HNI anticipates high single-digit Q4 revenue growth as Steelcase acquisition nears

Earnings Call Insights: HNI Corporation (HNI) Q3 2025

MANAGEMENT VIEW

* CEO Jeffrey Lorenger highlighted "Non-GAAP earnings per share increased 7% year-over-year, driven by a record third quarter non-GAAP operating margin." Lorenger reported that "Total net sales in the third quarter increased 3% organically over the same period a year ago and profit margins in the third quarter were strong." He noted "non-GAAP diluted earnings per share of $1.10" and stated, "Our full year earnings outlook is unchanged from what we provided on last quarter's call."
* Lorenger emphasized the Workplace Furnishings segment, noting "organic net sales increased 3% year-over-year, fueled by growth across all major brands," and its operating profit margin "expanded 40 basis points year-over-year and exceeded 12%."
* In Residential Building Products, Lorenger stated "third quarter revenue was roughly unchanged versus the prior year period," with remodel retrofit sales "grew modestly" and new construction revenue "down slightly."
* Lorenger reiterated the company's acquisition plans: "I wanted to provide some thoughts on the pending Steelcase acquisition... We currently expect synergies to reach $120 million and ultimate accretion to total $1.20 per share when fully mature, excluding purchase accounting." He added, "We have elevated earnings growth visibility for several years."
* CFO Vincent Berger said, "Fourth quarter revenue in Workplace Furnishings is expected to increase at a high single-digit rate year-over-year organically... For Residential Building Products, fourth quarter net sales are also projected to increase at a high single-digit rate compared to the same period in 2024."

OUTLOOK

* Management maintained its full year earnings outlook and projected "fourth consecutive year of double-digit non-GAAP EPS growth."
* Lorenger projected "mid-teens percent EPS growth" for 2025, with "KII synergies and the ramp of our Mexico facility... expected to contribute a total of $0.75 to $0.80 of EPS in 2025-2026 period."
* Berger noted, "We continue to project our debt levels will return to our targeted range of 1 to 1.5x within 18 to 24 months of closing" the Steelcase acquisition.

FINANCIAL RESULTS

* Lorenger reported "non-GAAP diluted earnings per share of $1.10" for the quarter, a "7%" increase year-over-year.
* Total net sales in the third quarter "increased 3% organically over the same period a year ago."
* Workplace Furnishings segment operating profit margin "expanded 40 basis points year-over-year and exceeded 12%."
* Residential Building Products segment operating margin was "a strong 18%," despite a "year-over-year" contraction.
* Non-GAAP operating margin for the quarter was "10.8%."

Q&A

* Gregory Burns, Sidoti & Company, LLC: Asked if the $1.20 of accretion from Steelcase was solely synergy-based. Berger confirmed, "that's the $120 million that we talked about on the investor call back in August. So that number has not changed." Burns followed up on the timing of KII and Mexico synergies; Berger responded, "We had said that $45 million to $50 million would be recognized between '25 and '26...we do see the $45 million to $50 million coming through."
* Burns asked about office furniture volume relative to pre-pandemic levels. Lorenger replied, "we probably are 30% to 35% on the volume side, still down just given pricing actions and tariffs."
* Reuben Garner, The Benchmark Company: Asked about the Q4 guidance breakout. Berger explained, "Workplace and Residential revenue...are expected to be in the fourth quarter, up high single digits with the extra week," but cited more project-driven business and system mix affecting margins and noted "insurance-related pressure year-over-year" on SG&A.
* Garner questioned residential growth potential in a flat market. Lorenger asserted, "we believe we can outperform this market," citing product initiatives and strong performance in both new construction and remodel channels.
* Garner also asked about risks in integrating Steelcase and capturing demand upswing. Lorenger responded, "our dealer partnerships are going to remain intact...brand distribution is going to remain intact. Sales force is intact, both for HNI and Steelcase companies."
* Brian Biros, Thompson Research Group: Sought clarity on residential order acceleration. Berger detailed, "remodel retrofit was up 7%, and it actually was accelerating as we went through the quarter...we actually grew backlog to 13%."
* Biros asked about Workplace segment demand by vertical. Lorenger explained, "verticals have been holding up well...return to office is just really getting going."

SENTIMENT ANALYSIS

* Analysts pressed for specifics on synergy realization, volume recovery, margin impacts, and acquisition integration, indicating a neutral to slightly positive tone focused on verifying upside and execution risk.
* Management maintained a confident tone in prepared remarks, using phrases like "We have strong market positions" and "we are particularly well positioned," while addressing Q&A with direct, measured responses and reiterating confidence: "That's a number that we're really confident in." Slightly more cautious language appeared regarding market uncertainty and integration risks.
* Compared to the prior quarter, the current tone remains confident but more focused on integration execution and near-term margin timing.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for EPS growth remains strong and unchanged, with continued expectation for double-digit improvement, whereas last quarter saw a modest upward revision.
* The current quarter highlighted record third quarter operating margin, while last quarter emphasized a larger year-over-year EPS increase and margin expansion.
* Management now places greater focus on the Steelcase acquisition, including specific synergy and accretion targets, which was not present in the previous quarter.
* Analysts’ questions shifted from underlying growth drivers and pricing to more details on acquisition integration and volume recovery relative to pre-pandemic benchmarks.
* Strategic priorities have broadened to include integration risks and synergy realization in addition to organic growth.
* Confidence in long-term market trends and initiatives remains, though management is more explicit about timing-related margin pressures and external headwinds this quarter.

RISKS AND CONCERNS

* Management cited "ongoing tariff-driven volatility and continuing macro uncertainty" as challenges.
* In Residential Building Products, Lorenger noted "continued challenging housing market dynamics" and "builder sentiment has weakened in recent months."
* Insurance-related pressure on SG&A and a higher tax rate were noted as impacting the fourth quarter.
* Berger addressed post-acquisition leverage, stating, "we continue to project our debt levels will return to our targeted range of 1 to 1.5x within 18 to 24 months of closing."
* Hospitality segment was affected by "more tariff-related demand volatility over the past 2 quarters."

FINAL TAKEAWAY

Management emphasized that HNI delivered record third quarter operating margins and continued organic revenue growth across major brands, supported by strong execution and strategic investments. The company reiterated guidance for a fourth consecutive year of double-digit non-GAAP EPS growth, projected high single-digit revenue growth in both principal segments for the fourth quarter, and maintained a confident outlook regarding the pending Steelcase acquisition, with $120 million in expected synergies and $1.20 per share accretion. Despite ongoing external headwinds, HNI’s leadership underscored its readiness to capitalize on improving market fundamentals and to integrate Steelcase while sustaining margin expansion and disciplined financial management.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/hni/earnings/transcripts]

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