Investors interested in Business Services stocks should always be looking to find the best-performing companies in the group. HNI (HNI) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? A quick glance at the company's year-to-date performance in comparison to the rest of the Business Services sector should help us answer this question.HNI is one of 315 individual stocks in the Business Services sector. Collectively, thes ...

Most of us have heard the dictum "the trend is your friend." And this is undeniably the key to success when it comes to short-term investing or trading. But it isn't easy to ensure the sustainability of a trend and profit from it.Often, the direction of a stock's price movement reverses quickly after taking a position in it, making investors incur a short-term capital loss. So, it's important to ensure that there are enough factors -- such as sound fundamentals, positive earnings estimate revisions, etc. -- ...

HNI (HNI) came out with quarterly earnings of $0.37 per share, beating the Zacks Consensus Estimate of $0.18 per share. This compares to earnings of $0.13 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 105.56%. A quarter ago, it was expected that this maker of office furniture and fireplaces would post earnings of $0.80 per share when it actually produced earnings of $0.98, delivering a surprise of 22.50%.Over the last four q ...

HNI Corporation 600 East Second Street, Muscatine, Iowa 52761, Tel 563 272 7400, Fax 563 272 7347, www.hnicorp.com News Release • Excellent earnings growth. First quarter earnings per share of $0.37 was up considerably on both a GAAP and non-GAAP basis versus the prior year despite an 8.1 percent year-over-year organic revenue decline, which was primarily driven by continued housing market softness. GAAP to non-GAAP reconciliations follow the financial statements in this release. • Profit transformation act ...

Most of us have heard the dictum "the trend is your friend." And this is undeniably the key to success when it comes to short-term investing or trading. But it isn't easy to ensure the sustainability of a trend and profit from it.The trend often reverses before exiting the trade, leading to a short-term capital loss for investors. So, for a profitable trade, one should confirm factors such as sound fundamentals, positive earnings estimate revisions, etc. that could keep the momentum in the stock alive.Our " ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) HNI Corporation provides workplace furnishings and residential building products, with fiscal 2023 net sales of **$2.4 billion**, significantly impacted by the Kimball International acquisition - HNI Corporation operates in two reportable segments: workplace furnishings and residential building products[20](index=20&type=chunk) Fiscal 2023 Net Sales by Segment | Segment | Net Sales (Billion USD) | Percentage of Total | | :--- | :--- | :--- | | Workplace Furnishings | $1.7 | 71% | | Residential Building Products | $0.7 | 29% | | **Total** | **$2.4** | **100%** | - On June 1, 2023, the Corporation acquired Kimball International, Inc. in a cash and stock transaction valued at **$503.7 million**[22](index=22&type=chunk) - The company's strategy is based on a customer-first mindset, creating effortless winning experiences, and owning operational excellence through Rapid Continuous Improvement (RCI)[33](index=33&type=chunk)[34](index=34&type=chunk) [Markets](index=4&type=section&id=Item%201.%20Business%20-%20Markets) The company competes in the workplace furnishings market through contract and SMB channels and is the North American leader in hearth products - The North American workplace furnishings market consists of two primary channels: the contract channel (large corporations) and the small and medium-sized business (SMB) channel, where HNI is a market leader[25](index=25&type=chunk)[27](index=27&type=chunk) - Key competitors in workplace furnishings include MillerKnoll, Inc., Steelcase, Inc., and Haworth, Inc[29](index=29&type=chunk) - HNI is the North American market leader in hearth products, which are sold for both new home construction and renovation of existing homes[30](index=30&type=chunk) - Competitors in the hearth products market include Travis Industries, Inc., Innovative Hearth Products, and Wolf Steel Ltd. (Napoleon)[31](index=31&type=chunk) [Sales](index=6&type=section&id=Item%201.