost recovery, following the period of elevated inflation, drove the first phase of expansion. Since then, multiple portfolio management moves ongoing network optimization efforts, KII synergies, and the benefits of ramping our Mexico facility have supported consistent profitability improvement.

Speaker #3: Based on the initiatives already underway, including the recently announced plans to close our Wayland, New York, manufacturing facility, we have lined a site to continued operating margin expansion in the coming years.

Speaker #3: And our margin expansion story is increasingly supported by affirming macroeconomic picture in our workplace furnishings segment. I will provide more macro commentary later in the call.

Jeff Lorenger: Our margin expansion story is increasingly supported by a firming macroeconomic picture in our workplace furnishing segment. I will provide more macro commentary later in the call. Shifting to our residential building product segment, our evolution started with the strategic shifts following the Great Financial Crisis. Since then, we have adjusted our cost structure, fully embraced lean manufacturing, and continued to pursue a vertically integrated business model with the leading brands in all product categories. The result was more than 1,000 basis points of operating margin expansion over the decade post-2009. In addition, since 2019, the efficiency, nimbleness, and uniqueness of our building products business have supported consistently strong profitability, with sustained operating margins in the mid to high teens. This consistency of both margins and cash flow are foundational elements to HNI's financial strength.

Speaker #3: Shifting to our residential building product segment, our evolution started with the strategic shifts following the great financial crisis. Since then, we have adjusted our cost structure, fully embraced lean manufacturing, and continued to pursue a vertically integrated business model with the leading brands in all product categories.

Speaker #3: The result was more than $1,000 basis points of operating margin expansion over the decade post-2009. In addition, since 2019, the efficiency, nimbleness, and uniqueness of our building products business have supported consistently strong profitability with sustained operating margins in the mid to high teens.

Speaker #3: This consistency of both margins and cash flow are found foundational elements to HNI's financial strength. We expect this profitability and cash generation to continue into 2026 and beyond.

Jeff Lorenger: We expect this profitability and cash generation to continue into 2026 and beyond. More recently, our focus in residential building products has shifted to the front end of the business and on driving top-line growth. Structural changes have been implemented to organize around the customer and ensure we have laser-focused go-to-market strategies to support our growth initiatives. These front-end investments are paying off in the absence of cyclical support. In 2025, we reported segment revenue growth of 6% despite continued weakness in the new home market. We expect to outperform again in 2026. This historical context helps set the stage as we enter the next exciting chapter of the HNI story. The acquisition of Steelcase unites two industry leaders to meet the dynamic marketplace and evolving needs of the workplace and accelerating in-office work trends.

Speaker #3: More recently, our focus in residential building products has shifted to the front end of the business and on driving top-line growth. Structural changes have been implemented to organize around the customer and ensure we have laser-focused go-to-market strategies to support our growth initiatives.

Speaker #3: These front-end investments are paying off in the absence of cyclical support. In 2025, we reported segment revenue growth of 6% despite continued weakness in the new home market.

Speaker #3: We expect to outperform again in 2026. This historical context helps set the stage as we enter the next exciting chapter of the HNI story.

Speaker #3: The acquisition of Steelcase unites two industry leaders to meet the dynamic marketplace and evolving needs of the workplace and accelerating in-office work trends. We have brought together two highly respected companies with shared values, talented teams, strong financial profiles, and highly complementary capabilities.

Jeff Lorenger: We have brought together two highly respected companies with shared values, talented teams, strong financial profiles, and highly complementary capabilities: innovation, thought leadership, and operational excellence, chief among them. This strong foundation, combined with expected synergies, will accelerate our ability to invest in long-term operational enhancements, digital transformation, customer-centered buying experiences, and products to meet evolving customer needs. Our integration efforts are underway, and we are leveraging a disciplined and proven approach informed by recent experience, while continuing to build on the iconic brands for which both companies are widely respected. HNI will now have total revenue of more than $5 billion, including all synergies, total adjusted EBITDA will be nearly $750 million, and annual free cash flow will approximately be $350 million. We are now the market leader in both of our industries, workplace furnishings and hearth products.

Speaker #3: Innovation, thought leadership, and operational excellence chief among them. This strong foundation combined with expected synergies will accelerate our ability to invest in long-term operational enhancements, digital transformation, customer-centered buying experiences, and products to meet evolving customer needs.

Speaker #3: Our integration efforts are underway, and we are leveraging a disciplined and proven approach informed by recent experience while continuing to build on the iconic brands for which both companies are widely respected.

Speaker #3: HNI will now have total revenue of more than $5.8 billion including all synergies total adjusted EBITDA will be nearly $750 million and annual free cash flow will approximate approximately be $350 million.

Speaker #3: We are now the market leader in both of our industries, workplace furnishings and hearth products. I can report that the integration of the Steelcase acquisition is off to a strong start.

Jeff Lorenger: I can report that the integration of the Steelcase acquisition is off to a strong start. 6 months following the announcement, we're even more confident in our move to add Steelcase to the HNI family. The complementary go-to-market nature of the two businesses from a capability, product, brand, customer, and cultural perspective, has been reinforced as we have begun to work together. We also remain confident in our ability to deliver the targeted synergies of $120 million and drive margin expansion at Steelcase. Our current synergy projections are focused on the Americas business and do not include any revenue synergies. Importantly, we are laser-focused on minimizing any front-end disruption across our workplace furnishings businesses. As we have consistently stated, there are no plans to change dealer partnerships, sales forces, or brand distribution.

Speaker #3: Six months following the announcement, we're even more confident in our move to add Steelcase to the HNI family. The complementary go-to-market nature of the two businesses from a

Speaker #1: The capability product brand , customer and cultural perspective has been reinforced as we have begun to work together . We also remain confident in our ability to deliver the targeted synergies of 120 million and drive margin expansion at Steelcase .

Speaker #1: Our current synergy projections are focused on the Americas business and do not include any revenue synergies . And importantly , we are laser focused on minimizing any front end disruption across our workplace furnishings businesses as we have consistently stated , there are no plans to change dealer partnerships , sales forces or brand distribution And as I've been traveling and engaging with our teams , it is clear that this continuity is being received positively by customers .

Jeff Lorenger: As I've been traveling and engaging with our teams, it is clear that this continuity is being received positively by customers, industry influencers, and our dealers. Now, I will turn the call over to VP to provide some additional detail about 2025, discuss our outlook for Q1 2026, and give some thoughts on how we see the full year playing out. I will provide a longer-term perspective on the opportunities surrounding our businesses before we open the call to your questions. VP?

Speaker #1: Industry influencers , and our dealers . Now turn the call over to VP to provide some additional detail about 2020 . Five . Discuss our outlook for the first quarter of 2026 and give some thoughts on how we see the full year playing out .

Speaker #1: I will then provide a longer term perspective on the opportunities surrounding our businesses before we open the call to your questions . VP thanks , Jeff .

Vincent Paul Berger: Thanks, Jeff. I will start with some additional comments about 2025. Fiscal 2025 non-GAAP diluted earnings per share for our legacy business was $3.74, which increased 22% from 2024 levels. Again, this was our fourth consecutive year of double-digit earnings growth, with the average annual growth rate exceeding 15%. Total net sales for the year increased 12% overall and 6% on an organic basis. Excluding all impacts from Steelcase, full-year adjusted operating margin for HNI expanded 80 basis points, reaching 9.4%. The improvement was driven by volume growth, productivity gains, Kimball International synergy capture, and price cost benefits.

Vincent Paul: Thanks, Jeff. I will start with some additional comments about 2025. Fiscal 2025 non-GAAP diluted earnings per share for our legacy business was $3.74, which increased 22% from 2024 levels. Again, this was our fourth consecutive year of double-digit earnings growth, with the average annual growth rate exceeding 15%. Total net sales for the year increased 12% overall and 6% on an organic basis. Excluding all impacts from Steelcase, full-year adjusted operating margin for HNI expanded 80 basis points, reaching 9.4%. The improvement was driven by volume growth, productivity gains, Kimball International synergy capture, and price cost benefits.

Speaker #1: I will start with some additional comments about 2025 . Fiscal 2025 . non-GAAP diluted earnings per Share for our legacy business was $3.74 , which increased 22% from 2024 levels .

Speaker #1: Again , this was our fourth consecutive year of double digit earnings growth , with the average annual growth rate exceeding 15% . Total net sales for the year increased 12% overall and 6% on an organic basis .

Speaker #1: Excluding all impacts from Steelcase , full year adjusted operating margin for expanded 80 basis points , reaching 9.4% . The improvement was driven by volume growth , productivity gains , Kimball International Synergy Synergy capture and price cost benefits from a segment perspective in our legacy workplace furnishings business .

