HNI Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 8 speakers on the call.

Operator

Day, everyone, and welcome to the HNI Corporation's 2nd Quarter Fiscal 2023 Results Conference Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the conference over to Mr.

Operator

Matt McCall. Please go ahead, sir.

Speaker 1

Good morning. My name

Speaker 2

is Matt McCall. I'm Vice President, Investor Relations and Corporate Development for HNI Corporation. Thank you for joining us to discuss our Q2 fiscal 2023 With me today are Jeff Lorenger, Chairman, President and CEO and Marshall Bridges, Senior Vice President and CFO. Copies of our financial news release and non GAAP reconciliations are posted on our website. Statements made during this call that are not strictly historical facts are forward looking statements, which are subject to known and unknown risks.

Speaker 2

Actual results could differ materially. The financial news release posted on our website includes additional factors that could affect actual results. The corporation assumes no obligation to update any forward looking statements made during the call. I'm now pleased to turn the call over to Jeff Lorenger. Jeff?

Speaker 3

Thanks, Matt. Good morning and thank you for joining us. Our Q2 results exceeded our expectations, demonstrating the momentum of our strategies, our market positions and our recent actions to streamline our businesses. On the call today, I will highlight 3 key topics. 1st, Our profit transformation efforts in workplace furnishings are ahead of schedule and help drive non GAAP profit growth despite lower volume.

Speaker 3

Our workplace furnishings margins have been reset. 2nd, since closing the Kimball International acquisition, We have become even more confident in the benefits of the combination. In addition, we have signed an agreement to divest Poppin and anticipate closing in the Q3. Once closed, the exit will increase our projected accretion and unmask the strength of Kimball International's core business. And 3rd, we put actions in place to support near term profitability in residential building products, while staying focused on our long term strategic investments.

Speaker 3

Following those highlights, Marshall will review our outlook. I will then conclude with some general closing commentary before we open the call to your questions. Moving to the first topic, our profit transformation efforts in workplace furnishings are ahead of schedule as we grew non GAAP profit despite lower volume. When compared to the prior year period and excluding the Kimball International acquisition, Non GAAP EPS grew 6% despite 15% lower organic sales. Non GAAP gross margin expanded 270 basis points and non GAAP operating margin expanded 150 basis points.

Speaker 3

The profit improvement was driven by our Transformation Plan in Workplace Furnishings. That plan remains unchanged and consists of 4 primary actions, which are driving sustained margin improvement. First, we are driving increased productivity. Our productivity efforts have exceeded our near term targets as reflected in our Q2 results and we expect an even greater impact in the second half. We are also investing to make our operational footprint more resilient and efficient, primarily through our new facility in Mexico.

Speaker 3

Our future results will greatly benefit from these investments as they mature. 2nd, we have streamlined our cost structure. We continue to expect $25,000,000 of our previously announced cost savings initiative to impact workplace furnishings this year.

Speaker 4

3rd,

Speaker 3

we continue to simplify our business, focusing on our most attractive markets. The actions we took over the past year to divest our China business and rationalize our e commerce offering are examples of simplification efforts that are currently improving our profitability. And 4th, our efforts to improve price cost continue to provide a benefit. As a result of these actions, 2nd quarter non GAAP operating margin in workplace furnishings expanded 550 basis points to 8.5%, excluding the impact of the Kimball International acquisition. That was the highest margin since the Q3 of 2019 and it was the 5th consecutive quarterly period of year over year non GAAP profit improvement in workplace furnishings.

Speaker 3

Our profit transformation plan does not depend upon volume growth. However, we are encouraged by the demand trends in workplace furnishings. Segment orders for the 1st 6 months of 2023 grew approximately 3% year over year. We continue to see strong performance in the small to midsized customer segment where we have an unmatched competitive position. Organic orders from the SMB customer group were up approximately 10% during the first half, while orders from contract customers Declined at a mid single digit rate over the same period.

Speaker 3

The improving workplace furnishings order rates reflect trends associated with Employment growth with small to midsize offices, population shifts to secondary geographies and increased furniture events driven by the adoption of hybrid work models and expiring leases. These trends all align with our strong market coverage and our product and price point breadth and depth positions that will be further enhanced through our combination with Kimball International. Moving to my second topic. Since closing, we have become even more confident in the benefits of our combination with Kimball International. The addition of KII will strengthen our business.