%20Business%20-%20Sales) Workplace furnishings are sold under brands like HON and Kimball, while residential products include Heatilator and Heat & Glo - Workplace furnishings are sold under multiple brands, including HON®, Allsteel®, Gunlocke®, and the newly acquired Kimball® and National® brands[36](index=36&type=chunk) - Residential building products are sold under widely recognized brands such as Heatilator®, Heat & Glo®, and Majestic®[39](index=39&type=chunk) - In fiscal 2023, the Corporation's five largest customers represented approximately **17% of its consolidated net sales**, with no single customer accounting for **10% or more**[41](index=41&type=chunk) [Resources](index=8&type=section&id=Item%201.%20Business%20-%20Resources) HNI operates manufacturing facilities in the U.S., India, and Mexico, holding numerous patents and trademarks critical to its business - Manufacturing facilities for workplace furnishings are in Georgia, Indiana, Iowa, Kentucky, New York, North Carolina, India, and Mexico, while hearth products are manufactured in Iowa, Minnesota, Pennsylvania, and Vermont[42](index=42&type=chunk) - As of December 30, 2023, the Corporation owned **183 U.S.** and **127 foreign patents**, and **281 U.S.** and **420 foreign trademark registrations**[46](index=46&type=chunk) - The company considers the HON®, Allsteel®, Kimball®, National®, Heat & Glo®, and Heatilator® trademarks to be material to its business[48](index=48&type=chunk) [Human Capital and Sustainability](index=9&type=section&id=Item%201.%20Business%20-%20Human%20Capital%20and%20Sustainability) HNI employed approximately 8,200 people as of December 2023, committed to diversity, development, and 100% renewable electricity by 2030 - The Corporation employed approximately **8,200 persons** as of December 30, 2023[52](index=52&type=chunk) - HNI has committed to **100% renewable electricity annually by 2030** and has set science-based carbon emission reduction goals[51](index=51&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces economic, strategic, operational, financing, legal, and regulatory risks, including challenges from the Kimball International acquisition - **Industry/Economic Risks:** Unfavorable economic conditions, such as lower office occupancy, high interest rates, and slowdowns in homebuilding, could decrease demand for the Corporation's products[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - **Strategic/Operational Risks:** The company may not achieve the intended benefits of its merger with Kimball International due to integration challenges, alongside risks like supply chain disruptions, labor shortages, and potential cybersecurity threats[90](index=90&type=chunk)[85](index=85&type=chunk)[113](index=113&type=chunk) - **Financing Risks:** The company incurred significant new indebtedness to finance the Kimball International merger, which contains restrictive covenants and increases exposure to rising interest rates[96](index=96&type=chunk)[124](index=124&type=chunk)[127](index=127&type=chunk) - **Legal/Regulatory Risks:** The business is subject to extensive environmental regulations, potential product defect liabilities, and risks related to protecting its intellectual property, particularly key trademarks[115](index=115&type=chunk)[116](index=116&type=chunk)[119](index=119&type=chunk) [Unresolved Staff Comments](index=25&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments - None[131](index=131&type=chunk) [Cybersecurity](index=25&type=section&id=Item%201C.%20Cybersecurity) HNI's cybersecurity program, aligned with NIST and overseen by the Audit Committee, has not identified material threats to date - The cybersecurity risk management program is generally based on the framework established by the National Institute of Standards and Technology (NIST)[132](index=132&type=chunk) - Oversight of cybersecurity risks is delegated to the Audit Committee of the Board of Directors, with day-to-day management handled by the Chief Information and Digital Officer (CIDO)[135](index=135&type=chunk)[137](index=137&type=chunk) - The Corporation has not identified any cybersecurity threats that have materially affected or are reasonably likely to affect the Corporation[140](index=140&type=chunk) [Properties](index=27&type=section&id=Item%202.