Vincent Paul Berger: From a segment perspective, in our legacy workplace furnishings business, full-year organic net sales increased 6% year-over-year, fueled primarily by the strength of our contract brands and the benefit of an extra week in fiscal 2025. Full-year profitability, excluding the Steelcase stub period, benefited from volume growth, our profit transformational efforts, KII synergy capture, while we continue to invest in future growth initiatives. Full-year non-GAAP operating profit margin expanded 100 basis points year-over-year to 10.5%, as we delivered on our previously stated goal of achieving double-digit operating margin. Non-GAAP operating margin has expanded nearly 900 basis points over the past three years. Looking ahead, we expect revenue growth and margin expansion in our legacy workplace furnishing business for the full year 2026, even as we continue to invest to drive growth.

Vincent Paul: From a segment perspective, in our legacy workplace furnishings business, full-year organic net sales increased 6% year-over-year, fueled primarily by the strength of our contract brands and the benefit of an extra week in fiscal 2025. Full-year profitability, excluding the Steelcase stub period, benefited from volume growth, our profit transformational efforts, KII synergy capture, while we continue to invest in future growth initiatives. Full-year non-GAAP operating profit margin expanded 100 basis points year-over-year to 10.5%, as we delivered on our previously stated goal of achieving double-digit operating margin. Non-GAAP operating margin has expanded nearly 900 basis points over the past three years. Looking ahead, we expect revenue growth and margin expansion in our legacy workplace furnishing business for the full year 2026, even as we continue to invest to drive growth.

Speaker #1: Full year organic net sales increased 6% year over year , fueled primarily by the strength of our contract brands and the benefit of an extra week in fiscal 2025 .

Speaker #1: Full year profitability , excluding the Steelcase stub period , benefited from volume growth . Our profit transformational efforts , Kii synergy Capture while we continue to invest in future growth initiatives , full year non-GAAP operating profit margin expanded 100 basis points year over year to 10.5% .

Speaker #1: As we delivered on our previously stated goal of achieving double digit operating margin , non-GAAP operating margin has expanded nearly 900 basis points over the past three years .

Speaker #1: Looking ahead , we expect revenue growth and margin expansion in our legacy workplace furnishings business for the full year 2026 . we continue to invest to drive growth in residential building products , fourth quarter revenue grew more than 10% versus the same period of 2020 .

Vincent Paul Berger: In residential building products, Q4 revenue grew more than 10% versus the same period of 2024, driven by the strength in the remodel retrofit market and the benefits of the extra week. For the full year, revenue increased nearly 6% versus 2024. New construction revenue was flat, with the remodel retrofit up a double-digit pace with solid volume improvement. Segment non-GAAP operating profit margin in 2025 expanded 60 basis points year-over-year to a strong 18.1%. We remain encouraged about the long-term opportunities tied to the broader housing market, and we continue to invest and grow our operating model and revenue streams. As we look to 2026, we expect modest segment revenue and profit growth, despite ongoing challenges in the new construction market. Overall, as Jeff mentioned, 2025 was an outstanding year for HNI.

Vincent Paul: In residential building products, Q4 revenue grew more than 10% versus the same period of 2024, driven by the strength in the remodel retrofit market and the benefits of the extra week. For the full year, revenue increased nearly 6% versus 2024. New construction revenue was flat, with the remodel retrofit up a double-digit pace with solid volume improvement. Segment non-GAAP operating profit margin in 2025 expanded 60 basis points year-over-year to a strong 18.1%. We remain encouraged about the long-term opportunities tied to the broader housing market, and we continue to invest and grow our operating model and revenue streams. As we look to 2026, we expect modest segment revenue and profit growth, despite ongoing challenges in the new construction market. Overall, as Jeff mentioned, 2025 was an outstanding year for HNI.

Speaker #1: For driven by the strength in the remodel retrofit market and the benefits of the extra week for the full year , revenue increased nearly 6% versus 2020 .

Speaker #1: For new construction, revenue was flat, with the remodel/retrofit up at a double-digit pace with solid volume improvement. Segment non-GAAP operating profit margin in 2025 expanded 60 basis points year over year to a strong 18.1%.

Speaker #1: We remain encouraged about the long term opportunities tied to the broader housing market , and we continue to invest and grow our operating model and revenue streams as we look to 2026 , we expect modest segment revenue and profit growth despite ongoing challenges in the new construction market Overall , as Jeff mentioned , 2025 was an outstanding year for HNI Corp Before I move to our outlook , a couple comments about Steelcase's impact on the quarter .

Vincent Paul Berger: Before I move to our outlook, a couple of comments about Steelcase's impact on the quarter. We completed the acquisition of Steelcase on 10 December. Thus, we consolidated Steelcase's performance for the final 3 weeks of December into our reported results. The second half of December is a lower shipment and production period for our industries. Consequently, that stub period included seasonally lower levels of daily shipment activity, while we're more than offset by the recognition of full costs and expenses for the period. We excluded this impact from our adjusted results, as it does not provide any fundamental insight into our performance. As Jeff mentioned, the expected timing and magnitude of our projected $120 million of synergies and $1.20 of accretion are unchanged and unimpacted by the stub period. For Q4, Steelcase generated strong results.

Vincent Paul: Before I move to our outlook, a couple of comments about Steelcase's impact on the quarter. We completed the acquisition of Steelcase on 10 December. Thus, we consolidated Steelcase's performance for the final 3 weeks of December into our reported results. The second half of December is a lower shipment and production period for our industries. Consequently, that stub period included seasonally lower levels of daily shipment activity, while we're more than offset by the recognition of full costs and expenses for the period. We excluded this impact from our adjusted results, as it does not provide any fundamental insight into our performance. As Jeff mentioned, the expected timing and magnitude of our projected $120 million of synergies and $1.20 of accretion are unchanged and unimpacted by the stub period. For Q4, Steelcase generated strong results.

Speaker #1: We completed the acquisition of Steelcase on December 10th . Thus , we consolidated Steelcase's performance for the final three weeks of December into our reported results .

Speaker #1: The second half of December is a lower shipment and production period for our industries. Consequently, that stub period included seasonally lower levels of daily shipment activity.

Speaker #1: While we're more than offset by the recognition of full costs and expenses for the period , we excluded , this impact from our adjusted results as it does not provide any fundamental insight into our performance And as Jeff mentioned , the expected timing and magnitude of our projected $120 million of synergies and $1.20 of accretion are unchanged and unimpacted by the sub period For the fourth calendar quarter , Steelcase generated strong results .

Speaker #1: Revenue grew approximately 5% year over year , and earnings grew about 9% from the fourth quarter of 2020 . For levels absent purchase accounting , restructuring and acquisition related costs .

Vincent Paul Berger: Revenue grew approximately 5% year-over-year, and earnings grew about 9% from the Q4 2024 levels, absent purchase accounting, restructuring, and acquisition-related costs. I'll transition to our outlook. For 2026, as Jeff mentioned, we expect a 5th year of double-digit non-GAAP EPS growth. Revenue growth is expected to continue while we drive bottom-line improvement. In addition, our network optimization efforts continue to support our ongoing earnings visibility story we've been discussing with you. Our favorable Q4 2025 results included accelerating the benefits of these efforts. Looking forward, these initiatives, which include KII synergies, the ramp-up of our Mexico facility, the closure of Hickory, and the planned closure of Wayland, are expected to yield an incremental $0.25 to $0.30 over the next 3 years. Approximately $0.10 of this will be recognized in 2026.

Vincent Paul: Revenue grew approximately 5% year-over-year, and earnings grew about 9% from the Q4 2024 levels, absent purchase accounting, restructuring, and acquisition-related costs. I'll transition to our outlook. For 2026, as Jeff mentioned, we expect a 5th year of double-digit non-GAAP EPS growth. Revenue growth is expected to continue while we drive bottom-line improvement. In addition, our network optimization efforts continue to support our ongoing earnings visibility story we've been discussing with you. Our favorable Q4 2025 results included accelerating the benefits of these efforts. Looking forward, these initiatives, which include KII synergies, the ramp-up of our Mexico facility, the closure of Hickory, and the planned closure of Wayland, are expected to yield an incremental $0.25 to $0.30 over the next 3 years. Approximately $0.10 of this will be recognized in 2026.

Speaker #1: Now I'll transition to our outlook for 2026 . As Jeff mentioned , we expect a fifth year of double digit non-GAAP EPs growth Revenue growth is expected to continue while we drive .

