HNI Q1 Earnings Call Highlights

Key Points

• HNI beat first-quarter expectations despite softer demand in Workplace Furnishings, helped by cost controls, pricing actions and productivity gains. Non-GAAP diluted EPS came in at $0.34, and management reiterated expectations for a strong 2026 with mid-teens EPS growth.
• Steelcase integration is progressing on schedule, with synergy capture and modest accretion still expected in 2026. HNI also ended Steelcase’s ERP project to streamline priorities and redirect resources toward customer-facing initiatives.
• Residential Building Products outperformed a weak housing market, with revenue up more than 2% and operating margin expanding to 17.6%. HNI said remodel/retrofit demand remained solid even as new construction stayed pressured by rates and affordability challenges.

HNI NYSE: HNI executives said the company delivered first-quarter 2026 results ahead of internal expectations despite a slower start to the year in its Workplace Furnishings business, citing cost controls, pricing actions and productivity gains as offsets to softer demand.

Chairman, President and CEO Jeff Lorenger said the quarter reflected the company’s ability to manage through “a difficult and dynamic environment” and said HNI still expects “a strong year in 2026,” including modest revenue growth in both major segments and a fifth consecutive year of double-digit earnings improvement.

Executive Vice President and Chief Financial Officer V.P Berger said diluted non-GAAP earnings per share totaled $0.34 in the quarter, slightly ahead of internal expectations. Non-GAAP results excluded items totaling $88 million, most of which were tied to purchase accounting impacts from the Steelcase acquisition. Total net sales increased 125% overall, while organic sales declined 3%.

Workplace Furnishings demand improved late in the quarter

HNI said demand in Workplace Furnishings was pressured early in the quarter by geopolitical and macroeconomic uncertainty, including the conflict in the Middle East, concerns about the U.S. economy and tariff impacts. Lorenger said legacy Workplace Furnishings net sales declined about 5% year over year on an organic basis, with weakness concentrated among large corporate customers during January and February. Businesses focused on small and medium-sized customers posted modest growth.

Management said order trends improved in March and continued to strengthen into the second quarter. Berger said legacy Workplace orders were down 3% in the first quarter, while contract orders, including both legacy HNI and Steelcase, were down closer to 5%. However, he said momentum improved through the quarter and continued over the most recent five-week period.

Lorenger described the early-quarter softness as an “air pocket,” saying customers appeared to pause purchasing decisions but did not broadly cancel projects. In response to an analyst question, he said quoting, dealer activity and sales force activity remained high while purchase orders slowed temporarily.

Including Steelcase, Workplace Furnishings non-GAAP operating profit was nearly $49 million in the first quarter, almost double the prior-year level, according to Lorenger.

Steelcase integration remains on track

Executives said the integration of Steelcase is progressing as expected, with synergy capture and accretion on track. HNI continues to expect modest accretion from Steelcase in 2026 and remains confident in its projected total synergy-driven accretion of $1.20 per share when fully mature. Lorenger said the company’s current synergy projections focus only on the Americas business and assume no revenue synergies.

Lorenger also said HNI terminated Steelcase’s multi-year ERP implementation project during the quarter. He said the move was part of a broader effort to streamline priorities, avoid disruption, eliminate substantial future ERP investment and redeploy resources toward customer-focused initiatives. In the question-and-answer session, Lorenger said HNI wanted to reassess the best technology path for the combined organization and use resources for product development, sales and network optimization.

Berger said HNI also implemented cost management actions in response to the slower start to the year. Those actions included reviewing open headcount, discretionary spending and headcount adjustments related to the termination of the Steelcase business transformation project. He said the goal was to protect the company’s target of double-digit non-GAAP EPS growth.

Residential Building Products outperforms weak housing backdrop

In Residential Building Products, HNI reported revenue growth of more than 2% from the prior-year quarter despite ongoing weakness in the new home market. Lorenger said new construction revenue declined in the mid-single digits year over year, which compared favorably with a high-single-digit decline in single-family permits. Remodel and retrofit revenue increased 13% from the prior-year period.

The segment’s first-quarter operating profit margin expanded 190 basis points to 17.6%. Berger said Residential Building Products orders increased 4% compared with the first quarter of 2025, with remodel and retrofit orders outperforming new construction.

Management said it expects continued softness in new construction in 2026, citing elevated interest rates, high home prices and affordability pressures. However, Lorenger said HNI’s go-to-market changes and growth investments should allow the business to continue outperforming the market. He said the company expects modest market growth in remodel and retrofit, consistent with LIRA projections.

Company reiterates double-digit earnings growth outlook

For the second quarter, HNI expects legacy Workplace Furnishings net sales to increase at a low-single-digit rate year over year. Including Steelcase, total Workplace Furnishings net sales are expected to grow approximately 155% to 160% from the prior-year period. Residential Building Products net sales are expected to decline at a low-single-digit rate in the quarter, partly because some recent orders have longer lead times and are expected to ship in the fall.

Berger said second-quarter non-GAAP diluted EPS is expected to decline modestly from 2025 levels, with Steelcase expected to be neutral to modestly accretive. He said the year-over-year pressure is expected to come from lower organic volume and continued investment.

For full-year 2026, HNI expects mid-teens percentage growth in non-GAAP EPS from 2025’s full-year level of $3.53. Management said earnings growth should accelerate in the second half, supported by productivity, cost management, network optimization, Steelcase accretion and price-cost benefits.

HNI also projected double-digit non-GAAP EPS growth in 2027. Berger said Steelcase accretion and legacy Workplace network optimization initiatives are expected to generate savings of more than $70 million in 2027 and more than $150 million when fully mature, excluding benefits from the newer cost management actions. Lorenger said HNI also expects an additional $30 million of savings from network optimization in legacy Workplace Furnishings over the next three years.

Tariffs, pricing and balance sheet plans

During the Q&A session, Berger said transportation, energy and tariff-related cost pressures are expected to create about a $2 million headwind in the second quarter, which HNI expects to recover in the third and fourth quarters through pricing and surcharges. He said the company is not repricing backlog orders.

Berger said HNI expects combined depreciation and amortization of approximately $150 million to $155 million in 2026, excluding purchase accounting impacts of approximately $105 million. Net interest expense is expected to total $75 million to $80 million, and the tax rate is expected to be about 25%.

On capital allocation, Berger said the benefits of the Steelcase acquisition, HNI’s strategy and financial discipline should support free cash flow and allow the company to deleverage quickly. He said leverage is expected to return to pre-deal levels of 1x to 1.5x within two years of the deal closing. HNI also remains committed to its dividend and continued investment in the business.

About HNI NYSE: HNI

HNI Corporation, founded in 1944 as the Heating & Novelty Company and headquartered in Muscatine, Iowa, is a leading manufacturer of office furniture and hearth products. Over its history, the company has evolved from producing gas heaters into two primary business segments: Office Furniture and Hearth & Home. HNI's Office Furniture division operates under well-known brands such as The HON Company, Allsteel, Gunlocke and Kimball, offering a comprehensive portfolio of workstations, seating, tables, storage solutions and acoustic products tailored for corporate, education, healthcare and government markets.

In its Hearth & Home segment, HNI designs, manufactures and distributes fireplaces, stoves, fireplace inserts, logs and related accessories.

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