%20Properties) The company operates approximately 11.6 million square feet of well-maintained facilities in the U.S., India, and Mexico Principal Manufacturing and Distribution Facilities (100,000 sq. ft. or larger) | Location | Workplace Furnishings Facilities | Residential Building Products Facilities | Owned Sq. Ft. (thousands) | Leased Sq. Ft. (thousands) | | :--- | :--- | :--- | :--- | :--- | | Muscatine, IA | 6 | — | 2,211 | — | | Jasper, IN | 5 | — | 1,223 | — | | Santa Claus, IN | 2 | — | 684 | — | | Lake City, MN | — | 2 | 342 | — | | Other U.S. | 11 | 6 | 2,669 | 1,554 | | Outside U.S. | 2 | — | 355 | 540 | [Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The Corporation is involved in various legal proceedings, but management expects no material adverse effect on its financial condition - After consultation with legal counsel, the Corporation does not expect liabilities from various disputes and legal proceedings to have a material adverse effect on its financial condition or results[146](index=146&type=chunk) [Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Corporation - Not applicable[147](index=147&type=chunk) [Information about our Executive Officers](index=28&type=section&id=Table%20I%20-%20Information%20about%20our%20Executive%20Officers) This section provides a table listing the Corporation's executive officers, their ages, positions, and business experience - The table lists key executive officers including Jeffrey D. Lorenger (Chairman, President, and CEO), Marshall H. Bridges (SVP and CFO), and presidents of the major business units like The HON Company and Allsteel LLC[149](index=149&type=chunk) Part II [Market for Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Shareholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) HNI common stock trades on NYSE, with a regular dividend policy and an active share repurchase program - The Corporation's common stock is listed on the New York Stock Exchange (NYSE) under the trading symbol HNI[151](index=151&type=chunk) - As of December 30, 2023, **$233.5 million** was authorized and available for the repurchase of shares[154](index=154&type=chunk) Share Repurchase Activity - Q4 2023 | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | 10/01/23 - 10/28/23 | — | $ — | | 10/29/23 - 11/25/23 | — | $ — | | 11/26/23 - 12/30/23 | 10.0 | $41.98 | | **Total** | **10.0** | | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, net sales increased to **$2.434 billion** due to the Kimball acquisition, while net income decreased due to acquisition and impairment costs - Significant developments in 2023 included the acquisition of Kimball International and the divestiture of Poppin Furniture, Inc[160](index=160&type=chunk) Consolidated Results of Operations (2023 vs. 2022) | Metric | 2023 (in millions) | 2022 (in millions) | Change | Change (bps) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,434.0 | $2,361.8 | 3.1% | | | Gross profit | $948.3 | $834.9 | 13.6% | | | Gross profit % | 39.0% | 35.4% | | 360 bps | | Operating income | $90.3 | $155.2 | (41.8)% | | | Operating income % | 3.7% | 6.6% | | -290 bps | | Net income attributable to HNI | $49.2 | $123.9 | (60.3)% | | - The decrease in net income was primarily due to a **$50.4 million** pre-tax gain on the sale of Lamex in 2022, compared to **$41.2 million** in acquisition costs and **$31.0 million** in impairment charges in 2023[162](index=162&type=chunk) [Segment Results](index=34&type=section&id=Item%207.%20MD%26A%20-%20Segment%20Results) Workplace Furnishings sales increased due to the Kimball acquisition, while Residential Building Products sales decreased due to housing market weakness Workplace Furnishings Segment Performance (2023 vs. 2022) | Metric | 2023 (in millions) | 2022 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net sales | $1,740.3 | $1,486.2 | 17.1% | | Operating profit | $68.6 | $3.4 | NM | | Operating profit % | 3.9% | 0.2% | 370 bps | - The increase in Workplace Furnishings sales was driven by the **$361.4 million** impact from the Kimball International acquisition, partially offset by a **$46.9 million** decrease from the Lamex divestiture[179](index=179&type=chunk) Residential Building Products Segment Performance (2023 vs. 2022) | Metric | 2023 (in millions) | 2022 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net sales | $693.7 | $875.6 | (20.8%) | | Operating profit | $116.6 | $158.7 | (26.5%) | | Operating profit % | 16.8% | 18.1% | -130 bps | - The sales decrease in Residential Building Products was driven by lower volume in both new construction and existing home channels due to housing market weakness and reduced remodeling activity[181](index=181&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Item%207.%20MD%26A%20-%20Liquidity%20and%20Capital%20Resources) Operating cash flow significantly increased to **$267.5 million** in 2023, while investing activities were dominated by the Kimball acquisition - Cash from operating activities increased to **$267.5 million** in 2023 from **$81.2 million** in 2022, mainly due to favorable changes in working capital, including lower inventory[185](index=185&type=chunk) - Investing activities included **$369.7 million** for the Kimball International acquisition and capital expenditures of **$79.1 million**[187](index=187&type=chunk)[188](index=188&type=chunk) - Financing activities included borrowing **$300 million** via a term loan to support the Kimball acquisition and paying **$58.5 million** in dividends[189](index=189&type=chunk)[190](index=190&type=chunk) - The Corporation anticipates capital expenditures for 2024 to be in an estimated range of **$90 million to $100 million**[187](index=187&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Item%207.