Speaker #1: Bottom line improvement in addition , our network optimization efforts continue to support our ongoing earnings visibility story . We've been discussing with you our favorable fourth quarter 25 results included the accelerating the benefits of these efforts .

Speaker #1: Looking forward , these initiatives , which include Kii synergies , the ramp up of our Mexico facility , the closure of Hickory and the planned closure of Wayland are expected to yield an incremental 25 to $0.30 over the next three years .

Speaker #1: Approximately $0.10 of this will be recognized in 2026 . Finally , we now are expecting modest EPs secretion from Steelcase in 2026 . Excluding the impact of purchase accounting Finally , a few additional comments to assist you with your 2026 modeling .

Vincent Paul Berger: Finally, we now are expecting modest EPS accretion from Steelcase in 2026, excluding the impact of purchase accounting. Finally, a few additional comments to assist you with your 2026 modeling. Combined, depreciation and amortization is expected to be approximately $175 to $180 million. Interest expense is expected to between $75 and $80 million. Our tax rate should be approximately 25%. For Q1 2026, we expect total net sales to increase by more than 130% year-over-year. Non-GAAP EPS is expected to decrease slightly from 2025 levels. Temporarily, Q1 earnings pressure is expected to be driven by revenue and expense recognition, timing, and the increased investment.

Vincent Paul: Finally, we now are expecting modest EPS accretion from Steelcase in 2026, excluding the impact of purchase accounting. Finally, a few additional comments to assist you with your 2026 modeling. Combined, depreciation and amortization is expected to be approximately $175 to $180 million. Interest expense is expected to between $75 and $80 million. Our tax rate should be approximately 25%. For Q1 2026, we expect total net sales to increase by more than 130% year-over-year. Non-GAAP EPS is expected to decrease slightly from 2025 levels. Temporarily, Q1 earnings pressure is expected to be driven by revenue and expense recognition, timing, and the increased investment.

Speaker #1: Combined depreciation and amortization is expected to be approximately $175 to $180 million. Interest expense is expected to be between $75 and $80 million, and our tax rate should be approximately 25% for the first quarter of 2026.

Speaker #1: We expect total net sales to increase by more than 130% year over year. Non-GAAP EPS is expected to decrease slightly from 2025 levels temporarily.

Speaker #1: First quarter earnings pressure is expected to be driven by revenue and expense recognition , timing , and the increased investment modest year over year revenue pressure in workplace is expected to be limited to the first quarter , and we expect mid-single digits for the full year .

Vincent Paul Berger: Modest year-over-year revenue pressure in Workplace is expected to be limited to Q1. We expect mid-single digits for the full year. Building products revenue is expected to be up low single digits for Q1 and the full year. We expect year-over-year adjusted earnings per share to return in Q2 and accelerate as the year progresses. Finally, a comment on cash flow and the balance sheet. Post the closing of the Steelcase acquisition, our balance sheet ended the year with a net debt to EBITDA ratio of 2x. We expect our cash flow strength to continue and accelerate with the addition of Steelcase. As a result, leverage is expected to return to pre-deal levels in the 1x to 1.5x range in the next 18 to 24 months.

Vincent Paul: Modest year-over-year revenue pressure in Workplace is expected to be limited to Q1. We expect mid-single digits for the full year. Building products revenue is expected to be up low single digits for Q1 and the full year. We expect year-over-year adjusted earnings per share to return in Q2 and accelerate as the year progresses. Finally, a comment on cash flow and the balance sheet. Post the closing of the Steelcase acquisition, our balance sheet ended the year with a net debt to EBITDA ratio of 2x. We expect our cash flow strength to continue and accelerate with the addition of Steelcase. As a result, leverage is expected to return to pre-deal levels in the 1x to 1.5x range in the next 18 to 24 months.

Speaker #1: Building products revenue is expected to be up low single digits for the first quarter , and the full year , and we expect year over year adjusted earnings per share to return in the second quarter .

Speaker #1: And accelerate as the year progresses Finally , a comment on cash flow in the balance sheet post the closing of the Steelcase acquisition , our balance sheet ended the year with a net debt to EBITDA ratio of two times .

Speaker #1: We expect our cash flow strength to continue and accelerate with the addition of Steelcase as a result , leverage is expected to return to Pre-deal levels in the 1 to 1.5 times range in the next 18 to 24 months .

Speaker #1: Finally , we remain committed to payment of our long standing dividend and continue to invest in the business to drive future growth . I will now turn the call back over to Jeff for some long term thoughts and closing comments .

Vincent Paul Berger: Finally, we remain committed to payment of our long-standing dividend and continue to invest in the business to drive future growth. I will now turn the call back over to Jeff for some long-term thoughts and closing comments.

Vincent Paul: Finally, we remain committed to payment of our long-standing dividend and continue to invest in the business to drive future growth. I will now turn the call back over to Jeff for some long-term thoughts and closing comments.

Speaker #1: Thanks, VP. Our fourth quarter and 2025 results demonstrate the strength of our strategies and our ability to manage through uncertain macroeconomic conditions.

Jeff Lorenger: Thanks, VP. Our Q4 and 2025 results demonstrate the strength of our strategies and our ability to manage through uncertain macroeconomic conditions while we remain focused on investing for the future. We expect strong results to continue in 2026, driven by our margin expansion efforts, synergy recognition, and continued revenue growth. As we look forward, the timing was right for the acquisition of Steelcase from a strategic, financial, and cyclical perspective. We are increasingly bullish about the workplace furnishings demand dynamics as the macroeconomic picture continues to firm. Return to office continues to be a positive driver of activity, with levels of remote work expected to continue to fall in 2026.

Speaker #1: While we remain focused on investing for the future, we expect strong results to continue in 2026, driven by our margin expansion efforts.

Speaker #1: Synergy recognition , and continued revenue growth . As we look forward , the timing was right for the acquisition of Steelcase . From a strategic , financial and cyclical perspective .

Speaker #1: We are increasingly bullish about the workplace furnishings demand dynamics, as the macroeconomic picture continues to firm. Return to office continues to be a positive driver of activity, with levels of remote work expected to continue to fall in 2026.

Speaker #1: Office leasing activity established a new post-pandemic high in the fourth quarter , with annual leasing activity up more than 5% for the full year 2025 and net absorption of office space , which has historically been a leading indicator of future industry demand , was meaningfully positive in the second half of 2025 .

Jeff Lorenger: Office leasing activity established a new post-pandemic high in Q4, with annual leasing activity up more than 5% for the full year, 2025. Net absorption of office space, which has historically been a leading indicator of future industry demand, was meaningfully positive in the second half of 2025. In fact, JLL believes a new expansionary cycle in the office space has begun. While new supply of office space will remain a headwind, we see multiple cyclical drivers of growth outside of new construction. Moving to housing, headlines continue to point to ongoing softness, especially in the new build space. Interest rates remain relatively elevated, prices remain high, and affordability remains low. As a result, we expect continued new construction weakness in 2026. However, our structural changes and growth investments should allow us to continue to outperform the market.

Speaker #1: In fact , JLL believes a new expansionary cycle in the office space has begun , while new supply of office space will remain .

Speaker #1: A headwind . We see multiple cyclical drivers of growth outside of new construction moving to housing . Headlines continue to print to to point to ongoing softness , especially in the new build space Interest rates remain relatively elevated .

Speaker #1: Prices remain high and affordability remains low . As a result , we expect continued new construction weakness in 2026 . However , our structural changes and growth investments should allow us to continue to outperform the market and remodel retrofit .

Jeff Lorenger: In remodel retrofit, we are assuming modest growth in 2026. This is consistent with the LIRA projections. In addition, we expect continued market outperformance in our R&R business. Importantly, we expect ongoing margin and cash flow consistency in this segment. Finally, our optimism continues to build around the addition of Steelcase to the HNI family. As I stated earlier, we are confident in our projected synergies of $120 million and accretion of $1.20. As VP mentioned, we now expect modest accretion in 2026. We enter 2026 a transformed and fundamentally stronger organization. Upon recognition of all targeted synergies, the profile of HNI will include substantially higher earnings, stronger margins, greater cash flow, and a continued strong balance sheet. This will enable us to deliver exceptional value to our shareholders, customers, dealers, members, and communities. Thank you again for joining us.

Speaker #1: We are assuming modest growth in 2026. This is consistent with the lira projections. In addition, we expect continued market outperformance in our R&R business.

Speaker #1: And, importantly, we expect ongoing margin and cash flow consistency in this segment. Finally, our optimism continues to build around the addition of Steelcase to the family.