Speaker 3

Together, we are strongly positioned to lead in the evolving workplace environment with an expanded presence in secondary geographies and leading positions in ancillary products. And the cultural fit between the organizations is strong and both sides are beginning to identify and unlock new opportunities for profit growth. We now see the previously announced Annual run rate synergy amount of $25,000,000 as a floor with strong potential for more. Additionally, we have signed an agreement to sell Poppin, which was acquired by KII in 2020. Based on trailing 12 month results, the sale of Poppin is estimated to increase annual operating profit by $20,000,000 while reducing annual revenue by $56,000,000 The divestiture is expected to be closed during the Q3.

Speaker 3

Poppins operating losses have masked the strength of KII's core businesses, which collectively generate an operating margin over 10%. My third topic is we have put actions in place to support near term profitability in residential building products, while we stay focused on our long term strategic investments. Our Residential Building Products segment continues to face volume pressure in line with the general weakness the broader housing market. In response to the volume declines, we have expanded our cost reduction efforts to support segment profitability. Specifically, these actions will lower 2023 segment expenses by an additional $5,000,000 to $10,000,000 When combined with our previous actions, our HNI wide cost reduction efforts now total $40,000,000 to $45,000,000 up from the $35,000,000 previously announced $15,000,000 to $20,000,000 of which will impact residential building products this year.

Speaker 3

Our cost reduction efforts along with the return of normal seasonality patterns will result in improved segment profitability beginning in Q3 of this year. In addition, recent demand trends have shown improvement. 2nd quarter orders in the segment decreased 16% versus Q2 2022. This is a significant improvement from the minus 37% in the Q1 of 2023. Furthermore, comps get easier in the second half of this year as we compare against the second half twenty twenty two when orders were down 12%.

Speaker 3

Short term notwithstanding, the intermediate to long term demand dynamics remain encouraging for this segment as we are well positioned for sustained revenue and profit growth. U. S. Housing is undersupplied, demographic trends point to robust future construction growth and there are indications that renovation activity will accelerate as existing homeowners are less likely to relocate given the current mortgage environment with many having attractive lower interest rates. In addition to strong market fundamentals, we have unique growth opportunities.

Speaker 3

We continue to invest in our initiatives aimed at expanding the market, including in the areas of category awareness, new product innovation, online capabilities and the expansion of our wholly owned installing distributor footprint. The market's strong fundamentals, our unique growth opportunities and our category leading positions point to the return of strong growth beyond 2023. I will now turn the call over to Marshall to discuss our outlook. Marshall?

Speaker 4

Thanks, Jeff. Let's start with demand where we have seen trends generally improve over the past quarter. In Workplace Furnishings, we organic revenue growth rates in the low single digits for the second half of twenty twenty three. That outlook is consistent with first half order patterns and excludes Kimball International. In Residential Building Products, we expect year over year declines to moderate in the second half due to lower prior year comparisons, improved trends in new construction and moving past the normalization of inventory in the channel.

Speaker 4

Specifically, we expect residential Boiling Products revenue to decline at a rate in the high teens during the second half of Let's shift to the financial benefits expected from Kimball International. We expect KII to add $290,000,000 to $320,000,000 Revenue to the second half excluding Poppin. We also project KII to add $0.10 to $0.15 to 2nd Half non GAAP EPS, again, excluding Poppin. A few notes on that projection. First, it's based on our Current view of purchase accounting, which is not yet final.

Speaker 4

2nd, it includes the benefits of synergies, which we expect will be at an annual run rate of $10,000,000 in the second half. And third, the non GAAP EPS benefit is and expected to be greater in the Q4. Regarding pop in, it will negatively impact non GAAP EPS until the divestiture and finalized, which we expect to occur prior to the end of Q3. Specifically, we estimate POPPIN $7,000,000 to $9,000,000 of revenue in the quarter with an expected operating loss of $3,500,000 to $4,000,000 I should note that POPPIN will be included in our non GAAP 3rd quarter results like it was in the 2nd quarter. All right.

Speaker 4

Let's shift to second half profit. We expect our profit transformation actions to continue to profit and margin improvement in our legacy workplace furnishings business. Those drivers and the net benefit of KAI and POP and that I just covered are expected to more than offset the negative impact from lower volume in residential building products that's being driven by the weaker housing market. Altogether, we expect profit growth in the second half of twenty twenty three in the Workplace Furnishing segment and for H and I overall. Let's now cover our 3rd quarter outlook.