%20MD%26A%20-%20Critical%20Accounting%20Policies%20and%20Estimates) Goodwill and Intangible Assets and Self-Insurance are critical accounting policies, with a **$27.6 million** goodwill impairment charge in 2023 - Goodwill is tested for impairment annually in the fourth quarter, with a quantitative test in 2023 for a small workplace furnishings reporting unit resulting in a pretax goodwill impairment charge of **$27.6 million**[205](index=205&type=chunk)[374](index=374&type=chunk) - The company is primarily self-insured for general, auto, product liability, and workers' compensation, with estimated liabilities of **$24.8 million** as of December 30, 2023, determined by actuarial valuations[214](index=214&type=chunk) - The acquisition of Kimball International resulted in the recognition of approximately **$110 million** in intangible assets, with the largest being customer lists valued at **$47 million**[212](index=212&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Corporation faces market risk from variable-rate debt and material price changes, with foreign currency exposure not significant - The Corporation has variable interest rate risk on its **$425 million** revolving credit facility and **$300 million** term loan, with an interest rate swap fixing the rate on **$100 million** of the term loan at **4.7%**[220](index=220&type=chunk) - The Corporation is exposed to price risk for direct materials such as steel, plastics, textiles, and wood particleboard[223](index=223&type=chunk) - Foreign currency exposure is currently not significant[222](index=222&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%209A.%20Controls%20and%20Procedures) Disclosure controls were effective as of December 2023, but Kimball International was excluded from the internal control assessment due to acquisition timing - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of December 30, 2023[227](index=227&type=chunk) - Kimball International was excluded from the annual assessment of the effectiveness of internal control over financial reporting due to the timing of the acquisition[231](index=231&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of 2023 that materially affected, or are reasonably likely to materially affect, internal controls[229](index=229&type=chunk) [Other Information](index=43&type=section&id=Item%209B.%20Other%20Information) Several directors and officers adopted Rule 10b5-1 trading arrangements during the fourth quarter of 2023 - During the fourth quarter of 2023, five directors and officers, including Donna D. Meade, Larry B. Porcellato, Miguel M. Calado, Vincent P. Berger, and Mary A. Bell, adopted Rule 10b5-1 trading arrangements[232](index=232&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=44&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information required for this item is incorporated by reference from the company's Definitive Proxy Statement for the Annual Meeting on May 16, 2024[236](index=236&type=chunk) [Executive Compensation](index=44&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the 2024 Proxy Statement - Information required for this item is incorporated by reference from the company's 2024 Proxy Statement[239](index=239&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=44&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the 2024 Proxy Statement - Information required for this item is incorporated by reference from the company's 2024 Proxy Statement[240](index=240&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=44&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement - Information required for this item is incorporated by reference from the company's 2024 Proxy Statement[241](index=241&type=chunk) [Principal Accountant Fees and Services](index=44&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) KPMG LLP is the independent registered public accounting firm, with fee information incorporated by reference from the 2024 Proxy Statement - The Corporation's independent registered public accounting firm is KPMG LLP, Chicago, IL[242](index=242&type=chunk) - Information regarding accountant fees and services is incorporated by reference from the company's 2024 Proxy