Speaker #1: As I stated earlier , we are confident in our projected synergies $120 million and accretion of $1 . 20 . And as VP mentioned , we now expect modest accretion in 2026 .

Speaker #1: We enter 2026 a transformed and fundamentally stronger organization upon recognition of all targeted synergies. The profile of HNI will include substantially higher earnings, stronger margins, greater cash flow, and a continued strong balance sheet.

Speaker #1: This will enable us to deliver exceptional value to our shareholders , customers , dealers , members and communities . Thank you again for joining us .

Speaker #1: We will now open the call to your questions

Jeff Lorenger: We will now open the call to your questions.

Speaker #2: At this time , I would like to remind everyone , in order to ask a question , press star . Then the number one and your telephone keypad .

Operator 2: At this time, I would like to remind everyone, in order to ask a question, press Star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Reuben Garner with The Benchmark Company. Your line is now open. Please go ahead.

Operator: At this time, I would like to remind everyone, in order to ask a question, press Star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Reuben Garner with The Benchmark Company. Your line is now open. Please go ahead.

Speaker #2: We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ben Garner with The Benchmark Company.

Speaker #2: Your line is now open. Please go ahead.

Speaker #3: Thank you . Good morning guys Maybe to start , just to clarification about the outlook for the year , given the the stub period and and your efforts to kind of show what the underlying business did in the fourth quarter or the are the revenue and double digit earnings growth .

Reuben Garner: Thank you. Good morning, guys.

Jeff Lorenger: Hey.

Reuben Garner: Maybe to start, just the clarification about the outlook for the year, given the stub period and your efforts to kind of show what the underlying business did in Q4. Are the revenue and double-digit earnings growth comments for next year, are they off of the base without Steelcase or the base with Steelcase?

Speaker #3: Comments for next year , are they off of the base without Steelcase or the base with Steelcase

Speaker #1: Perfect . Ruben I kind of walk through the pieces . If you look at the , you know , on the face of the 346 , that's including the Steelcase stub as well as all the purchase accounting , which is close to $4.6 million of headwind .

Vincent Paul Berger: Perfect, Reuben. I'll kind of walk through the pieces. If you look at the, you know, on the face of the $3.46, that's including the Steelcase stub, as well as all the purchase accounting, which is close to $4.6 million a headwind. If you take out the purchase accounting, it's $3.53. That's what you're gonna wanna compare to for the future years, because that's what's ran through the P&L. If that specific number is gonna actually be up 16%, if you talk about the growth. Then if you look at the $3.74, that's excluding purchase accounting and the Steelcase stub period.

Vincent Paul: Perfect, Reuben. I'll kind of walk through the pieces. If you look at the, you know, on the face of the $3.46, that's including the Steelcase stub, as well as all the purchase accounting, which is close to $4.6 million a headwind. If you take out the purchase accounting, it's $3.53. That's what you're gonna wanna compare to for the future years, because that's what's ran through the P&L. If that specific number is gonna actually be up 16%, if you talk about the growth. Then if you look at the $3.74, that's excluding purchase accounting and the Steelcase stub period.

Speaker #1: If you take out the perfect the purchase accounting , it's $3.53 . That's what you're going to want to compare to for the future years , because that's what ran through the PNL and an that specific number is going to actually be up 16% .

Speaker #1: If you talk about the growth . And then if you look at the 3.74 , that's excluding purchase accounting and the Steelcase stub period

Speaker #3: And the double digit growth for 26 would be off of which one of those three numbers . 353 . Perfect . Okay And then your comments about workplace furnishings in the first quarter .

Reuben Garner: The double-digit growth for 26 would be off of which one of those three numbers?

Vincent Paul Berger: 353.

Vincent Paul: 353.

Reuben Garner: Perfect. Okay, and then your comments about workplace furnishings in Q1. I don't think I heard you mention whether, you know, just seeing what's happening in some of the major cities in the Northeast and knowing that, you know, New York in particular is playing a role. Is that in the recovery, is that driving the kind of flattish, I think you said, Q1? What gives you confidence about the acceleration that you're expecting as the year progresses in the mid-single-digit, full-year, full-year guide? Is there any kind of backlog or order numbers from Steelcase and HNI legacy that kind of gives you confidence in a pretty meaningful acceleration as the year moves on?

Speaker #3: I don't think I heard you mention whether , you know , just seeing what's happening in some of the major cities in the northeast and knowing that , you know , New York in particular , is playing a role .

Speaker #3: Is that in the recovery ? Is that driving the kind of flattish ? I think you said first quarter . And what gives you confidence about the acceleration that you're expecting as the year progresses in the mid single digit full year , full year guide , is there any kind of backlog or or numbers from Steelcase and HNI Corp legacy ?

Speaker #3: That kind of gives you confidence in a pretty meaningful acceleration as the year moves on.

Speaker #4: Yeah , Ruben , that's a good question . I mean , you know , weather's always can can impact . We don't really hang our hat on that .

Jeff Lorenger: Yeah, Reuben, that's a good question. I mean, you know, weather is always can impact. We don't really hang our hat on that. I mean, I think it probably has some impact. It's been a little choppy, even in the fireplace business, you know, the hearth business, because they are outside, you know, and getting the homes to install. There's a little tent up there, probably, and a little headwind. The, you know, bottom line is, both when you look at Legacy and Steelcase, we've got really, you know, strong, healthy activity, bid counts, both number and dollars, particularly in the contract side or in the high teens. The funnel, you know, our funnel metrics are up in count and in dollars, and particularly in large projects, over $5 million.

Speaker #4: I mean , I think it probably has some impact . It's been a little choppy even in the fireplace business . You know , the hearth because they are outside .

Speaker #4: You know , and getting the homes to install . So there's there's a little pent up there , probably in a little headwind .

Speaker #4: But the , you know , bottom line is both when you look at legacy and Steelcase , we've got really , you know , strong , healthy activity , bid counts both number and dollars , particularly in the contract side or in the high teens .

Speaker #4: The funnel , you know , our funnel metrics are up in count and in dollars . And particularly in large projects , over $5 million .

Speaker #4: And I say these are consistent across what I would call both legacy and the Steelcase business . If you look at it and that's that's what's kind of driving , you know , our confidence , you know , in addition to the macro topics that I talked about , you know , firming up on , on , on office and net absorption and things like that .

Jeff Lorenger: I'd say these are consistent across what I would call both Legacy and the Steelcase business, if you look at it. That's, that's what's kind of driving, you know, our confidence, you know, in addition to the macro topics that I talked about, you know, firming up on office and net absorption and things like that. You got that going on macro and micro. Internally, we see these bid numbers and presale activity numbers all trending, you know, nicely positive.

Speaker #4: So you got that going on macro and and micro . Internally we , we see these these bid numbers and pre-sale activity numbers all trending , you know nicely positive

Speaker #3: And then Jeff you've had a little over 60 days I think if my math is right since the deals closed that you've been able to kind of get in and meet with people , see how they do things , what what have you learned ?

Reuben Garner: Jeff, you've had a little over 60 days, I think, if my math's right, since the deal's closed, that you've been able to kind of get in and meet with people, see how they do things. What have you learned, you know, what kind of has surprised you to the upside or downside? What opportunities do you think you've kind of developed or seen over the last 2 months?

Speaker #3: You know, what kind of has surprised you to the upside or downside? What opportunities do you think you've kind of developed or seen over the last couple of months?

Speaker #4: Yeah , it's a good question , Ruben . I spent a lot of time with the teams in Grand Rapids and a lot of times in a lot of time in the market , and I would say , you know , first of all , confidence continues to grow on on why we , you know , did this transaction If you look at the customer reach and the complementary nature of the brands and geographies , go to markets , the talented teams are working well together .

Jeff Lorenger: Yeah, that's a good question, Reuben. I've spent a lot of time with the teams in Grand Rapids and a lot of time in the market. I would say, you know, first of all, confidence continues to grow on why we, you know, we did this transaction. If you look at the customer reach and the complementary nature of the brands and the geographies go-to markets, the talented teams are working well together. We're out of the gates quick. Then I would tell you that the positive response we've seen from customers, dealers, sales force, influencers, basically, people in the value chain, as I've gone out in the market and talked to them, are very positive on this combination.

Speaker #4: We're out , we're out . We're out of the gates . Quick . And then I would tell you the positive response we've seen from customers , dealers , sales force influencers , basically people in the value chain , as I've gone out in the market and talked to them , are very positive on this , on this combination .