Speaker 4

We expect organic workplace furnishings revenue to be approximately flat to slightly up compared to the prior year. When including Kimball International and Poppin, we expect Workplace Furnishings revenue to be at a year over year rate in the low 40% range on a reported basis. In Residential Billing Products, we expect revenue to decline at a rate in the low to mid-twenty percent range versus the Q3 of 2022. We expect non GAAP EPS to be modestly below Q3 2022 levels, primarily due to lower volume in residential building products, the normalization of variable compensation and the impact of POP in. We expect those negative factors to be partially offset by continued profit improvement in Workplace Furnishings and benefits from KII.

Speaker 4

Shifting to the balance sheet, we ended the 2nd quarter with debt to EBITDA of 2.3 times as calculated under our existing credit agreements. However, the definitions governing debt and EBITDA will change if we repay our private notes. Under those new definitions, our leverage at the end of the second quarter would have been an estimated 1.6 times. We have the capacity to repay those notes, which totaled $100,000,000 Regardless of the definition, we have a very manageable level of debt. We have a history of generating strong free cash flow through a variety of economic conditions.

Speaker 4

The combination with Kimball International will further strengthen our cash flow, Our reasonable leverage and cash generation will provide flexibility for the dynamic environment and continued investment. I'll now turn the call back over

Speaker 3

to Jeff. Thanks Marshall. In summary, our 2nd quarter results in workplace furnishings show the clear benefits of our profit transformation initiatives. And importantly, there are still many opportunities ahead. As we look to the remainder of the year, We expect continued year over year profit and margin improvement in workplace furnishings.

Speaker 3

The addition of Kimball International to H and I will strengthen our business and we are increasingly confident in the combination of strategic and financial benefits. KII enhances our position to lead in the evolving workplace environment and provides new opportunities for profit growth. And we have confirmed at least $25,000,000 in annual synergies with a strong potential for more, none of which includes eliminating Poppins' $20,000,000 annual loss. Finally, in residential building products, We have demonstrated the ability to grow profit over the long term and we'll continue to invest in our growth strategies even as we navigate near term housing headwinds. Intermediate to long term fundamentals of the housing market are strong.

Speaker 3

Our market leading brands, product depth and price point breadth uniquely position us to drive high margin growth through category awareness and product innovation, all while we continue to leverage our owned installing distribution footprint. In closing, our strategies are unchanged and gaining momentum. We will continue to expand margins in workplace furnishings, Deliver value creation through the KII combination and drive long term revenue growth in residential building products. I would like to thank all our HNI members for their dedication and focus and continued effort as we

Operator

We'll take our first question from Greg Burns with Sidoti.

Speaker 5

Good morning. Can Can you just talk about maybe the demand trends you're seeing in workplace furnishings, particularly the order trends you've seen since the end of the quarter. And are you seeing any improvement in maybe activity in the contract side of the business with Maybe work from return to office trends improving or anything of that nature that might be Driving demand for the Workplace Furnishings business.

Speaker 3

Yes, Greg. I'd say since the start of the 3rd quarter, We've seen solid positive orders in our Workplace Furnacing segment. Orders are running ahead of the first half rate, which was a 3% rate organically. Generally speaking, we're out of the blocks with some momentum. Activity is Picking up on a pre buy basis, so I'd say it's cautious, but we're liking how we started.

Speaker 5

Okay. And then for the Residential Buildings Products segment, is there a target Margin, a margin that you're targeting for that business with the savings or where do you think you could

Speaker 4

Yes. Greg, as you look at our seasonal Profit pattern before the post pandemic couple of years there. The second quarter is always our lowest margin quarter. So we Margins to increase from these levels due to natural seasonality. We also expect that the demand trends are improving And then we got this additional support from these actions we just took.

Speaker 4

So when you look at back half margins, we expect them to be much better than we were in the second quarter. And we expect to get into that mid to upper teens range.

Speaker 6

Great. Okay. All

Operator

right. And we'll move on to our next question from Reuben Garner with The Benchmark Company.

Speaker 6

Thank you. Good morning, everybody. Good morning. So I guess to start the Margin performance in the legacy workplace segment was really impressive. Can you talk about what's Kind of baked into the guide for the Q3 from a profitability standpoint in that segment.

Speaker 6

Any reason why You go backwards from the levels that you just put up and, yes, I guess, I'll stop there and Follow-up.