Statement[243](index=243&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=45&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed as part of the Form 10-K report, including merger and credit agreements - This section lists all financial statements, schedules, and exhibits filed with the report, including the Consolidated Statements of Comprehensive Income, Balance Sheets, Equity, and Cash Flows[246](index=246&type=chunk) [Management Report on Internal Control Over Financial Reporting](index=49&type=section&id=Management%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management concluded that HNI maintained effective internal control over financial reporting as of December 2023, excluding Kimball International - Management concluded that HNI Corporation maintained effective internal control over financial reporting as of December 30, 2023[262](index=262&type=chunk) - The assessment of internal controls excluded Kimball International, which was acquired in the second quarter of 2023, representing approximately **32% of consolidated total assets** and **15% of net sales** for the year[260](index=260&type=chunk) [Report of Independent Registered Public Accounting Firm](index=50&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on HNI's financial statements and internal controls, identifying critical audit matters related to Kimball acquisition intangibles and self-insurance liabilities - The auditor, KPMG LLP, issued an unqualified opinion on both the consolidated financial statements and the effectiveness of internal control over financial reporting[266](index=266&type=chunk) - The audit of internal control over financial reporting excluded an evaluation of Kimball International, consistent with management's exclusion[267](index=267&type=chunk) - Critical Audit Matters included: 1) The fair value of the customer relationship intangible asset acquired in the Kimball acquisition, due to the subjective judgment required for the customer retention rate assumption 2) The valuation of workers' compensation and product liabilities, due to the inherent uncertainty in estimating ultimate settlement costs[276](index=276&type=chunk)[279](index=279&type=chunk)

Financial Data and Key Metrics Changes - For Q4 2023, non-GAAP earnings per share increased by 56% year-over-year despite a 6% organic revenue decline, primarily due to housing market weakness [12][14] - The company achieved a gross leverage ratio of 1.9 times, down from over two times just two quarters after the Kimball International acquisition [39][40] - Non-GAAP EPS for 2023 increased by more than 20% year-over-year, building on a 35% increase in the prior year [14] Business Line Data and Key Metrics Changes - In Workplace Furnishings, the non-GAAP operating profit margin for legacy HNI was 7.2%, representing a 480 basis point year-over-year expansion [6][12] - The residential building products segment saw a non-GAAP operating margin improvement to over 22%, a 240 basis point increase year-over-year, despite a 13% revenue decline [21][22] - Orders from legacy contract customers were down 2% for the year but were flat in Q4 year-over-year, indicating stabilization [9][37] Market Data and Key Metrics Changes - The housing market showed signs of improvement, particularly in single-family permits and starts, which grew healthily in Q4 [23] - The company expects low single-digit organic revenue growth in both Workplace Furnishings and residential building products for 2024 [24] - The addition of Kimball International is projected to contribute $215 million to $225 million in incremental revenue in 2024 [25] Company Strategy and Development Direction - The company is focused on margin expansion in Workplace Furnishings and driving high-margin revenue growth in residential building products [31] - The integration of Kimball International is ahead of schedule, with expected annual cost synergies now projected at $35 million [30][36] - The company plans to continue investing in productivity improvements and cost reduction initiatives [7][16] Management's Comments on Operating Environment and Future Outlook - Management noted that demand remains choppy but stable, with encouraging trends in return-to-office metrics and lease expirations [17][18] - The company anticipates continued margin expansion and profitability improvements despite macroeconomic pressures [16][54] - Management expressed confidence in the long-term demand fundamentals for housing and renovation activities [38] Other Important Information - The company exceeded its initial $30 million corporate-wide cost savings target, achieving a run rate savings of $50 million by the end of 2023 [32] - The company is committed to reinvesting in the