Speaker #4: And so that's that's been a real I mean , we , we , we predicted that to be the case . But actually going to talk to customers in their locations and here in the questions they ask and the enthusiasm they've shown , you know , for this , it's been , you know , it's been really strong

Jeff Lorenger: I mean, we predicted that to be the case, but actually going to talk to customers in their locations and hearing the questions they ask and the enthusiasm they've shown, you know, for this, it's been, you know, it's been really strong.

Speaker #3: All right . Thanks . And I'm going to sneak one more in . I'm not going to count that first one as a full question .

Reuben Garner: All right, thanks. I'm going to sneak one more in. I'm not going to count that first one as a full question. The building products, space, your outlook for low single-digit growth is super encouraging, very impressive, given how you performed in 2025. It looked like you changed some things up about how you're selling or displaying the product down at the Builder Show, a couple of weeks ago. I guess, talk about what's driving your outperformance of the industry. There's not a lot of categories in building products, talking about kind of even flattish volume environments for this year. For you guys to do it on top of what you did in 2025, something has to be working for you. Can you just kind of dig into what you're doing there?

Speaker #3: So the building products space , your outlook for low single digit growth is super encouraging . Very impressive given how you performed in 25 .

Speaker #3: It looked like you changed some things up about how you're selling or displaying the product down at the builder show—a couple of weeks ago, I guess.

Speaker #3: Talk about what's driving your outperformance of the industry. There's not a lot of categories in building products. Talking about kind of even flattish volume environments for this year.

Speaker #3: So for you guys to do it on top of what you did in 25 , something has to be working for you . Can you just kind of dig into what you're doing there ?

Speaker #4: Yeah , we can . The VP can comment on us as well . I mean , I think we've started to talk about this a while ago .

Jeff Lorenger: Yeah, well, VP can comment on us as well. I mean, I think we've started to talk about this a while ago, you know, Reuben, which is, you know, really getting closer to the builders and the customer, engaging in the market, being laser-focused on, you know, what we can bring to the table for our customers. It's early days, but it's being really well received. I mean, we've got a great product lineup. We, you know, we hit all price points, all fuel types. As we get in and engage more specifically from a manufacturer side, alongside our industry, you know, best-in-class distribution partners, the two things are really starting to have an impact.

Speaker #4: You know , Ruben , which is , you know , really getting closer to the builders and the customer engaging in the market being laser focused on , you know , what we can bring to the table for our customers .

Speaker #4: And it's been it's it's early days , but it's being really well received . I mean we've got a great product lineup . You know , we hit all price points , all fuel types .

Speaker #4: And and as we get in and engage more specifically from a manufacturer side alongside our industry , you know best in class distribution partners , the two things are really starting to have an impact .

Speaker #4: And combine that with the service model that we have in our in our own , you know , our , our large installing distributors independent and our faith .

Jeff Lorenger: Combine that with the service model that we have in our own, you know, our large installing distributors, independent and our FHH, it, you know, what I would tell you is it's moving the needle. We got a good product pipe we're talking about in the electric category, and all these things are really starting to catch hold. I think that's really what's going on. I mean, it's nothing more than really customer intimate focus, you know, where customers wanna be met, whether it be, you know, in the R&R segment or in the new home segment. I don't know, VP, if you got any other-

Speaker #4: You know what I would tell you is it's it's moving the needle and and so we got a good product pipe . We're talking about the electric category .

Speaker #4: And all these things are really are really starting to to catch hold . And I think that's , that's really what's going on .

Speaker #4: I mean it's , it's , it's nothing more than really customer intimate focus . You know , where customers want to want to be met , whether it be , you know , in the R&R segment or in the new home segment , I don't know if you got any other .

Speaker #1: Yeah . Jeff , I would add the way we measure this , Ruben , is you can , you know , everybody sees the news of permits down 7% year to date and they see contracting markets .

Vincent Paul Berger: Yeah, Jeff, I'd add, the way we measure this, Reuben, is you know, everybody sees the news of permits down 7% year to date, and they see contracting markets. We actually measure it market by market, and the initiatives that Jeff's talking about, the intimacy, we can see that we're seeing better results on that. Those are share gains, and in some cases, getting more fireplace spec. It's the controlling the controllables. On the remodel side, we've done a nice job on the stove side of our business. We've gone to a single brand to consolidate it. We've been able to get a lot more reach, a lot more reach into the retail and the big box. That was an area for growth that's inside the numbers as well. The long-term investments are paying off.

Vincent Paul: Yeah, Jeff, I'd add, the way we measure this, Reuben, is you know, everybody sees the news of permits down 7% year to date, and they see contracting markets. We actually measure it market by market, and the initiatives that Jeff's talking about, the intimacy, we can see that we're seeing better results on that. Those are share gains, and in some cases, getting more fireplace spec. It's the controlling the controllables.

Speaker #1: We actually measure it market by market . And the initiatives that Jeff's talking about , the intimacy , we can see that we're seeing better results than that .

Speaker #1: So those are share gains . And in some cases get more fireplace spec . So it's the controlling the controllables and the remodel side .

Vincent Paul: On the remodel side, we've done a nice job on the stove side of our business. We've gone to a single brand to consolidate it. We've been able to get a lot more reach, a lot more reach into the retail and the big box. That was an area for growth that's inside the numbers as well. The long-term investments are paying off. We still have a lot more to do and to get to more markets and more builders, but we certainly, are not falling victim to a down 7% permit number.

Speaker #1: We've done a nice job on the stove side of our business . We've gone to a single brand to consolidate it . We've been able to get a lot more reach a lot more reach into the retail and the big box .

Speaker #1: So that was an area for growth that that's inside the numbers as well . So the long term investments are paying off . We still have a lot more to do to get to more markets and more builders .

Vincent Paul Berger: We still have a lot more to do and to get to more markets and more builders, but we certainly, are not falling victim to a down 7% permit number.

Speaker #1: But we certainly are not falling victim to a down 7% permit number

Speaker #3: Great . Thanks for the detail , guys . Congrats on the strong close to the year in the strong outlook . The stock market's being a bit irrational today , but I assume all this will work at work itself out .

Reuben Garner: Great. Thanks for the detail, guys. Congrats on the strong close to the year and the strong outlook. The stock market's being a bit irrational today, but I assume all this will work itself out. Good luck in 2026.

Speaker #3: And good luck in '26.

Speaker #4: Thank you . Thanks , Reuben

Jeff Lorenger: Thank you.

Vincent Paul Berger: Thanks, Reuben.

Vincent Paul: Thanks, Reuben.

Operator 3: Your next question comes from the line of Steven Ramsey with Thompson Research Group. Please go ahead.

Operator: Your next question comes from the line of Steven Ramsey with Thompson Research Group. Please go ahead.

Speaker #2: Your next question comes from the line of Steven Ramsay with Thompson Research Group. Please go ahead.

Speaker #5: Hey good morning everyone . I wanted to start on the synergy . Number 120 million . Being America's focus . A couple things on that First , I would given your past execution , I think there could be upside to that .

Steven Ramsey: Hey, good morning, everyone. wanted to start on the synergy number, $120 million being America's focus. Couple things on that. First, given your past execution, I think there could be upside to that. I'm curious kind of what points or targets you would need to reach to potentially raise that down the road. Secondly, it being America's focused seems to imply that Steelcase International is still projected to be a negative offset. Could that be a source of upside in the future?

Speaker #5: I'm curious kind of what points or targets you would need to reach to to potentially raise that down the road . And then secondly , it being America's focus seems to imply that Steelcase International is still projected to be a negative offset .

Speaker #5: Could that be a source of upside in the future ?

Speaker #1: Perfect, Steven. I'll take it kind of in two pieces. The first $120 million that we originally announced is through our disciplined approach that we've learned through the key process.

Vincent Paul Berger: Perfect, Steven. I'll take it kind of in two pieces. The first, the $120 million that we originally announced is through our disciplined approach that we've learned through the KI process. You heard Jeff say, we're still comfortable with that number. It takes every bit of three to six months to get. You know, the team working on the specific projects of, you know, how we're gonna go execute it, which is why I've talked about accretion of $0.60 in the second year once these projects are up and running. To your question about timing, you know, six months in, if we've learned more, we'll share more. Right now, we're focused on making sure we understand the buckets between procurement, logistics, SG&A, and network optimization, and that we'll share with you as we learn more as we go.