Speaker 4

Yes. Look, we're committed to expanding our margins in Workplace Furnishings, Ruben. If you look at the year over year improvement, we saw in the Q2 roughly $20,000,000 year over year. We'd expect similar improvement, maybe slightly less. The slightly less probably has more to do with the variable comp Difference from a year over year perspective, which is a little more challenging.

Speaker 4

But yes, we don't intend to go backwards, although there may be some quarterly fluctuations, The general trend should be upwards for a bit. Lots of opportunity ahead of us to continue to expand margins, not only this year, but in years to come.

Speaker 6

And the big step up that we've seen, is how much of that is Is it pretty evenly divided price cost between the and the strategic initiatives that you put in place over the last 9 to 12 months.

Speaker 4

Compared to the prior year, our total profit improvement really It's driven by about $25,000,000 of price cost in the 2nd quarter. We got about $10,000,000 of benefit from our cost savings program. And we picked up about $11,000,000 from just being more efficient in how we operate our business at the SG and A line. It kind of reflects our efforts to streamline things. So those are really what's driving it.

Speaker 4

And if you extrapolate that over to workplace furnishings, they're pretty similar, 4 drivers there, 3 drivers.

Speaker 6

Okay. And then moving on to pop in or the pop in decision, can you just talk about what kind of What into that? Is it just as simple as you guys maybe already have products or a way to serve that market?

Speaker 3

Yes. Ruben, it's a good question. I mean, as we pointed out, part of this is stream we've been streamlining our business for profit where we compete best in the most attractive markets. And we've right sized our e comm business coming into this. We dispossessed our China business and this is along the same lines.

Speaker 3

We've looked at it and It's got a good brand. It's doing its thing, but it really frees up The strength and profitability of the core KII Business. And so that was really the reason we did it is it kind of Fit that bill like we've been managing the business to this point.

Speaker 4

And Reuben, I'd like to maybe point out that it Also kind of reveals the value of our investment in KII. When you look at Our multiple units like Enterprise Value divided by EBITDA and you subtract out the losses that POPN had and add in the $25,000,000 of synergies that we expect and see potential for more. You're looking at a valuation multiple in the mid-5s, which we see is very attractive.

Speaker 6

Very helpful. Last one for me. I'm going to sneak one more in. The residential Building Products outlook. We've seen new construction trends kind of stabilize or even improve over the last 3 to 6 months, is the kind of near term weakness you're still seeing into the Q3, is that driven more by what you're And on the repair and remodel side of the equation?

Speaker 4

Yes. Ruben, We have seen the single family permits trend a bit better here late in the second quarter. I mean typically We kind of see pretty good correlation between single family permits and our activity 90 days later. So look at the Q1, single family Permits are down 32%, kind of in line with where we were in our Q2. We did see single family permits really get a lot less in June, but we think that's probably going to play out more in the Q4 than the 3rd.

Speaker 4

And that's one of the reasons we're expecting Our declines to moderate as we move into the back half and if that trend continues, there's some benefit to our what We projected some upside to it.

Speaker 6

Okay, great. Thanks. Congrats again on the strong results and good luck. Thanks.

Operator

We'll take our next question from Budd Bugatch with Water Tower Research.

Speaker 1

Good morning and thank you for taking my questions as well. I guess my first two questions are just going to follow-up with some comments that Marshall, you and Jeff Maige. You said, I think in RVP, you expect margins to get back to mid to upper teens. That the second half of this year, is it mid and in the third quarter and upper teens in the 4th or is that a longer term aspiration?

Speaker 4

That comment was meant to be for the full year 2023, Budd.

Speaker 1

Okay. For the full year, including the Q2, because those margins were as low, I They've been 6 years ago or so.

Speaker 4

Yes. We believe that we're going to See much margin improvement sequentially from the Q2 in this year.

Speaker 1

And the full year will be mid to upper teens?

Speaker 4

Yes. I mean, we're talking in like 16%, 17% range.

Speaker 1

Okay. That's fine. And Jeff, you said out of the blocks, So, Q3 is better than the Q2. Is that contract versus SMB or is that How do you characterize that?

Speaker 3

Yes. I think it's mostly SMB when you're comparing Q3 to out of the blocks to Q2, that's where the relative strength continues, Budd. Orders are still down year over year mid Single digits in contract, but the funnel continue to show is showing growth and activity metrics are picking up For sure.

Speaker 1

So, conference quarters are still down year over year, but narrowing to getting close to breakeven?

Speaker 3

Yes. I would say that's a fair assessment, but it's a fair assessment for sure.

