• Non-GAAP EPS (Q4 2024): $0.87
• Non-GAAP EPS (Full Year 2024): $3.06, up 15% from 2023
• Consolidated Operating Margin (2024): Expanded 130 basis points to 8.6%
• Workplace Furnishings Non-GAAP Operating Margin (2024): 9.5%
• Residential Building Products Operating Profit Margin (2024): Expanded 50 basis points to 17.5%
• Workplace Furnishings Segment Orders (Q4 2024): Up 2% year over year
• Contract Orders (Q4 2024): Up 4% year over year
• Operating Cash Flow (2024): Exceeded $225 million
• Year-End Gross Debt Leverage (2024): 1.1 times
• Cash Returned to Shareholders (2024): $129 million through stock buybacks and dividends

• Warning! GuruFocus has detected 4 Warning Sign with HNI.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• HNI Corp (NYSE:HNI) achieved a third consecutive year of double-digit non-GAAP EPS growth in 2024.
• The company reported a record high non-GAAP EPS of $3.06 for the full year, up 15% from 2023.
• Consolidated operating margin expanded by 130 basis points to 8.6%, the highest level since 2005.
• Workplace furnishings segment saw a 44% increase in non-GAAP operating profit, with a margin of 9.5%, the highest since 2007.
• HNI Corp (NYSE:HNI) has strong earnings visibility through 2026, driven by operational improvements and synergy initiatives.

Negative Points

• Workplace furnishings experienced softness with small and medium-sized customers, particularly in the transactional business.
• Fourth quarter revenue in the contract furniture business was down slightly due to the timing of larger projects.
• Residential building products saw a 5% year-over-year revenue decline in the fourth quarter due to housing market weakness.
• Tariff uncertainty and rising inflation expectations are expected to cause ongoing volatility in 2025.
• First quarter 2025 non-GAAP earnings per share are expected to decrease slightly due to the impact of tariffs.

Q & A Highlights

Q: Can you elaborate on the investments HNI is making in the workplace segment and why now is the right time? A: Jeffrey Lorenger, Chairman, President, and CEO, explained that while margin expansion remains a focus, HNI is investing in selling capabilities, simplifying and improving customer experience, and enhancing product development and digital connectivity. The timing is right due to strength in verticals like office, healthcare, education, and hospitality, which warrant more investment.

Q: What are the company-specific drivers for growth in the residential building products segment, especially in the latter half of the year? A: Vincent Berger, Executive Vice President and CFO, highlighted that investments are being made in selling capabilities, consumer awareness, and product pipeline. The company is organizing around the consumer, leveraging relationships with national accounts, and driving category awareness. These efforts are expected to drive growth without degrading high-margin results.

Q: What is HNI's exposure to the federal government, and how are potential changes being managed? A: Vincent Berger noted that while the federal government is an important part of the business, it is relatively small. The company is maintaining its current approach, with no significant changes in buying patterns observed yet. HNI remains present and invested in this space, anticipating potential changes over the next few years.

Q: Are there any signs of improvement or stabilization in the SMB segment, given its volatility? A: Jeffrey Lorenger mentioned that the SMB segment is currently flat, with potential for revenue upside in the latter half of the year. The segment suffered from post-election volatility, but as conditions stabilize, improvement is anticipated.

Q: How is HNI planning to offset the impact of tariffs, and why can they be managed on a contemporaneous basis? A: Jeffrey Lorenger explained that while the first quarter will see some impact, HNI plans to use a surcharge approach instead of permanent price adjustments, allowing for quicker response. The company is also working on supplier concessions and productivity improvements to achieve a neutral impact on tariffs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.