Hni Corp ((HNI)) has held its Q1 earnings call. Read on for the main highlights of the call.
Protect Your Portfolio Against Market Uncertainty
- Discover companies with rock-solid fundamentals in TipRanks' Smart Value Newsletter.
- Receive undervalued stocks, resilient to market uncertainty, delivered straight to your inbox.
The recent earnings call for HNI Corporation reflected a generally positive sentiment, highlighting strong growth in non-GAAP EPS, revenue, and profitability in key segments. However, the company also acknowledged challenges such as a decline in SMB revenue, tariff-related pressures, and uncertainties in the housing market. This balance between highlights and lowlights suggests a cautious optimism for the future.
Non-GAAP EPS Growth
HNI Corporation reported a nearly 20% year-over-year increase in non-GAAP EPS, surpassing expectations. This growth was supported by revenue increases across both of the company’s primary segments.
Segment Revenue Growth
The Residential Building Products segment saw a 7% year-over-year revenue increase, while the Workplace Furnishings segment experienced a slight revenue uptick compared to the same period in 2024.
Profitability and Margin Expansion
The company achieved significant profitability improvements, with consolidated non-GAAP gross and operating margins expanding to 40% and 5.3%, respectively. The operating margin reached its highest first-quarter level since 2007.
Strong Contract Customer Growth
Contract customer orders rose by 4% year-over-year, with a notable 15% increase when excluding the hospitality sector, indicating robust demand in this area.
Residential Building Products Profit Growth
Operating profit in the Residential Building Products segment grew by 16% year-over-year, with the segment’s EBIT margin expanding by 130 basis points to 15.7%.
Order Backlog Increase
The Workplace Furnishings segment reported a 19% year-over-year increase in order backlog, signaling strong future demand.
Returns to Office Opportunities
The company noted that elevated levels of nonviable office space present a positive indicator for future furniture demand, suggesting potential growth opportunities.
Strong Balance Sheet and Cash Flow
HNI Corporation ended the quarter with a gross debt leverage of 1.3x and conducted $40 million in stock repurchases, reflecting confidence in future earnings and cash flow generation.
SMB Revenue Decline
Shipments to small and medium-sized customers declined by approximately 5% compared to the same period in 2024, with continued softness in transactional purchase activity.
Workplace Furnishings Margin Compression
The Workplace Furnishings segment experienced a 20 basis point compression in non-GAAP EBIT margin year-over-year, attributed to higher discounts on large projects.
Tariff and Inflation Concerns
The company expressed concerns about tariff uncertainty and rising inflation expectations, which are anticipated to cause ongoing demand volatility and temporary margin pressure.
Challenges in New Construction Orders
New construction orders saw a slight decline, with the housing market facing challenges such as elevated interest rates and weaker consumer confidence.
Temporary Price Cost Pressure
HNI Corporation expects second-quarter price cost margin pressure related to tariffs to total between $3 million and $5 million.
Forward-Looking Guidance
HNI Corporation maintains its earnings guidance with expectations for double-digit non-GAAP EPS growth for a fourth consecutive year. This growth is anticipated to be driven by operational efficiencies and strategic investments, despite challenges in certain market segments.
In summary, HNI Corporation’s earnings call conveyed a cautiously optimistic outlook, with notable achievements in EPS growth and profitability. While challenges such as SMB revenue decline and tariff pressures persist, the company remains confident in its strategic direction and future growth potential.