Vincent Paul: Perfect, Steven. I'll take it kind of in two pieces. The first, the $120 million that we originally announced is through our disciplined approach that we've learned through the KI process. You heard Jeff say, we're still comfortable with that number. It takes every bit of three to six months to get. You know, the team working on the specific projects of, you know, how we're gonna go execute it, which is why I've talked about accretion of $0.60 in the second year once these projects are up and running. To your question about timing, you know, six months in, if we've learned more, we'll share more. Right now, we're focused on making sure we understand the buckets between procurement, logistics, SG&A, and network optimization, and that we'll share with you as we learn more as we go.

Speaker #1: You heard Jeff say , we're still comfortable with that number . It takes every bit of 3 to 6 months to get , you know , the team working on the specific projects of how we're going to execute it , which is why I've talked about accretion of $0.60 in the second year .

Speaker #1: Once these projects are up and running . And so to your question about timing , you know , six months in , if we've learned more , we'll we'll share more .

Speaker #1: But right now we're focused on making sure we we understand the buckets between procurement logistics and network optimization . And that will share with you as we learn more as we go .

Speaker #1: But I think the key thing from the last time we talked is we expected it to be neutral in year one . And now that we're in there , this is actually going to be modestly accretive in year one .

Vincent Paul Berger: I think the key thing from the last time we talked is, we expected it to be neutral in year one. Now that we're in there, this is actually gonna be modestly accretive in year one. That's really good, considering the capital structure and the additional shares that were issued, that it doesn't change our total target, but it shows that we'll start seeing the benefits of a little quicker. That's kind of question one. Question two on international, that is not offsetting anything. This $1.20 stands on its own. The international business has very good assets.

Vincent Paul: I think the key thing from the last time we talked is, we expected it to be neutral in year one. Now that we're in there, this is actually gonna be modestly accretive in year one. That's really good, considering the capital structure and the additional shares that were issued, that it doesn't change our total target, but it shows that we'll start seeing the benefits of a little quicker. That's kind of question one. Question two on international, that is not offsetting anything. This $1.20 stands on its own. The international business has very good assets.

Speaker #1: And that's that's really good considering the capital structure and the additional shares that were issued that it doesn't change our total target , but it shows that we'll start seeing the benefits of a little quicker .

Speaker #1: That's kind of question one . Question two on international , this that is not offsetting anything . This dollar 20 stands on its own The international business has has very good assets .

Vincent Paul Berger: You know, as Jeff said, you know, with the business and the teams working together, we're getting up to speed on that business, whether it's APAC or EMEA, we're getting lots of insight of, you know, how the business and their go-to-market and their advantages. I'd tell you, the teams are energized right now to drive profit improvement plans. They're in place, in all of those areas, and that will not be a drag on the $1.20.

Speaker #1: You know , as Jeff said , you know , with the business and the teams working together , we're getting up to speed on that business .

Vincent Paul: You know, as Jeff said, you know, with the business and the teams working together, we're getting up to speed on that business, whether it's APAC or EMEA, we're getting lots of insight of, you know, how the business and their go-to-market and their advantages. I'd tell you, the teams are energized right now to drive profit improvement plans. They're in place, in all of those areas, and that will not be a drag on the $1.20.

Speaker #1: Whether it's APAC or EMEA, we're getting lots of insight off of how the business and their go-to-market and their advantages.

Speaker #1: And I'd tell you , the teams are are energized right now to drive profit improvement plans . They're in place in all of those areas .

Speaker #1: And that will not be a drag on the on the dollar 20 .

Speaker #5: Okay . That's that's great Color . Wanted to think about the resi growth investments . And you talked about that being a consistent margin is the implication that 2026 .

Steven Ramsey: Okay. That's great color. Wanted to think about the resi growth investments. You talked about that being a consistent margin. Is the implication that 2026 resi margin is flattish with sales up? Is there a cadence for the year on the resi margin profile?

Speaker #5: Resi margin is flattish with sales up . And is there a cadence for the year on the resi margin profile ?

Speaker #1: Yeah , I think that's the right way to think about it . Steve . And you know , that business is extremely flexible and profitability as you've seen it from whether it's 500 million or 850 million , it tracks between the 1,718% .

Vincent Paul Berger: Yeah, I think that's the right way to think about it, Steven. You know, that business is extremely flexible in profitability, as you've seen it, from whether it's $500 million or $850 million, it tracks between the 17%, 18%. We are gonna continue to make the investments Jeff was talking about, with, you know, builder and getting closer to the builder. We would expect those margins with the revenue growth to stay right around the same area.

Vincent Paul: Yeah, I think that's the right way to think about it, Steven. You know, that business is extremely flexible in profitability, as you've seen it, from whether it's $500 million or $850 million, it tracks between the 17%, 18%. We are gonna continue to make the investments Jeff was talking about, with, you know, builder and getting closer to the builder. We would expect those margins with the revenue growth to stay right around the same area.

Speaker #1: We are going to continue to make the investments . Jeff was talking about with , you know , builder and getting closer to the builder .

Speaker #1: So we would expect those margins with the revenue growth to stay right around the same area

Speaker #5: Okay . And then maybe you can share a bit more on the resi growth investments . And if those have shifted in the last year or so , as you've started making those , it's clearly working and you're it sounds like you're saying it's geared towards builders .

Steven Ramsey: Okay, maybe you can share a bit more on the resi growth investments and if those have shifted in the last year or so as you've started making those. It's clearly working, and you're saying it's geared towards builders, yet RNR is the growth driver. Maybe you can kinda connect the dots there on the investments being more to builders, but the growth being from RNR.

Speaker #5: Yet R&R is the growth driver. Maybe you can kind of connect the dots there on the investments being more to builders, but the growth being from R&R?

Speaker #1: Yeah , I think there's a couple of things on this . One , Steven one , when we talk about investments , this has been a three year journey .

Vincent Paul Berger: Yeah, I think there's a couple things on this one, Steven. 1, when we talk about investments, this has been a 3-year journey. You know, the operational excellence of this business is what's allowed us to deliver the results. You know, in the last 3 years, we've moved to a front-end structure. We've brought in leaders running each of these business units that bring those front-end points of view, and they're the ones leading the charge in each of the intimacy models in both new home and existing home. We've also made a significant amount of investments in product and innovation. You know, part of the success and our offset against the market is we are entering new categories and new areas. You know, specifically, an example would be, you know, wood stoves and DIY.

Vincent Paul: Yeah, I think there's a couple things on this one, Steven. 1, when we talk about investments, this has been a 3-year journey. You know, the operational excellence of this business is what's allowed us to deliver the results. You know, in the last 3 years, we've moved to a front-end structure. We've brought in leaders running each of these business units that bring those front-end points of view, and they're the ones leading the charge in each of the intimacy models in both new home and existing home. We've also made a significant amount of investments in product and innovation. You know, part of the success and our offset against the market is we are entering new categories and new areas. You know, specifically, an example would be, you know, wood stoves and DIY.

Speaker #1: You know , the operational excellence of this business is what's allowed us to deliver the results . You know , in the last three years we've we've moved to a front end structure .

Speaker #1: We've brought in leaders running each of these business units that that bring those front end , front end points of view . And they're they're the ones leading the the charge in each of the , the intimacy models in home and existing home .

Speaker #1: We've also made a significant amount of investments in product and innovation . You know , part of this success in our offset against the market is we are entering new categories and new areas .

Speaker #1: You know , specifically , an example would be , you know , wood stoves and DIY . That's a large market . We didn't have a place in .

Vincent Paul Berger: That's a large market we didn't have a place in, so we're making investments with go-to-markets there. It's allowing us to do it, as well as what Jeff said on the electric side. I think you're seeing investments on the new home and the remodel side as well. They just pace to how they come in through the revenue streams are not always at the same time.

Vincent Paul: That's a large market we didn't have a place in, so we're making investments with go-to-markets there. It's allowing us to do it, as well as what Jeff said on the electric side. I think you're seeing investments on the new home and the remodel side as well. They just pace to how they come in through the revenue streams are not always at the same time.

Speaker #1: So, we're making investments with go-to-markets there that's allowing us to do it, as well as what Jeff said on the electric side.

Speaker #1: So I think you're seeing investments on the new home and the remodel side as well . And they just pace of how they come in through the the revenue streams are not always at the same time .

Speaker #4: Yeah , that's a great point . I also would we're getting really good at I think someone else mentioned it . The IBS show , you know , is a different look from what we've had in the past .

Jeff Lorenger: I think it's a great point. We're getting really good, and I think someone else mentioned at the IBS Show, you know, it's a different look from what we've had in the past. We're connecting more to designers, you know, interior designers. I mean, there's a lot of focus there relative to design as well, Steven. So it's kind of across the board, and I lump it all back to getting much closer and intimate with our geographic areas, design trends, you know, customer, you know, intimacy, and all the while working that with the changes VP talked about. It's been a couple, 3-year run, and it's starting to pay dividends, and we're gonna keep investing.