Speaker 1

Okay. And I don't want to beat this dead horse too much, But I see on some of the comments on social media kind of things, some raised eyebrows on Toppin Decision, can you kind of maybe go over how that decision was made or when that decision was made? Was it made prior to the Closing the acquisition or was it something you decided as you got deeper into it after the acquisition closed?

Speaker 3

Yes, Budd. I mean, I haven't I don't know what I don't really follow a lot of social media, but I would tell you it was made after and We take all this stuff very seriously and we looked at it in the context of how we're managing the overall portfolio and business. And it kind of fell into that camp of streamlining our business to markets where we believe we have attractive long term profitable growth Prospects and that really resulted in the decision. It's not much more complicated than that.

Speaker 1

Okay. That's fair. And the conditions of the sale agreement, you evidently must have found already buyer for it. Are there any conditions that could Cause that to go off the rails, or is there financing conditions or something like that that could cause it to be delayed or deferred or Canceled?

Speaker 3

No, but we don't see that. It's a pretty straightforward transaction.

Speaker 1

I got you. Okay. And I'm a little and this is my own failings. The accounting, you've got it held for sale. Is there a reason why it's not disc ops?

Speaker 1

Sure. How does that work, Marshall?

Speaker 4

Yes, but it qualifies as held for sale. It would not qualify for discontinued Since it's being sold, and you see it on the balance sheet there. There's another asset in our held for sale Category as well is popping, so there's 2 things in there.

Speaker 1

I got you. And so okay. And tax rate for guidance, what are you looking for tax rate for the second half or the full year?

Speaker 4

For the full year, we expect non GAAP tax, the effective tax rate to be close to 23%. It will probably be closer to 22% in the 3rd quarter, But then the gap is different, right, because of the deductibility of the some of the transaction expenses.

Speaker 1

Right. And is the amount that you're going to get from Poppin material or is there a number that we can put into kind of a balance sheet or What do you expect on the sale?

Speaker 4

It's all netted out, but the cash flow tax is pretty negligible. The price is a little over $3,000,000 but when it's all said and done, it's pretty negligible impact on our cash flows.

Speaker 1

Okay. And I'll tell you, you priced it or you put it on the books in a place where that will have no impact on either on GAAP earnings, I would Suspect?

Speaker 4

Correct. Yes. The opening balance sheet reflects that valuation.

Speaker 1

Got you. The private you made 2 other comments that I just want to I understand the private notes, you talked about what the leverage would be, if you paid them off and you do have the capability of paying them off. Are you going to pay it off? Is that what's the is that decision just deferred or I'm not sure why you made the comment as you did, why you framed it?

Speaker 4

Yes, but we've raised that because it's better illustrative of sort of the financial flexibility we have because we could pay those off with very short notice. They do those notes have attractive interest rates right now. So, maybe not in our best interest at the very moment to pay them off, but, and it's not meant to be Debt to EBITDA ratio would lead you to believe it'd really be 1.6 if we chose to repay those notes.

Speaker 1

Okay. And there's no prepayment penalty if you do pay them Orly?

Speaker 4

Right now, the make whole on those is 0.

Speaker 1

Got you. Okay. And last for me, the variable comp You talked about normalization of variable comp. I take that to mean that you expect to have variable comp in this year And last year it was reversed out. Is that the way to look and think about that?

Speaker 4

Yes. Q3 of last year, we had quite a large reversal of an accrual That is not going to repeat this year. So that's you characterized it correctly.

Speaker 1

Got you. Okay. Well, thank you very much. I know it's a busy time there. So we Do appreciate your commentary and best of wishes for the second half and for beyond.

Speaker 3

Thanks, Budd.

Operator

We'll take our next question from Steven Ramsey with Thompson Research Group.

Speaker 7

Hi, good morning. Maybe to understand the SMB contract demand trends a little bit further, SMB still outperforming. Is the gap between them expected to close meaningfully in the second half as contract Trends improve or do you think SMB, the gap stays pretty wide even over the next 6 plus months?

Speaker 4

Stephen, yes, I think that gap is going to continue, maybe not as wide as it is right now or has been over the last year or 2, but it really reflects our position in the marketplace. It also reflects this Migration to these smaller locations and just general higher return to office rates in those markets. So Feel very strong about our position and the strength of those markets.