business, funding dividends, and pursuing share buybacks and M&A opportunities [43] Q&A Session Summary Question: Can you help us put together the moving pieces for 2024? - Management expects EPS growth in the high single digits to low teens, driven by margin expansion and accretion from Kimball International [48] Question: What are your expectations for the Residential Building Products segment? - Management anticipates new construction growth in the mid-single digits, with remodel retrofit expected to improve gradually [78] Question: Are you seeing any pickup in customer activity in the office market? - Management noted stabilization in the office market, with positive signs for small project business and furniture events [71][73] Question: How do you see the normal seasonality of earnings and revenues returning? - Management confirmed a return to normal seasonality, expecting roughly 30% of profit in the first half and 70% in the second half [87] Question: What are your long-term strategic plans post-Kimball International acquisition? - Management sees significant runway for profit and margin expansion, focusing on integrating Kimball International and driving growth in high-margin segments [88][89]

[HNI Corporation Earnings Report Overview](index=1&type=section&id=HNI%20Corporation%20Earnings%20Report%20Overview) HNI Corporation reported strong full-year 2023 sales and significant Q4 earnings growth, driven by the Kimball International acquisition and margin expansion across segments [Executive Summary](index=1&type=section&id=Executive%20Summary) HNI Corporation reported full-year 2023 sales of $2.434 billion and net income of $49.2 million, with non-GAAP diluted EPS increasing to $2.65, and Q4 sales up 19% year-over-year with non-GAAP diluted EPS at $0.98 | Metric | 2023 (GAAP) | 2022 (GAAP) | Change | | :----- | :---------- | :---------- | :----- | | Sales | $2.434 billion | $2.361 billion | 3.1% | | Net Income | $49.2 million | $123.9 million | (60.3%) | | GAAP EPS Diluted | $1.09 | $2.94 | (62.9%) | | Non-GAAP EPS Diluted | $2.65 | $2.20 | 20.5% | | Metric | Q4 2023 (GAAP) | Q4 2022 (GAAP) | Change | | :----- | :------------- | :------------- | :----- | | Sales | $679.8 million | $568.9 million | 19.5% | | Net Income | $22.7 million | $16.3 million | 39.2% | | GAAP EPS Diluted | $0.48 | $0.39 | 23.1% | | Non-GAAP EPS Diluted | $0.98 | $0.63 | 55.6% | [Fourth Quarter Highlights](index=1&type=section&id=Fourth%20Quarter%20Highlights) The fourth quarter saw strong earnings growth, significant margin expansion in Workplace Furnishings, and the Kimball International acquisition proving solidly accretive with increased synergy expectations - Strong earnings growth: Q4 GAAP EPS increased **23% year-over-year**, and non-GAAP diluted EPS was **56% higher** despite a **6.4% year-over-year organic revenue decline**[6](index=6&type=chunk) - Workplace Furnishings margin expansion: Segment GAAP operating margin expanded **410 basis points** year-over-year, with Legacy HNI non-GAAP operating profit margin increasing **480 basis points** due to price-cost improvement, productivity gains, and cost savings initiatives[6](index=6&type=chunk) - Kimball International (KII) accretion: KII added approximately **$16 million** to fourth quarter operating profit (**11% operating profit margin**) and an estimated **$0.07** to fourth quarter non-GAAP EPS, with total annual cost synergies now expected to be **$35 million**[6](index=6&type=chunk) - Residential Building Products margins improve: Segment GAAP operating margin expanded **310 basis points** year-over-year to **22.3%**, and non-GAAP operating margin improved **240 basis points** to **22.3%** despite a **13.1% year-over-year revenue decline**[6](index=6&type=chunk)[7](index=7&type=chunk) - Balance sheet strengthened: Reduced debt by **$73 million** in the fourth quarter and by **$162 million** during the second half of 2023, ending Q4 with **$436 million** in total debt and a gross leverage ratio of **1.9x**[7](index=7&type=chunk) [Financial Performance - Fourth Quarter 2023](index=3&type=section&id=Financial%20Performance%20-%20Fourth%20Quarter%202023) HNI Corporation's Q4 2023 financial performance was significantly boosted by the Kimball International acquisition, leading to increased sales and improved operating margins [Consolidated Fourth Quarter Financial Performance (GAAP & Non-GAAP)](index=3&type=section&id=Consolidated%20Fourth%20Quarter%20Financial%20Performance%20(GAAP%20%26%20Non-GAAP)) HNI Corporation's Q4 2023 consolidated financial performance showed significant growth in net sales and operating income, both on a GAAP and non-GAAP basis, largely driven