Speaker #4: We're connecting more to designers . You know , interior designers . I mean , there's a lot of relative to design as well .

Speaker #4: Stephen . So it's kind of across the board . And I lump it all back to getting much closer and intimate with with our geographic areas , design trends , you know , customer , you know , intimacy in all the while working that with with the changes VP talked about .

Speaker #4: It's been a it's been a couple three year run and it's starting to pay dividends . And we're going to keep investing

Speaker #5: Okay . That's all helpful . Thank you

Steven Ramsey: Okay. That's all helpful color. Thank you.

Speaker #2: Your next question comes from the line of Greg Burns with Sidoti & Company. Please go ahead.

Operator 3: Your next question comes from the line of Greg Burns with Sidoti & Company. Please go ahead.

Operator: Your next question comes from the line of Greg Burns with Sidoti & Company. Please go ahead.

Speaker #6: Morning . I was just hoping to get a little bit more color on the the profit headwinds in the first quarter . You know what exactly are they and why are they going to be rolling off as we move through the balance of the year ?

Greg Burns: Morning. I was just hoping to get a little bit more color on the profit headwinds in Q1. You know, what exactly are they, and why are they gonna be rolling off as we move through the balance of the year?

Speaker #1: Yeah , Greg , the first starts with just the timing of the revenue . It's a little choppy on kind of how some of the contract side of the business , everything that Jeff talked about on the backdrop is , is all good .

Vincent Paul Berger: Yeah, Greg, it first starts with just the timing of the revenue. It's a little choppy on kind of how some of the contract side of the business, everything that Jeff talked about on the backdrop is all good and favorable for us. You know, if I look at even how orders came in Q4, the workplace was actually up 5%, and Steelcase is actually showing up good order trends as well. It's just the timing of when that stuff's going to shift. The revenue is the first piece, and we have a couple comps just from last year that we're up against. It's why we do believe it's a short-term issue, and the full year is more important. I think on the expense side, there's really two things happening.

Vincent Paul: Yeah, Greg, it first starts with just the timing of the revenue. It's a little choppy on kind of how some of the contract side of the business, everything that Jeff talked about on the backdrop is all good and favorable for us. You know, if I look at even how orders came in Q4, the workplace was actually up 5%, and Steelcase is actually showing up good order trends as well. It's just the timing of when that stuff's going to shift. The revenue is the first piece, and we have a couple comps just from last year that we're up against. It's why we do believe it's a short-term issue, and the full year is more important. I think on the expense side, there's really two things happening.

Speaker #1: And favorable for us . And you know , if I look at even how orders came in in the fourth quarter , the workplace was actually up 5% in Steelcase is actually good order trends as well .

Speaker #1: It's just the timing of when that stuff's going to shift. So the revenue is the first piece, and we have a couple comps just from last year that we're up against.

Speaker #1: It's why why we do believe it's a short term issue . And the full year is more important , I think on the expense side , there's really two things happening .

Vincent Paul Berger: Bringing in the Steelcase family, there's a comp timing that's hitting in Q1 that, you know, would have hit in Q2 under their P&L, so that's a little bit expense pressure. We're still balancing our investments. We're still making sure that, you know, we're thinking about the long game and the macroeconomics tells us still to keep investing. I think the revenue growth, the timing of the expense, and us continuing investment puts the short-term pressure. More importantly, as we go through the year, you're gonna see the double-digit EPS growth accelerate in Q2, Q3, and Q4, based on not only volume, but the visibility story we're talking about. Okay, great. I think last quarter, you called out some hospitality orders or the timing on hospitality orders.

Speaker #1: Bringing in the Steelcase family . There's a there's a comp timing that's hitting in the first quarter that , you know , would have hit in the in the second quarter under their PNL .

Vincent Paul: Bringing in the Steelcase family, there's a comp timing that's hitting in Q1 that, you know, would have hit in Q2 under their P&L, so that's a little bit expense pressure. We're still balancing our investments. We're still making sure that, you know, we're thinking about the long game and the macroeconomics tells us still to keep investing. I think the revenue growth, the timing of the expense, and us continuing investment puts the short-term pressure. More importantly, as we go through the year, you're gonna see the double-digit EPS growth accelerate in Q2, Q3, and Q4, based on not only volume, but the visibility story we're talking about.

Speaker #1: So that's a little bit expense pressure . And we're still balancing our investments . We're still we're still making sure that we're thinking about the long game and the back , the macroeconomics tells us still to keep investing .

Speaker #1: So I think the revenue growth , the timing of the expense and us continuing investment puts the short term pressure . But more importantly , as we go through the year , you're going to see the double digit EPs growth accelerate in Q2 , Q3 and Q4 based on not only volume , but the visibility story .

Speaker #1: We're talking about

Speaker #6: Okay , great . And I think last , last quarter , you called out Some hospitality orders or the the timing on hospitality orders .

Greg Burns: Okay, great. I think last quarter, you called out some hospitality orders or the timing on hospitality orders. Could you just maybe update us on the hospitality market and if there's any change there?

Speaker #6: Could you just maybe update us on the hospitality market? And if there's any, any change there.

Vincent Paul Berger: Could you just maybe update us on the hospitality market and if there's any change there?

Speaker #4: Yeah . No , there is not the hospitality market is , is is is solid . We you know we were up against the comp but look say similar to the contract market pipeline is strong .

Jeff Lorenger: Yeah, no, there is not. The hospitality market is solid. We, you know, we were up against the comp. Look, similar to the contract market, pipeline is strong, a business is making investments, performing well. They have a, you know, a market leader position in-room furniture. We like that business a lot. We expect that it'll perform at or above prior year.

Speaker #4: A business is making investments performing well . They have a you know market leader position in in room furniture . And so we like to have business a lot .

Speaker #4: And we expect that it'll perform at or above prior year . So

Speaker #6: Okay . All right . Great . Thank you .

Vincent Paul Berger: Okay. All right, great. Thank you.

Vincent Paul: Okay. All right, great. Thank you.

Speaker #4: Thanks

Jeff Lorenger: Thanks.

Speaker #2: Your last question comes from the line of David MacGregor with Longbow Research. Please go ahead.

Operator 3: Your last question comes from the line of David MacGregor with Longbow Research. Please go ahead.

Operator: Your last question comes from the line of David MacGregor with Longbow Research. Please go ahead.

Speaker #7: Yes . Good morning everyone . Thanks for taking the questions . I guess from our our dealer conversations this quarter . It's pretty clear that demand for design support has accelerated pretty dramatically .

David MacGregor: Yes, good morning, everyone. Thanks for taking the questions. I guess from our dealer conversations this quarter, it's pretty clear that demand for design support has accelerated pretty dramatically. Just wondering if you can talk about the amount of work that you believe is developing in the pipeline, but maybe not yet in the order backlog, and how you're thinking about the timing of that work converting to orders and then to sales dollars?

Speaker #7: And so I'm just wondering if you can talk about the amount of work that you believe is developing in the pipeline , but maybe not yet in the order backlog .

Speaker #7: And how you're thinking about the timing of that work . Converting to orders and then to sales dollars

Speaker #4: Yeah , that's that's the question , isn't it ? David ? I think you're you're you're hearing the same stuff that we're seeing , which is there is a lot of there's a lot of activity .

Jeff Lorenger: Yeah, that's the question, isn't it, David? I think you're hearing the same stuff that we're seeing, which is there is a lot of, there's a lot of activity. It's, I believe it's real. We're actually, just to get upstream on that a little bit, a lot of our businesses are deploying additional resources to help dealers and customers get things through the pipe, because that does become a backlog area relative to the ability to get things designed. We're also working on some AI tools and some other digital tools to be able to help that as well, you know, for the long game.

Speaker #4: It's I believe it's it's real . And we're actually just to get upstream on that a little bit . A lot of our businesses are deploying additional resources to help dealers and customers get things through the pipe , because that does become a backlog area relative to the ability to get things designed .

Speaker #4: We're also working on some AI tools and some other digital tools to be able to help that as well . For the long game .

Jeff Lorenger: Look, we historically, this business has had a pretty stable conversion kind of spec to order cycle, post-COVID, it's been a little bit all over the map, it hasn't really settled down. I would tell you that once these things start and you see the commitment, particularly on the larger projects, they come in. It's just sometimes they don't fall perfectly in the areas. The other thing that we're seeing with the Steelcase acquisition is, their exposure to the large stuff that, you know, once it gets lit, it goes, it's robust. Now, we're still working with them on how they view their timing and predict the order to revenue cycles and the spec to order cycles.

