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 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 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 (HNI) - 2023 Q4 - Earnings Call Transcript