by the Kimball International acquisition | Metric | Q4 2023 (GAAP) | Q4 2022 (GAAP) | Change (GAAP) | Q4 2023 (Non-GAAP) | Q4 2022 (Non-GAAP) | Change (Non-GAAP) | | :-------------------- | :------------- | :------------- | :-------------- | :----------------- | :----------------- | :------------------ | | Net Sales | $679.8M | $568.9M | 19.5% | $679.8M | $568.9M | 19.5% | | Gross Profit % | 40.2% | 36.6% | 360 bps | 40.2% | 37.4% | 280 bps | | Operating Income | $30.7M | $23.0M | 33.6% | $66.1M | $36.2M | 82.6% | | Operating Income % | 4.5% | 4.0% | 50 bps | 9.7% | 6.4% | 330 bps | | EPS – diluted | $0.48 | $0.39 | 23.1% | $0.98 | $0.63 | 55.6% | [Impact of Kimball International Acquisition on Q4](index=4&type=section&id=Impact%20of%20Kimball%20International%20Acquisition%20on%20Q4) The Kimball International acquisition significantly boosted HNI's consolidated Q4 performance, contributing substantially to net sales, gross profit, and operating income, despite a decline in Legacy HNI's organic sales | Metric | Legacy HNI (GAAP) | KII (GAAP) | Consolidated HNI (GAAP) | Consolidated HNI (Q4 2022 GAAP) | Legacy HNI (Non-GAAP) | KII (Non-GAAP) | Consolidated HNI (Non-GAAP) | Consolidated HNI (Q4 2022 Non-GAAP) | | :-------------------- | :---------------- | :--------- | :---------------------- | :-------------------------- | :-------------------- | :--------- | :---------------------- | :-------------------------- | | Net Sales | $532.4M | $147.4M | $679.8M | $568.9M | $532.4M | $147.4M | $679.8M | $568.9M | | Net Sales Change YoY | (6.4%) | N/A | 19.5% | N/A | (6.4%) | N/A | 19.5% | N/A | | Gross Profit % | 39.8% | 41.6% | 40.2% | 36.6% | 39.8% | 41.6% | 40.2% | 37.4% | | Operating Income | $14.5M | $16.2M | $30.7M | $23.0M | $50.3M | $15.7M | $66.1M | $36.2M | | Operating Income % | 2.7% | 11.0% | 4.5% | 4.0% | 9.5% | 10.7% | 9.7% | 6.4% | | EPS - diluted | N/A | N/A | $0.48 | $0.39 | $0.91 | N/A | $0.98 | $0.63 | [Fourth Quarter Summary Comments](index=4&type=section&id=Fourth%20Quarter%20Summary%20Comments) Consolidated net sales increased by **19.5%** due to the Kimball International acquisition, offsetting a **6.4% organic sales decrease**, while gross profit margin expanded by **360 basis points** - Consolidated net sales increased **19.5%** from the prior-year quarter to **$679.8 million**, with the acquisition of Kimball International increasing sales by **$147.4 million**, while organic sales decreased **6.4%**[13](index=13&type=chunk) - Gross profit margin expanded **360 basis points** compared to the prior-year quarter, driven by favorable price-cost, improved net productivity, lower restructuring costs, and the impact of the Kimball International acquisition[13](index=13&type=chunk) - Restructuring and impairment charges totaled **$31.4 million** in the current-year quarter, primarily from goodwill and intangible asset impairments related to small business units in the Workplace Furnishings segment[13](index=13&type=chunk) - Non-GAAP net income per diluted share was **$0.98** compared to **$0.63** in the prior-year quarter, primarily driven by improved net productivity, favorable price-cost, lower core SG&A, and the net impact of the Kimball International acquisition[13](index=13&type=chunk) - The GAAP tax rate in the current-year period was **0.0 percent**, impacted by the effects of the Kimball International acquisition and impairment charges, while non-GAAP net income per diluted share included an effective tax rate of **19.5 percent**[14](index=14&type=chunk) [Financial Performance - Full Year 2023](index=5&type=section&id=Financial%20Performance%20-%20Full%20Year%202023) HNI Corporation's full-year 2023 financial performance showed sales growth driven by acquisitions, with non-GAAP metrics indicating improved profitability despite GAAP declines [Consolidated Full Year Financial Performance (GAAP & Non-GAAP)](index=5&type=section&id=Consolidated%20Full%20Year%20Financial%20Performance%20(GAAP%20%26%20Non-GAAP)) For the full year 2023, HNI Corporation reported a **3.1%** increase in GAAP net sales, reaching **$2.434 billion**, with non-GAAP operating income and diluted EPS showing significant growth | Metric | FY 2023 (GAAP) | FY 2022 (GAAP) | Change (GAAP) | FY 2023 (Non-GAAP) | FY 2022 (Non-GAAP) | Change (Non-GAAP) | | :-------------------- | :------------- | :------------- | :--------------

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (State of Incorporation) Iowa 42-0617510 600 East Second Street P.O. Box 1109 Muscatine , Iowa 52761-0071 ( 563 ) 272-7400 (I.R.S. Employer Identification No.) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock HNI New York Stock Exchange ...