Speaker #4: But look , we we historically this business has had a pretty stable conversion kind of spec to order cycle and post Covid . It's been a little bit all over the map and it hasn't really settled down .

Speaker #4: But but I would tell you that once these things start and you see the commitment , particularly on the larger projects , they come in , it's just sometimes they don't fall perfectly in the areas .

Speaker #4: And the other thing that we're seeing with the Steelcase acquisition is their exposure to the large stuff that , you know , once it once it gets lit , it goes it is its robust .

Jeff Lorenger: The other thing that we're seeing with the Steelcase acquisition is, their exposure to the large stuff that, you know, once it gets lit, it goes, it's robust. Now, we're still working with them on how they view their timing and predict the order to revenue cycles and the spec to order cycles. I can't really give you a great answer on a it's 90 days, or it's 60 days, or it's 30 days. You know, it's real, and it's volatile relative to when it gets put in. We're bullish.

Speaker #4: Now , we're still working with them on on how they view their timing and predict the , the order to the order to revenue cycles and the spec to order cycles .

Jeff Lorenger: I can't really give you a great answer on a it's 90 days, or it's 60 days, or it's 30 days. You know, it's real, and it's volatile relative to when it gets put in. We're bullish.

Speaker #4: So I can't really give you a great answer on a it's 90 days or 60 days or it's 30 days , but you know , it's , it's real and it's volatile relative to when it when it gets put in .

Speaker #4: But we're bullish .

Speaker #7: Yeah . Yeah . It's out there . There's no doubt about it . Yeah . Second question is just my second question really just around the discussion around synergies .

David MacGregor: Yeah. Yeah, it's out there. There's no doubt about it.

Jeff Lorenger: Yeah.

David MacGregor: My second question really just around the discussion around synergies. You know, you talked about the $120 million. You know, it seems like you're bumping the 2026 expectation a little bit, and I'm mindful that you haven't made any change to the $120 million. I guess the question is: Is the better outlook on 2026 a function of maybe incremental synergies that you've identified, or is it really timing? I guess, related to that is the whole discussion around commercial synergies, which I fully understand why you don't want to get into too much detail around that at this point. I'm wondering if you can just discuss it at a very high level, just kind of the actions you're taking to facilitate, you know, the eventual capture of those commercial synergies.

Speaker #7: And you know, you've talked about $120 million. You know, it seems like you're bumping the '26 expectation a little bit. And I'm mindful that you haven't made any change to the $120 million.

Speaker #7: But I guess the question is is the better outlook on 26 a function of maybe incremental synergies that you've identified , or is it really timing ?

Speaker #7: And then I guess, related to that is the whole discussion around commercial synergies, which I fully understand why you don't want to get into too much detail around that at this point.

Speaker #7: But I'm wondering if you could just discuss it a very high level . It's kind of the actions you're taking to to facilitate the eventual capture of those commercial synergies .

Speaker #1: Yeah , I'll take the first part of that . David . The timing and the the dollar of year one actually hasn't changed as it relates to the synergies we had predicted a little bit more transition costs and some offsets in our original accretion analysis .

Vincent Paul Berger: Yeah, I'll take the first part of that, David. The timing and the dollar of year one actually hasn't changed as it relates to the synergies. We had predicted a little bit more transition costs and some offsets in our original accretion analysis as you put the businesses together. As a result, we'll just get a little bit more of that two-year look of $0.60 a little bit earlier. I would tell you, our philosophy hasn't changed, and our approach hasn't changed, you know, as we've set that number.

Vincent Paul: Yeah, I'll take the first part of that, David. The timing and the dollar of year one actually hasn't changed as it relates to the synergies. We had predicted a little bit more transition costs and some offsets in our original accretion analysis as you put the businesses together. As a result, we'll just get a little bit more of that two-year look of $0.60 a little bit earlier. I would tell you, our philosophy hasn't changed, and our approach hasn't changed, you know, as we've set that number.

Speaker #1: As you put the businesses together . So it's just it's just as a result , we'll just get a little bit more of that .

Speaker #1: That two year look of $0.60 , a little bit earlier . So I would tell you our philosophy hasn't changed . And our approach hasn't changed .

Speaker #1: You know , as we've set that number .

David MacGregor: Yeah, I think.

Speaker #4: Yeah . And yeah , and then on the , the synergies . Yeah you're right . It's early days and we what I would tell you though as I've traveled you know we're seeing some nice what I would call organic connections between our networks to support revenue synergies , particularly with some of our open line brands .

Jeff Lorenger: Yeah, David, then on the synergies, you're right. It's early days, what I would tell you, though, as I've traveled, you know, we're seeing some nice, what I would call, organic connections between our networks to support revenue synergies, particularly with some of our open line brands. That, you know, when that formalizes more and gets more structure to it, we're gonna kind of let it play out a little bit and see kind of how the natural system works, then we can look more at that. Look, I mean, we see some organic pull for some of that revenue, it's early days, but we'll probably be talking about that down the road.

Speaker #4: And so that , you know , we when that formalizes more and gets more structure to it , we're going to kind of let it play out a little bit and see kind of how the natural system works .

Speaker #4: And then we can we can look more at that . But look , I mean , it's going to we see we see some organic pull for , for some of that revenue .

Speaker #4: And it's early days . But we'll , we'll probably be talking about that down the road . But right now it's I'm encouraged by what I see .

Jeff Lorenger: Right now, it's. I'm encouraged by what I see.

David MacGregor: If, could I squeeze maybe one more in? Just maybe, for the model, if you will, working capital in 2026 and how we should be modeling working capital.

Speaker #7: Can I squeeze maybe one more in? And just maybe for the model, if you will, working capital in 2026, and how we should be modeling working capital.

Speaker #1: Yeah , we're going to you know , we we benefited you know , with the pulling on the Steelcase balance sheet . We're actually sequentially improved a little bit .

Vincent Paul Berger: Yeah. You know, we benefited, you know, with the pulling on the Steelcase balance sheet. We're actually sequentially improved a little bit. Just with the timing of expenses, we're gonna need to make a little bit of an investment, David, but not significant, you know, when you think about the net working capital as we go into 2026 and beyond. I think one more comment there, though, the operational discipline inside of the HNI piece as we bring into that balance sheet, I would tell you there's opportunity as we get into the out years.

Vincent Paul: Yeah. You know, we benefited, you know, with the pulling on the Steelcase balance sheet. We're actually sequentially improved a little bit. Just with the timing of expenses, we're gonna need to make a little bit of an investment, David, but not significant, you know, when you think about the net working capital as we go into 2026 and beyond. I think one more comment there, though, the operational discipline inside of the HNI piece as we bring into that balance sheet, I would tell you there's opportunity as we get into the out years.

Speaker #1: And just with the timing of expenses , we're going to need to make a little bit of an investment , David , but not not significant .

Speaker #1: You know , when you think about the net working capital as we go into 2026 and beyond . So but but I think one more comment there though , the the operational discipline inside of the knee piece is we bring into that balance sheet .

Speaker #1: I would tell you there's opportunity as we get into the out years.

Speaker #7: Got it. Thanks very much. Good luck with everything.

David MacGregor: Got it. Thanks very much. Good luck with everything.

Speaker #4: Thank you .

Jeff Lorenger: Thank you.

Speaker #1: Thanks

Vincent Paul Berger: Thanks.

Vincent Paul: Thanks.

Speaker #2: That concludes our Q&A session. I will now turn the call back over to Mr. Laundrie for closing remarks.

Operator 3: That concludes our Q&A session. I will now turn the call back over to Mr. Loranger for closing remarks.

Operator: That concludes our Q&A session. I will now turn the call back over to Mr. Loranger for closing remarks.

Speaker #4: Hey , thank you for joining us today . And your interest in NI . We look forward to speaking with you again in April .

Jeff Lorenger: Hey, thank you for joining us today and your interest in HNI. We look forward to speaking with you again in April. Have a great day.

Speaker #4: Have a great day

Speaker #2: Ladies and gentlemen, that does conclude our conference call for today. Thank you all for joining, and you may now disconnect.

Operator 3: Ladies and gentlemen, that does conclude our conference call for today. Thank you all for joining, and you may now disconnect. Everyone, have a great day.

Operator: Ladies and gentlemen, that does conclude our conference call for today. Thank you all for joining, and you may now disconnect. Everyone, have a great day.

Q4 2025 HNI Corp Earnings Call

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