Speaker 3

Yes, I think that's I concur, Steve, and I would also say that like I've Said maybe to Greg or early on that kind of across the board, We're out of the blocks in the Q3 on both SMB and contract pretty nicely. Now Look, I mean, we've been through this before, so we're, we'll say cautious, but we are out of the blocks pretty well. So there could be some potential for A little bit of closing of the gap, but I would say Marshall is accurate SMB will the relative strength we believe will still be kind of the lead in those two segments.

Speaker 7

Got you. Okay. And then are delivery timelines of orders being placed for the workplace segment. Are those delivery timelines pretty normal now or are customers still deferring some of that delivery?

Speaker 3

I think they're normal in this once they place the order. I mean, there's still a group Customers that continue to wring their hands and look at where their lease terms are expiring and try Figure out what their play is going to be, but those who have been spurred into activity, Those that group has looks like it's normalized.

Speaker 7

Okay, helpful. And then Definitely interesting color on legacy H and I margin being 300 bps lower than Kimball ex Poppin in the second quarter, is there anything irregular there? The moves you're making in the legacy Workplace segment, is that expected to close that margin gap into the high single digit, low double digit range, Something that happens in the next 6 to 12 months.

Speaker 4

Steve, we're absolutely committed to Expanding margins in our legacy workplace furnishings business is one of our core efforts. As Jeff said in his prepared comments, we've got Kind of a 4 point plan to make that happen. So as I said earlier, we're expecting continued margin expansion there. I don't know that our goal is to close the gap. We'd like to see margins expand in both KI and legacy H and I, But we certainly are going to improve margins in legacy H and I.

Speaker 6

Okay, helpful. Thank you.

Operator

And we'll take a follow-up question from Budd Bugatch with Water Tower Research.

Speaker 1

Yes. I just wanted to go over a couple of other quick things. On the last two calls, if I remember correctly, you made points about the seasonality of earnings over the year and I'm just curious if you had any expanded comment on That relationship, I think it was 30, 70, if I remember 4, this year.

Speaker 4

Yes. But I think we're expecting it to be in that range. The pre-twenty 22 average is 1 third, first half, 2 thirds, second half. And I think we're going to be relatively close to that this year.

Speaker 1

Okay. And last for me, in RVP, you talked a little bit about some improvements seeing. And I think Previous, you said new housing was weaker than remodel retrofit. And I'm curious if you're seeing that improvement primarily coming out of new housing versus Remodel retrofit and whether there's any color on the incidence of attachment, which has been an issue with new houses?

Speaker 4

We're seeing improvements in the order and projected revenue rates in both new construction and remodel retrofit. Ramallah retrofit was off more than new construction in the Q2. A lot of that had to do with this inventory correction that we saw Yes, the trade went underwent in the Q2. Some of that will happen in the 3rd, but as we get into the back half, that's going to be behind us, it's going to help us See better rates there. New construction, as I said earlier, the single family permit data that the general new construction Activity is trending better and we're starting to see that flow through, although it's probably more of

Speaker 1

a 4th

Speaker 4

quarter phenomenon than a 3rd quarter phenomenon. Yes, but I think

Speaker 3

your comment sorry, but go ahead.

Speaker 1

Go ahead. I'm sorry, Jeff.

Speaker 3

Well, I was just going to say attachment rates are About where we've been running. I mean, those are stable and actually we're focused on that as well, but Those are holding up like they have been last couple of

Speaker 1

years. Yes, you've had some wonderful initiatives trying to Get back to reverse the longer term trend. And I'm curious whether or not we're seeing any of that bottoming and starting to Maybe get to the bottom of the smile curve and back up the other side.

Speaker 3

Yes, I think we're clearly seeing that bottom, bud. So I think we're bullish on our ability to turn that given some early indications we have

Speaker 1

Yes, I was wondering whether in fact it was coming Primarily from electric or some of the other expansions?

Speaker 3

Yes. It's kind of across the board actually. It's really category awareness and getting the homeowner and the homebuyer in their buying journey when making them aware of their options and educating them earlier in Processed.

Speaker 1

Got you. Thank you. Thank you very much. It's a wonderful business. So the fact that you can expand that would be great.

Speaker 1

Thank you.

Speaker 3

Great. Thanks, Bob.

Operator

And there are no further questions at this time. I'd like to turn the call back over to Mr. Lorenger for closing remarks.

Speaker 3

Great. Appreciate everyone's interest in HNI today. Thank you for joining us and having a dialogue. Have a great day.

Operator

And that concludes today's presentation. Thank you for your participation and you may now disconnect.

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Earnings Conference Call
HNI Q2 2023
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