Financial Data and Key Metrics Changes - Non-GAAP EPS grew by 6% year-over-year despite a 15% decline in organic sales, indicating effective profit transformation efforts [4][19] - Non-GAAP gross margin expanded by 270 basis points and non-GAAP operating margin expanded by 150 basis points, driven by the profit transformation plan [17][19] - The company ended Q2 2023 with a debt to EBITDA ratio of 2.3 times, which would have been approximately 1.6 times if private notes were repaid [13][27] Business Line Data and Key Metrics Changes - Workplace Furnishings segment saw a 3% year-over-year growth in orders for the first half of 2023, with non-GAAP operating margin expanding by 550 basis points to 8.5% [7][19] - Residential Building Products segment experienced a 16% decline in orders compared to Q2 2022, but this was an improvement from a 37% decline in Q1 2023 [10][46] - The company expects Residential Building Products revenue to decline in the high teens during the second half of 2023, with a moderation in year-over-year declines [11][46] Market Data and Key Metrics Changes - The company noted strong demand trends in Workplace Furnishings, particularly among small to midsized customers, which are expected to continue [7][39] - The housing market remains undersupplied, with demographic trends indicating robust future construction growth, despite current volume pressures [42][49] Company Strategy and Development Direction - The company is focused on profit transformation and margin improvement, particularly in Workplace Furnishings, and is committed to expanding margins in both legacy HNI and Kimball International [19][49] - The divestiture of Poppin is expected to enhance annual operating profit by $20 million while reducing annual revenue by $56 million, allowing for a clearer focus on core business strengths [21][28] - The company is investing in initiatives aimed at expanding market presence, including new product innovation and online capabilities [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the benefits of the Kimball International acquisition, anticipating significant synergies and improved market positioning [8][28] - The company expects organic revenue growth rates in Workplace Furnishings to be in the low single-digits for the second half of 2023, with a positive outlook for the fourth quarter [24][26] - Management acknowledged the challenges in the Residential Building Products segment but remains optimistic about long-term growth prospects [49] Other Important Information - The company has increased its cost reduction efforts to a total of $40 million to $45 million, up from $35 million previously announced [22] - The divestiture of Poppin is expected to negatively impact non-GAAP EPS until finalized, with an estimated operating loss of $3.5 million to $4 million for the quarter [12] Q&A Session Summary Question: Can you discuss demand trends in Workplace Furnishings? - Management noted solid positive orders in Workplace Furnishings since the start of Q3, running ahead of the first half rate of 3% [31] Question: What is the target margin for Residential Building Products? - Management indicated that they are focused on improving profitability in the Residential Building Products segment, with expectations for improved margins in the future [32] Question: What drove the decision to divest Poppin? - The decision was made to streamline the business and focus on core profitable growth areas, as Poppin's operating losses masked the strength of Kimball International's core businesses [58][68] Question: How do you expect margins to trend in the second half? - Management expects margins to improve significantly in the second half, aiming for mid to upper teens range [52][66] Question: What are the expectations for the impact of Kimball International? - The company anticipates Kimball International to add $290 million to $320 million in revenue and $0.10 to $0.15 to non-GAAP EPS in the second half, excluding Poppin [44]